Accounting Policies of ABB India Ltd. Company
Dec 31, 2022
1. Corporate Information
ABB India Limited (âthe Companyâ) has served utility and industry customers for over seven decades with the complete range of engineering, products, solutions and services in areas of Automation and Power technology. The Company has extensive installed base for manufacturing and a countrywide marketing and service presence. Besides catering to Indian domestic market, the Company is also playing an increasing role in the global market.
The Company is a public limited company domiciled in India and incorporated under the provisions of the Indian Companies Act. The registered office is located at Bengaluru. Its shares are listed on Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).
The financial statements are approved for issue by the Companyâs Board of Directors on February 10, 2023.
2. Significant accounting policies
2.1 Basis of preparation of financial statements A Statement of compliance
These financial statements are prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016.
B Functional and presentation currency
The financial statements are presented in INR in crores, rounded off to two decimal places, except when otherwise indicated.
C Basis of measurement
The financial statements have been prepared on a historical cost convention and on an accrual basis of accounting, except for the following assets and liabilities which have been measured at fair value:
>- Derivative financial instruments
>- Investments classified as Fair Value Through Profit or Loss (âFVTPLâ).
>- Fair value of plan assets less present value of defined benefit obligations.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
2.2 Use of estimates
The preparation of the financial statements in conformity with Ind AS requires management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Application of accounting policies that require critical accounting estimates involving complex and subjective judgments and the use of assumptions in these financial statements have been disclosed in Note 2.3. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the financial statements.
2.3 Critical accounting estimates and judgements
a. Project revenue and costs
The Company uses the percentage-of-completion method in accounting for its fixed-price contracts. Use of the percentage-of-completion method requires the Company to estimate the efforts or costs expended to date as a proportion of the total efforts or costs to be expended. Efforts or costs expended have been used to measure progress towards completion as there is a direct relationship between input and productivity. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the expected contract estimates at the reporting date.
b. Property, plant and equipment (âPPE'')
Property, plant and equipment represent a significant proportion of the asset base of the Company. The charge in respect of periodic depreciation is derived after determining an estimate of an assetâs expected useful life and the expected residual value at the end of its life. The useful lives and residual values of Companyâs assets are determined by management at the time the asset is acquired and reviewed periodically, including at each financial year end. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technology.
c. Employee 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 complexities involved in 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. The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. The mortality rate is based on publicly available mortality tables. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rate and past trends. Further details about gratuity obligations are given in Note 37.
d. Provision for litigations and contingencies
The Company estimates the provisions that have present obligations as a result of past events and it is probable that outflow of resources will be required to settle the obligations. These provisions are reviewed at the end of each reporting period and are adjusted to reflect the current best estimates. The Company uses significant judgements to assess contingent liabilities. Contingent liabilities are recognised when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount cannot be made. Contingent assets are neither recognised nor disclosed in the financial statements.
e. Provision for income tax
The Company uses estimates and judgements in respect of eligibility of costs / expenses as a deductible item while determining the provision for income tax.
f. Expected credit losses on trade receivables:
The expected credit loss provision on trade receivables are based on assumptions about risk of default and expected timing of collection. The Company uses judgment in making these assumptions and selecting the inputs to the expected credit loss calculation based on the Companyâs history of collections, customerâs creditworthiness and market conditions at the end of each reporting period.
2.4 Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification. An asset is treated as current when it is:
⢠Expected to be realised or intended to be sold or consumed in normal operating cycle
⢠Held primarily for the purpose of trading
⢠Expected to be realised within twelve months after the reporting period, or
⢠Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
⢠All other assets are classified as non-current.
All assets and liabilities have been classified as current or non- current as per the Companyâs operating cycle and other criteria set out in Schedule III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current and non- current classification of assets and liabilities, except for projects business. The projects business comprises long-term contracts which have an operating cycle exceeding one year. For classification of current assets and liabilities related to projects business, the Company uses the duration of the individual life cycle of the contract as its operating cycle.
A liability is current when:
⢠It is expected to be settled in normal operating cycle
⢠It is held primarily for the purpose of trading
⢠It is due to be settled within twelve months after the reporting period, or
⢠There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
⢠The Company classifies all other liabilities as non-current.
⢠Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents.
2.5 Foreign Currency
Functional currency
The functional currency of the company is the Indian Rupee.
Transactions and translations
Initial recognition transactions in foreign currencies are recorded by the Company at their respective functional currency spot rates at the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. The gains or losses resulting from such translations are recognised in the statement of profit and loss.
Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at fair value are translated at the exchange rate prevalent at the date when the fair value was determined. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of the transaction.
Transaction gains or losses realized upon settlement of foreign currency transactions are included in determining net profit for the period in which the transaction is settled. Revenue, expense and cash flow items denominated in foreign currencies are translated into the relevant functional currencies using the exchange rate in effect on the date of the transaction.
2.6 Revenue Recognition
Revenue is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. Revenue are stated exclusive of goods and service tax and net of returns and trade and quantity discount.
Revenue from sale of products is recognised on transfer of control of the products to the customers, which is usually on delivery of goods to the customer or as per contractual terms with the customer.
Revenues from fixed price contracts are recognized on the percentage of completion method, in proportion that the contract costs incurred for work performed up to the reporting date bear to the estimated total contract costs. Contract revenue earned in excess of billing has been reflected under "Other current assets" and billing in excess of contract revenue has been reflected under "Other current liabilities" in the balance sheet. Full provision is made for any loss in the year in which it is first foreseen. Liquidated damages / penalties are provided for as per the contract terms wherever there is a delayed delivery attributable to the Company.
Revenue from services is recognised as per the terms of the contract with the customer using the percentage of completion method, in proportion that the costs incurred for work performed up to the reporting date bear to the estimated total costs.
Revenue from the development services are recognised on a cost plus basis and billed in accordance with the terms of arrangement with the customer.
Commission income is recognised as and when the terms of the contract are fulfilled.
Interest income is recognised on time proportion basis, based on the underlying interest rates.
2.7 Income Taxes
Income tax expense comprises current and deferred income tax. Income tax expense is recognized in net profit in the statement of profit and loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in other comprehensive income. Current income tax for current and prior periods is recognized at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted. Deferred income tax assets and liabilities are recognized for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Deferred income tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of changes in tax rates on deferred income tax assets and liabilities is recognized as income or expense in the period that includes the enactment or the substantive enactment date. A deferred income tax asset is recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilized. The Company offsets tax assets and tax liabilities, where it has a legally enforceable right to set off the recognized amounts and where it intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
2.8 Property, plant and equipment
Property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing part of the plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of property, plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied.
All other repair and maintenance costs are recognised in statement of profit or loss as incurred. The Company identifies and determines cost of each component/ part of Property, plant and equipment separately, if the component/ part has a cost which is significant to the total cost of the Property, plant and equipment and has useful life that is materially different from that of the remaining asset.
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is classified as capital advances under other non-current assets and cost of assets not ready for use at the balance sheet date are disclosed under capital work- in- progress.
The Company depreciates property, plant and equipment over their estimated useful lives using the straight-line method. The estimated useful lives of assets are as follows:
|
Useful lives estimated by the management in years: |
|
|
⢠Leasehold improvements |
Shorter of over the period of lease or useful life |
|
⢠Factory buildings |
15-30 |
|
⢠Other buildings |
3-60 |
|
⢠Furniture and fixtures |
10 |
|
⢠Office equipments |
3-5 |
|
⢠Plant and equipment |
6-21 |
|
⢠Vehicles ⢠Freehold land is not depreciated |
5 |
Depreciation methods, useful lives and residual values are reviewed periodically, including at each financial year end.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Gains or losses arising from de-recognition of an property, plant and equipment are measured as the difference between the net disposal proceeds and the carrying amount of property, plant and equipment are recognized in the statement of profit and loss when the property, plant and equipment is derecognized.
2.9 Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in the statement of profit and loss in the period in which the expenditure is incurred. The estimated useful life of assets in years are as follows:
⢠Technical know-how fees 3-10
⢠Capitalized software costs 3-5
The useful lives of intangible assets are assessed as either finite or indefinite.
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit and loss.
Goodwill and intangible assets with indefinite useful life recognized on business combination are tested for impairment at least annually and when events occur or changes in circumstances indicate that the recoverable amount of an asset or cash generating unit to which the assets pertains is less than the carrying value.
Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit and loss when the asset is derecognised.
2.10 Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
2.11 Inventories
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. The cost of various categories of inventories is arrived at as follows:
Stores, spares, raw materials, components and traded goods - at rates determined on the moving weighted average method.
Goods in Transit - at actual cost.
Work-in-progress and finished goods - at full absorption cost method which includes direct materials, direct labour and manufacturing overheads. Cost is determined on weighted average method.
Provision for obsolescence is made wherever necessary.
2.12 Impairment
a Financial assets
Financial assets (other than at fair value) The Company assesses at each date of balance sheet whether a financial asset or a group of financial assets is impaired. Ind AS 109 (''Financial Instruments'') requires expected credit losses to be measured through a loss allowance. The Company recognises lifetime expected losses for all contract assets and / or all trade receivables that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. Additionally the Company provides for impairment upon the occurrence of the triggering event.
The impairment provisions for financial assets are based on evaluation of the risk of default over the expected life of the receivables and expected timing of collection. The Company uses judgment in making these assumptions and selecting the inputs to the impairment calculation, based on the Company''s past history of collections, customer''s credit-worthiness, existing market conditions as well as forward looking estimates at the end of each reporting period.
b Non-financial assets
Intangible assets and property, plant and equipment
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cash-generating unit''s (CGU) fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
Intangible assets and property, plant and equipment are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the CGU to which the asset belongs.
If such assets are considered to be impaired, the impairment to be recognized in the statement of profit and loss is measured by the amount by which the carrying value of the assets exceeds the estimated recoverable amount of the asset. An impairment loss is reversed in the statement of profit and loss if there has been a change in the estimates used to determine the recoverable amount. The carrying amount of the asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been recognized for the asset in prior years.
2.13 Cash flow statement
Cash flows are reported using the indirect method, whereby profit for the period 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 or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.
2.14 Other income
Other income is comprised primarily of interest income. Interest income is recognized using the effective interest method.
2.15 Provisions, Contingent liability and assets General
A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that is reasonably estimable, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect of time value of money is material, Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.
Warranty provisions
Provisions for warranty-related costs are recognised when the product is sold to the customer. Initial recognition is based on historical experience. The initial estimate of warranty-related costs is revised annually.
Contingent liability
A 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 or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
Contingent assets
Contingent assets are not recognised or disclosed in financial statements since this may result in the recognition of income that may never be realised. However, when the realisation of income is virtually certain, then the related asset is not a contingent asset and is recognised.
Onerous contracts
Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the Company has a contract under which the unavoidable costs (full cost basis) of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract.
2.16 Financial instruments
2.16.1 Initial recognition
The Company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are recognized at fair value on initial recognition, except for trade receivables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities, that are not at fair value through profit or loss, are added to the fair value on initial recognition.
2.16.2 Subsequent measurement
a. Non-derivative financial instruments
(i) Financial assets carried at amortised cost
A financial asset is subsequently measured at amortised cost if it is held within a business where the objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
(ii) Financial assets at fair value through other comprehensive income
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business where the objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Company has made an irrevocable election for its investments which are classified as equity instruments to present the subsequent changes in fair value in other comprehensive income based on its business model. Further, in cases where the Company has made an irrevocable election based on its business model, for its investments which are classified as equity instruments, the subsequent changes in fair value are recognized in other comprehensive income.
(iii) Financial assets at fair value through profit or loss
A financial asset which is not classified in any of the above categories are subsequently fair valued through profit or loss.
(iv) Financial liabilities
Financial liabilities are subsequently carried at amortized cost using the effective interest method, For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
(v) Derecognition
A financial asset is primarily derecognised when:
⢠The rights to receive cash flows from the asset have expired, or
⢠The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-throughâ arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
b. Derivative financial instruments
The company holds derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank. Commodity risk is mitigated by entering into future contracts to hedge against fluctuation in commodity prices.
Financial assets or financial liabilities, at fair value through profit or loss.
This category has derivative financial assets or liabilities which are not designated as hedges.
Although the company believes that these derivatives constitute hedges from an economic perspective, they may not qualify for hedge accounting under Ind AS 109, Financial Instruments. Any derivative that is either not designated a hedge, or is so designated but is ineffective as per Ind AS 109, is categorized as a financial asset or financial liability, at fair value through profit or loss.
Derivatives not designated as hedges are recognized initially at fair value and attributable transaction costs are recognized in the statement of profit and loss when incurred. Subsequent to initial recognition, these derivatives are measured at fair value through profit or loss and the resulting exchange gains or losses are included in other income / expenses. Assets/ liabilities in this category are presented as current assets/current liabilities if they are either held for trading or are expected to be realized within 12 months after the balance sheet date.
Certain commercial contracts may grant rights to the Company or the counterparties, or contain other provisions that are considered to be derivatives. Such embedded derivatives are assessed at inception of the contract and depending on their characteristics, accounted for as separate derivative instruments and shown at their fair value in the balance sheet with changes in their fair value recognized through profit or loss.
2.17 Fair value of financial instruments
Fair value hierarchy:
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
2.18 Earnings per share
Basic earnings per equity share is computed by dividing the net profit attributable to the equity holders of the Company by the weighted average number of equity shares outstanding during the period. The Company has no potentially dilutive equity shares.
2.19 Employee benefits
2.19.1 Gratuity & Provident Fund - Defined benefit plans
The present value of the obligation under defined benefit plans are determined based on actuarial valuation using the Projected Unit Credit Method. In case of funded plans, the fair value of the plan assets is reduced from the gross obligation under the defined benefit plans to recognize the obligation on a net basis.
In case of defined benefit plans, remeasurement comprising of actuarial gains and losses is recognized in other comprehensive income (OCI) and is reflected in retained earnings and is not eligible to be reclassified to profit or loss.
The Company recognises the following changes in the net defined benefit obligation as an expense in statement of profit and loss:
⢠Service cost including current service cost, past service cost and gains and losses on curtailments and settlements; and
⢠Net interest expense or income.
Provident fund has been considered as a defined benefit plan since any additional obligations on account of investment risk and interest rate risk are required to be met by the Company.
2.19.2 Superannuation - Defined contribution scheme
Contribution to Superannuation Fund, is made at pre-determined rates to the Superannuation Fund Trust and is charged to the statement of profit and loss during the period in which the employee renders the related services. There are no other obligations other than the contribution payable to the Superannuation Fund Trust.
2.19.3 Compensated absences
Accumulated leave, which is expected to be utilised within the next 12 months, is treated as short-term employee benefits. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date. The Company presents the entire accumulated leave as a current liability in the balance sheet, since it does not have an unconditional right to defer its settlement for 12 months after the reporting date.
The expected cost of accumulating compensated absences is determined by actuarial valuation performed by an independent actuary at each balance sheet date using the projected unit credit method on the additional amount expected to be paid/availed as a result of the unused entitlement that has accumulated at the balance sheet date.
2.19.4 Share based compensation
The company recognizes compensation expense relating to share-based payments in net profit using fair-value in accordance with Ind AS 102, Share-Based Payment. The estimated fair value of awards is charged to income on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was in-substance, multiple awards with a corresponding increase to share options outstanding account.
For cash-settled share-based payment transactions, the Company measures the services acquired and the liability incurred at the fair value of the liability. The Company recognises the services received, and a liability to pay for those services, as the employees render service. The liability is measured, initially and at the end of each reporting period until settled, at the fair value of the share appreciation rights, by applying an option pricing model, taking into account the terms and conditions on which the share appreciation rights were granted, and the extent to which the employees have rendered service to date.
2.20 Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value. For the purpose of statement of cash flows, cash and cash equivalents consist of cash and cheque at hand and cash and deposit with bank.
2.21 Operating cycle
A portion of the Companyâs activities (primarily long-term project activities) has an operating cycle that exceeds one year. Accordingly, assets and liabilities related to these long-term contracts, which will not be realized/paid within one year, have been classified as current. For all other activities, the operating cycle is twelve months.
2.22 Non-current assets held for sale and discontinued operations
Non-current assets (including disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable.
Non-current assets classified as held for sale are measured at lower of their carrying amount and fair value less cost to sell.
Non-current assets classified as held for sale are not depreciated or amortised from the date when they are classified as held for sale.
An impairment loss is recognized for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognized for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognized. A gain or loss not previously recognized by the date of the sale of the non-current asset (or disposal group) is recognized at the date of de-recognition.
Non-current assets classified as held for sale and the assets and liabilities of a disposal group classified as held for sale are presented separately from the other assets and liabilities in the balance sheet.
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and:
(a) represents a separate major line of business or geographical area of operations and;
(b) is part of a single co-ordinated plan to dispose of such a line of business or area of operations.
The results of discontinued operations are presented separately in the statement of profit and loss. The comparative statement of profit and loss is re-presented as if the operation had been discontinued from the start of the comparative period.
2.23 Leases
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for a consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether:
⢠the contract involves the use of an identified asset;
⢠the Company had the right to obtain substantially all the economic benefits from use of the asset throughout the period of use; and
⢠the Company had the right to direct the use of the asset.
The Company as lessor
At inception or on modification of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease component on the basis of their relative standalone prices. When the Company acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.
The Company as lessee
The Company recognises a right-of-use asset (ROU) and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Company by the end of the lease term or the cost of the right-of-use asset reflects that the Company will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property, plant and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Companyâs incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.
Lease payments included in the measurement of the lease liability comprise the following:
- fixed payments, including in-substance fixed payments;
- variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
- amounts expected to be payable under a residual value guarantee; and
- the exercise price under a purchase option that the Company is reasonably certain to exercise, lease payments in an optional renewal period if the Company is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Company is reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company''s estimate of the amount expected to be payable under a residual value guarantee, if the Company changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised insubstance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of use asset has been reduced to zero.
Short-term leases and leases of low-value assets
The Company has elected not to recognise right-of use assets and lease liabilities for leases of low value assets and short-term leases. The Company recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. The Company''s significant leasing arrangements are mainly in respect of land & buildings, plant & equipment and vehicles.
2.24 Exceptional items
When an item of income/expense within profit and loss from ordinary activities is of such size, nature or incidence that their disclosure is relevant to explain the performance of the Company for the year, the nature and amount of such items are disclosed as exceptional item.
2.25 Amendments to Schedule III of Companies Act, 2013
The Company has adopted the presentation requirements under the amended schedule III including changes to comparative financial information where applicable in preparation of the financial statements.
2.26 Standards issued but not effective
On March 23, 2022, the Ministry of Corporate Affairs (MCA) has notified Companies (Indian Accounting Standards) Amendment Rules, 2022. This notification has resulted into amendments in the following existing accounting standards which are applicable to company for the financial year starting from January 1, 2023.
Ind AS 103 - Business Combination
Ind AS 109 - Financial Instrument
Ind AS 16 - Property, Plant and Equipment
Ind AS 37 -Provisions, Contingent Liabilities and Contingent Assets
Application of above standards are not expected to have any significant impact on the company''s financial statements
Dec 31, 2018
1. Significant accounting policies
1.1 Basis of preparation of financial statements A Statement of compliance
These financial statements are prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016.
B Functional and presentation currency
The financial statements are presented in INR in crores, rounded off to two decimal places, except when otherwise indicated.
C Basis of measurement
The financial statements have been prepared on the historical cost convention basis, except for certain financial instruments (refer accounting policy regarding financial instruments), which are measured at fair values at the end of each reporting period, as explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services as at the date of respective transactions.
2.2 Use of estimates
The preparation of the financial statements in conformity with Ind AS requires management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Application of accounting policies that require critical accounting estimates involving complex and subjective judgments and the use of assumptions in these financial statements have been disclosed in Note 2.3. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the financial statements.
2.3 Critical accounting estimates and judgements
2.3.1 Estimates
a. Project revenue and costs
The Company uses the percentage-of-completion method in accounting for its fixed-price contracts. Use of the percentage-of-completion method requires the Company to estimate the efforts or costs expended to date as a proportion of the total efforts or costs to be expended. Efforts or costs expended have been used to measure progress towards completion as there is a direct relationship between input and productivity. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the expected contract estimates at the reporting date.
b. Property, plant and equipment
Property, plant and equipment represent a significant proportion of the asset base of the Company. The charge in respect of periodic depreciation is derived after determining an estimate of an assetâs expected useful life and the expected residual value at the end of its life. The useful lives and residual values of Companyâs assets are determined by management at the time the asset is acquired and reviewed periodically, including at each financial year end. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technology.
c. Employee 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 complexities involved in 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. The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. The mortality rate is based on publicly available mortality tables. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rate and past trends. Further details about gratuity obligations are given in Note 34.
d. Provision for litigations and contingencies
The provision for litigations and contingencies are determined based on evaluation made by the management of the present obligation arising from past events the settlement of which is expected to result in outflow of resources embodying economic benefits, which involves judgements around estimating the ultimate outcome of such past events and measurement of the obligation amount. Due to the judgements involved in such estimations the provisions are sensitive to the actual outcome in future periods.
2.3.2 Judgements
Information about judgments made in applying accounting policies that have the most significant effects on the amounts recognised in the financial statements is included in the following notes
- Note 40 - leases: whether an arrangement contains a lease; and
- Note 40 - lease classification.
2.4 Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification. An asset is treated as current when it is:
- Expected to be realised or intended to be sold or consumed in normal operating cycle
- Held primarily for the purpose of trading
- Expected to be realised within twelve months after the reporting period, or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period
- All other assets are classified as non-current
A liability is current when:
- It is expected to be settled in normal operating cycle
- It is held primarily for the purpose of trading
- It is due to be settled within twelve months after the reporting period, or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
- The Company classifies all other liabilities as non-current
- Deferred tax assets and liabilities are classified as non-current assets and liabilities
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
2.5 Foreign Currency
Functional currency
The functional currency of the company is the Indian Rupee.
Transactions and translations
Initial recognition transactions in foreign currencies are recorded by the Company at their respective functional currency spot rates at the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. The gains or losses resulting from such translations are recognised in the statement of profit and loss.
Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at fair value are translated at the exchange rate prevalent at the date when the fair value was determined. Nonmonetary assets and non-monetary liabilities denominated in a foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of the transaction.
Transaction gains or losses realized upon settlement of foreign currency transactions are included in determining net profit for the period in which the transaction is settled. Revenue, expense and cash flow items denominated in foreign currencies are translated into the relevant functional currencies using the exchange rate in effect on the date of the transaction.
2.6 Revenue Recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government. The Company has concluded that it is the principal in all of its revenue arrangements since it is the primary obligor in all the revenue arrangements as it has pricing latitude and is also exposed to inventory and credit risks.
Revenue are stated exclusive of goods and service tax and net of trade and quantity discount.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates.
In case of large transformers, revenue is recognized on achievement of contractual milestone. Revenue recognized in excess of billing has been reflected under âOther financial assetsâ as unbilled revenue.
Revenues from long-term contracts are recognized on the percentage of completion method, in proportion that the contract costs incurred for work performed up to the reporting date bear to the estimated total contract costs. Contract revenue earned in excess of billing has been reflected under âOther financial assetsâ and billing in excess of contract revenue has been reflected under âOther current liabilitiesâ in the balance sheet. Full provision is made for any loss in the year in which it is first foreseen.
Liquidated damages / penalties are provided for as per the contract terms wherever there is a delayed delivery attributable to the Company.
Revenue from the development services is recognised as per the contract terms and when accrued. When the contract outcome cannot be measured reliably, revenue is recognised only to the extent that the expenses incurred are eligible to be recovered.
Commission income is recognized as per contract terms and when accrued.
Dividend income is recognised when the Companyâs right to receive the payment is established, which is generally when shareholders approve the dividend.
Interest income is recognised on time proportion basis.
2.7 Income Taxes
Income tax expense comprises current and deferred income tax. Income tax expense is recognized in net profit in the statement of profit and loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in other comprehensive income. Current income tax for current and prior periods is recognized at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted. Deferred income tax assets and liabilities are recognized for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Deferred income tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of changes in tax rates on deferred income tax assets and liabilities is recognized as income or expense in the period that includes the enactment or the substantive enactment date. A deferred income tax asset is recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilized. The Company offsets current tax assets and current tax liabilities, where it has a legally enforceable right to set off the recognized amounts and where it intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
2.8 Property, plant and equipment
On transition to Ind-AS, the Company has elected to continue with the carrying value of all its property, plant and equipment recognised as at 1st January, 2016 measured as per the previous GAAP and use that carrying value as a deemed cost of property, plant and equipment.
Property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing part of the plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of property, plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied.
All other repair and maintenance costs are recognised in statement of profit or loss as incurred. The Company identifies and determines cost of each component/ part of Property, plant and equipment separately, if the component/ part has a cost which is significant to the total cost of the Property, plant and equipment and has useful life that is materially different from that of the remaining asset. Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is classified as capital advances and cost of assets not ready for use at the balance sheet date are disclosed under capital work- in- progress.
The Company depreciates property, plant and equipment over their estimated useful lives using the straight-line method. The estimated useful lives of assets are as follows:
Useful lives estimated by the management in years:
Depreciation methods, useful lives and residual values are reviewed periodically, including at each financial year end.
2.9 Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in the statement of profit and loss in the period in which the expenditure is incurred. The estimated useful life of assets are as follows:
The useful lives of intangible assets are assessed as either finite or indefinite.
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of another asset.
Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.
Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit and loss when the asset is derecognised.
2.10 Leases
Leases under which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. When acquired, such assets are capitalized at fair value or present value of the minimum lease payments at the inception of the lease, whichever is lower. Lease payments under operating leases are charged to statement of profit and loss on straight line basis over the period of the lease, unless the payments are structured to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases.
2.11 Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
2.12 Inventories
Inventories are stated at the lower of cost and net realisable value. The cost of various categories of inventories is arrived at as follows:
Stores, spares, raw materials, components and traded goods - at rates determined on the moving weighted average method.
Goods in Transit - at actual cost.
Work-in-progress and finished goods - at full absorption cost method which includes direct materials, direct labour and manufacturing overheads. Cost is determined on weighted average method.
Provision for obsolescence is made wherever necessary.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
2.13 Impairment
a. Financial assets
Financial assets (other than at fair value) The Company assesses at each date of balance sheet whether a financial asset or a group of financial assets is impaired. Ind AS 109 (âFinancial Instrumentsâ) requires expected credit losses to be measured through a loss allowance. The Company recognises lifetime expected losses for all contract assets and / or all trade receivables that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. The Company provides for impairment upon the occurrence of the triggering event.
b. Non-financial assets Intangible assets and property, plant and equipment
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the assetâs recoverable amount. An assetâs recoverable amount is the higher of an assetâs or cash-generating unitâs (CGU) fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
Intangible assets and property, plant and equipment are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the CGU to which the asset belongs.
If such assets are considered to be impaired, the impairment to be recognized in the statement of profit and loss is measured by the amount by which the carrying value of the assets exceeds the estimated recoverable amount of the asset. An impairment loss is reversed in the statement of profit and loss if there has been a change in the estimates used to determine the recoverable amount. The carrying amount of the asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been recognized for the asset in prior years.
2.14 Cash flow statement
Cash flows are reported using the indirect method, whereby profit for the period 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 or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.
2.15 Other income
Other income is comprised primarily of interest income. Interest income is recognized using the effective interest method.
2.16 Provisions & Contingent liability
General
A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that is reasonably estimable, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect of time value of money is material, Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.
Warranty provisions
Provisions for warranty-related costs are recognised when the product is sold to the customer. Initial recognition is based on historical experience. The initial estimate of warranty-related costs is revised annually.
A 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 or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
2.17 Financial instruments
2.17.1 Initial recognition
The Company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are recognized at fair value on initial recognition, except for trade receivables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities, that are not at fair value through profit or loss, are added to the fair value on initial recognition.
2.17.2 Subsequent measurement
a. Non-derivative financial instruments
(i) Financial assets carried at amortised cost
A financial asset is subsequently measured at amortised cost if it is held within a business where the objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
(ii) Financial assets at fair value through other comprehensive income
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business where the objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Company has made an irrevocable election for its investments which are classified as equity instruments to present the subsequent changes in fair value in other comprehensive income based on its business model. Further, in cases where the Company has made an irrevocable election based on its business model, for its investments which are classified as equity instruments, the subsequent changes in fair value are recognized in other comprehensive income.
(iii) Financial assets at fair value through profit or loss
A financial asset which is not classified in any of the above categories are subsequently fair valued through profit or loss.
(iv) Financial liabilities
Financial liabilities are subsequently carried at amortized cost using the effective interest method, For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
(v) Derecognition
A financial asset is primarily derecognised when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-throughâ arrangement^ and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
b. Derivative financial instruments
The company holds derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank.
Financial assets or financial liabilities, at fair value through profit or loss.
This category has derivative financial assets or liabilities which are not designated as hedges.
Although the company believes that these derivatives constitute hedges from an economic perspective, they may not qualify for hedge accounting under Ind AS 109, Financial Instruments. Any derivative that is either not designated a hedge, or is so designated but is ineffective as per Ind AS 109, is categorized as a financial asset or financial liability, at fair value through profit or loss.
Derivatives not designated as hedges are recognized initially at fair value and attributable transaction costs are recognized in the statement of profit and loss. when incurred. Subsequent to initial recognition, these derivatives are measured at fair value through profit or loss and the resulting exchange gains or losses are included in other income/expenses. Assets/ liabilities in this category are presented as current assets/current liabilities if they are either held for trading or are expected to be realized within 12 months after the balance sheet date.
Certain commercial contracts may grant rights to the Company or the counterparties, or contain other provisions that are considered to be derivatives. Such embedded derivatives are assessed at inception of the contract and depending on their characteristics, accounted for as separate derivative instruments and shown at their fair value in the balance sheet with changes in their fair value recognized through profit or loss.
2.18 Fair value of financial instruments
Fair value hierarchy:
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1âQuoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
2.19 Earnings per share
Basic earnings per equity share is computed by dividing the net profit attributable to the equity holders of the Company by the weighted average number of equity shares outstanding during the period. Diluted earnings per equity share is computed by dividing the net profit attributable to the equity holders of the Company by the weighted average number of equity shares considered for deriving basic earnings per equity share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares. The dilutive potential equity shares are adjusted for the proceeds receivable had the equity shares been actually issued at fair value (i.e. the average market value of the outstanding equity shares). Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at a later date. Dilutive potential equity shares are determined independently for each period presented.
2.20 Employee benefits
2.20.1 Gratuity & Provident Fund - Defined benefit plans
The present value of the obligation under defined benefit plans are determined based on actuarial valuation using the Projected Unit Credit Method. In case of funded plans, the fair value of the plan assets is reduced from the gross obligation under the defined benefit plans to recognize the obligation on a net basis.
Incase of defined benefit plans, remeasurement comprising of actuarial gains and losses is recognized in other comprehensive income (OCI) and is reflected in retained earnings and is not eligible to be reclassified to profit or loss.
The Company recognises the following changes in the net defined benefit obligation as an expense in statement of profit and loss:
- Service cost including current service cost, past service cost and gains and losses on curtailments and settlements; and
- Net interest expense or income.
Provident fund has been considered as a defined benefit plan since any additional obligations on account of investment risk and interest rate risk are required to be met by the Company.
2.20.2 Superannuation - Defined contribution scheme
Contribution to Superannuation Fund, is made at pre-determined rates to the Superannuation Fund Trust and is charged to the statement of profit and loss during the period in which the employee renders the related services. There are no other obligations other than the contribution payable to the Superannuation Fund Trust.
2.20.3 Compensated absences
Accumulated leave, which is expected to be utilised within the next 12 months, is treated as short-term employee benefits. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date. The Company presents the entire accumulated leave as a current liability in the balance sheet, since it does not have an unconditional right to defer its settlement for 12 months after the reporting date.
2.20.4 Share based compensation
The company recognizes compensation expense relating to share-based payments in net profit using fair-value in accordance with Ind AS 102, Share-Based Payment. The estimated fair value of awards is charged to income on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was in-substance, multiple awards with a corresponding increase to share options outstanding account.
Equity-settled transactions
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model.
That cost is recognised, together with a corresponding increase in share-based payment (SBP) reserves in equity, over the period in which the performance and/or service conditions are fulfilled in employee benefits expense. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Companyâs best estimate of the number of equity instruments that will ultimately vest. The expense or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in employee benefits expense.
2.21 Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value. For the purpose of statement of cash flows, cash and cash equivalents consist of cash and cheque at hand / remittance in transit and cash and deposit with bank.
2.22 Operating cycle
A portion of the Companyâs activities (primarily long-term project activities) has an operating cycle that exceeds one year. Accordingly, assets and liabilities related to these long-term contracts, which will not be realized/paid within one year, have been classified as current. For all other activities, the operating cycle is twelve months.
2.23 Non-current assets held for sale and discontinued operations
Non-current assets (including disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable.
Non-current assets classified as held for sale are measured at lower of their carrying amount and fair value less cost to sell.
Non-current assets classified as held for sale are not depreciated or amortised from the date when they are classified as held for sale.
An impairment loss is recognized for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognized for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognized. A gain or loss not previously recognized by the date of the sale of the non-current asset (or disposal group) is recognized at the date of de-recognition.
Non-current assets classified as held for sale and the assets and liabilities of a disposal group classified as held for sale are presented separately from the other assets and liabilities in the balance sheet. A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and:
(a) represents a separate major line of business or geographical area of operations and;
(b) is part of a single co-ordinated plan to dispose of such a line of business or area of operations. The results of discontinued operations are presented separately in the statement of profit and loss.
2.24 Recent Indian Accounting Standards (Ind AS)
Following new standard and amendment to Ind AS have not been applied by the Company as they are effective for annual periods beginning on or after January 1, 2019:
Ind AS 115 Revenue from Contracts with Customers Ind AS 21 The effect of changes in Foreign Exchange rates
Ind AS 115 Revenue from Contracts with Customers
âIn March 2018, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) Amendment Rules, 2018, notifying Ind AS 115 âRevenue from Contracts with Customersâ (New Revenue Standard), which replaces Ind AS 11 âConstruction Contractsâ and Ind AS 18âRevenueâ. The core principle of the New Revenue 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. Some of the key changes introduced by the New Revenue Standard include additional guidance for multiple-element arrangements, measurement approaches for variable consideration, specific guidance for licensing of intellectual property. The new standard also provides guidance on evaluation of performance obligations being distinct to enable separate recognition and could impact timing of recognition of certain elements of multiple element arrangements.
Significant additional disclosures in relation to revenue are also prescribed. The New Revenue Standard also provides two broad alternative transition options - Retrospective Method and Cumulative Effect Method - with certain practical expedients available under the Retrospective Method. The Company is in the process of evaluating the impact of the New Revenue Standard on the present and future arrangements and shall determine the appropriate transition option once the said evaluation has been completed.
Ind AS 21 - The effect of changes in Foreign Exchange rates
The amendment clarifies on the accounting of transactions that include the receipt or payment of advance consideration in a foreign currency. The appendix explains that the date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non-monetary prepayment asset or deferred income liability. If there are multiple payments or receipts in advance, a date of transaction is established for each payment or receipt. The Company is evaluating the impact of this amendment on its financial statements.
Dec 31, 2016
1. Corporate information
ABB India Limited (''the Company'') has served utility and industry customers for over six decades with the complete range of engineering, products, solutions and services in areas of Automation and Power technology. The Company has extensive installed base for manufacturing and a countrywide marketing and service presence. Besides catering to Indian domestic market, the Company is also playing an increasing role in the global market.
2. Significant accounting policies
2.1 Basis of preparation of financial statements
The financial statements of the Company have been prepared in accordance with the generally accepted accounting principles in India (Indian GAAP). The Company has prepared these financial statements to comply in all material respects with the accounting standards notified under section 133 of the Companies Act 2013, read together with Rule 7 of the Companies (Accounts) Rules 2014. The financial statements have been prepared on an accrual basis and under the historical cost convention except certain derivative financial instruments which have been measured at fair value.
The accounting policies adopted in the preparation of financial statements are consistent with those used in the previous year.
2.2 Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as at the date of the financial statements and reported amount of revenues and expenses during the reporting period. Actual results could differ from these estimates. Any revision to accounting estimates is recognized prospectively in current and future periods.
2.3 Change in useful lives of assets
Pursuant to the requirements of Schedule II of the Companies Act, 2013 (âthe Actâ), the management had reassessed and changed, wherever necessary the useful lives to compute depreciation from January 1, 2015, which was the effective date for application of Schedule II for the Company. Accordingly, the carrying amount as at January, 1 2015 is being depreciated over the revised remaining useful life of the assets. The carrying value of Rs, 8.94 crores (net of deferred tax of Rs, 4.73 crores), in case of assets with Nil revised remaining useful life as at January 1, 2015 was reduced from the retained earnings. Further, had the Company continued with the previously assessed useful lives, charge for depreciation for the previous year would have been lower and the profit for the previous year would have been higher by Rs, 37.96 crores.
2.4 Tangible and intangible assets
Fixed assets are stated at the cost of acquisition, less accumulated depreciation / amortisation and accumulated impairment losses, if any. Cost of fixed assets comprises purchase price, duties, levies and any directly attributable cost of bringing the asset to its working condition for the intended use. Own manufactured assets are capitalized at cost including an appropriate share of overheads. Borrowing costs related to the acquisition or construction of the qualifying fixed assets for the period up to the completion of their acquisition or construction are capitalized, if capitalization criteria are met. Cost of fixed assets not ready for their intended use before balance sheet date are disclosed under capital work in progress.
Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing fixed assets, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the statement of profit and loss for the period during which such expenses are incurred.
Gains or losses arising from de-recognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
Capitalized software includes costs on Enterprise Resource Planning (ERP) Project and other costs relating to software, which provide significant future economic benefits. ERP Project costs comprise license fees and cost of system integration services. All costs relating to upgradations / enhancements are generally charged off as revenue expenditure unless they bring significant additional benefits of lasting nature.
2.5 Depreciation / amortization
Depreciation on assets is provided on the straight-line method on the basis of economic useful lives as estimated by the management.
The identified components are depreciated separately over their useful lives; the remaining components are depreciated over the life of the principal asset. Depreciation is provided from the date of capitalisation till the date of sale of assets.
Useful lives estimated by the management in years:
- Leasehold land and leasehold improvements over the period of lease being 1 to 10 years
- Technical know-how fees 3-10
- Capitalized software costs 3-5
Goodwill on business acquisition is not amortized but tested for impairment.
2.6 Impairment of assets
The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/ external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset''s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the assets. In determining net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. Impairment losses, including impairment on inventories, are recognized in the statement of profit and loss. After impairment, depreciation is provided on the revised carrying amount of the assets over its remaining useful life.
A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset''s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of profit and loss.
2.7 Investments
Investments that are readily realisable and intended to be held for not more than a year from the date on which such investments are made are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments.
On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the statement of profit and loss.
2.8 Inventories
Inventories are stated at the lower of cost and net realisable value. The cost of various categories of inventories is arrived at as follows:
- Stores, spares, raw materials, components and traded goods - at rates determined on the moving weighted average method.
- Goods in Transit - at actual cost.
- Work-in-progress and finished goods - at full absorption cost method which includes direct materials, direct labour and manufacturing overheads. Cost is determined on weighted average method. Excise duty is included in the value of finished goods inventory.
Provision for obsolescence is made wherever necessary.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
2.9 Retirement and other employee benefits
Contribution to Superannuation Fund, a defined contribution scheme, is made at pre-determined rates to the Superannuation Fund Trust and is charged to the statement of profit and loss during the period in which the employee renders the related services. There are no other obligations other than the contribution payable to the Superannuation Fund Trust.
Contributions to the recognized Provident Fund/ Gratuity Fund, defined benefits scheme, and provision for other long term employee benefits - leave are made on the basis of actuarial valuations using the projected unit credit method made at the end of each financial year and are charged to the statement of profit and loss during the year.
Accumulated leave, which is expected to be utilised within the next 12 months, is treated as short-term employee benefits. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date. The Company presents the entire accumulated leave as a current liability in the balance sheet, since it does not have an unconditional right to defer its settlement for 12 months after the reporting date.
Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred.
Expenses incurred towards voluntary retirement scheme are charged to the statement of profit and loss immediately.
2.10 Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.
- Sales of products and services are recognized when significant risks and rewards of ownership of products are passed on to customers or when the service has been provided. In case of large transformers, revenue is recognized on achievement of contractual milestone. Revenue recognized in excess of billing has been reflected under "Other Current Assets" as Unbilled Revenue. Net sales are stated at contractual realisable values, net of excise duty, sales tax, service tax, value added tax and trade discounts.
- Revenues from long-term contracts are recognized on the percentage of completion method, in proportion that the contract costs incurred for work performed up to the reporting date bear to the estimated total contract costs. Contract revenue earned in excess of billing has been reflected under "Other Current Assets" and billing in excess of contract revenue has been reflected under "Other Current Liabilities" in the balance sheet. Full provision is made for any loss in the year in which it is first foreseen.
- Liquidated damages / penalties are provided for as per the contract terms wherever there is a delayed delivery attributable to the Company.
- Commission income is recognized as per contract terms and when accrued.
- Income from development services are recognized on rendering of service as per contract terms
- Dividend income is recognized when the right to receive dividend is established.
- Interest income is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.
2.11 Provisions, contingent liabilities and contingent assets
A provision is recognized when the Company has a present obligation as a result of past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, in respect of which a reliable estimate can be made based on technical evaluation and past experience. Provisions are not discounted to its present value and are determined based on management 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 management estimates.
Disclosures for contingent liability are made when there is a possible or present obligation for which it is not probable that there will be an outflow of resources. When there is a possible or present obligation in respect of which the likelihood of outflow of resources is remote, no disclosure is made.
Contingent assets are neither recognized nor disclosed in the financial statements.
Provisions for warranty-related costs are recognized when the product is sold or service provided. Provision is based on historical experience. The estimate of such warranty-related costs is revised annually.
2.12 Foreign currency transactions
Foreign currency transactions are recorded by applying the daily exchange rates. Exchange differences arising on foreign currency transactions settled during the year are recognized in the statement of profit and loss for the year.
All foreign currency denominated monetary assets and liabilities are translated at the exchange rates prevailing on the balance sheet date. The resultant exchange differences are recognized in the statement of profit and loss for the year. Non-monetary items, which are measured in terms of historical cost denominated in a foreign currency, are reported using the exchange rate at the date of the transaction. Non-monetary items, which are measured at fair value or other similar valuation denominated in a foreign currency, are translated using the exchange rate at the date of transaction.
The Company uses derivative financial instruments such as forward exchange contracts to hedge its risks associated with foreign currency fluctuations.
Gain or loss on restatement of forward exchange contracts for hedging underlying out standings at the balance sheet date are recognized in the statement of profit and loss for the year in which it occurs. The premium or discount on such contracts is recognized in the statement of profit and loss over the period of the contract.
Gain or loss on fair valuation of forward exchange contracts for hedging highly probable forecasted transactions not covered under Accounting Standard (AS) 11 " The effect of changes in foreign exchange ratesâ are recognized in the statement of profit and loss for the year in which it occurs.
The Company does not follow hedge accounting.
2.13 Taxation
Tax expense comprises current tax and deferred tax.
The current charge for income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act including probable adjustments, if any, for international and domestic transactions with associated enterprises.
The deferred tax for timing differences between the book and tax profits for the year is accounted for using the tax rates and laws that have been enacted or substantively enacted as of the balance sheet date. Deferred tax assets arising from timing differences are recognized to the extent there is virtual certainty that the assets can be realised in future. Deferred tax assets are reviewed at each balance sheet date for its reliability. The Company writes-down the carrying amount of deferred tax assets to the extent it is no longer reasonably certain of its realisation.
2.14 Operating leases
Leases, where the less or effectively retains substantially all the risks and benefits of ownership of the leased item, 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.
2.15 Operating cycle
A portion of the Company''s activities (primarily long-term project activities) has an operating cycle that exceeds one year. Accordingly, assets and liabilities related to these long-term contracts, which will not be realized/paid within one year, have been classified as current. For all other activities, the operating cycle is twelve months.
2.16 Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period is adjusted for events such as bonus issue, bonus element in a rights issue, share split, and reverse share split (consolidation of shares) that have changed the number of equity shares outstanding, without a corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
a) Terms/rights attached to equity shares
The Company has only one class of equity shares having a par value of '' 2/- 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.
During the year ended December 31, 2016, the amount of per share dividend recommended and provided for distributions to equity shareholders is '' 4.00/-. (December 31, 2015: '' 3.70/-)
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.
As per records of the Company and other declarations received from shareholders, the above shareholding represents both legal and beneficial ownerships of shares.
Dec 31, 2015
1. Corporate information
ABB India Limited ('the Company') has served utility and industry
customers for over six decades with the complete range of engineering,
products, solutions and services in areas of Automation and Power
technology. The Company has extensive installed base for manufacturing
and a countrywide marketing and service presence. Besides catering to
Indian domestic market, the Company is also playing an increasing role
in the global market.
2.1 Basis of preparation of financial statements
The financial statements of the Company have been prepared in
accordance with the generally accepted accounting principles in India
(Indian GAAP). The Company has prepared these financial statements to
comply in all material respects with the accounting standards notified
under section 133 of the Companies Act 2013, read together with Rule 7
of the Companies (Accounts) Rules 2014. The financial statements have
been prepared on an accrual basis and under the historical cost
convention except certain derivative financial instruments which have
been measured at fair value.
The accounting policies adopted in the preparation of financial
statements are consistent with those used in the previous year.
2.2 Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles (GAAP) requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent liabilities as at the
date of the financial statements and reported amount of revenues and
expenses during the reporting period. Actual results could differ from
these estimates. Any revision to accounting estimates is recognized
prospectively in current and future periods.
2.3 Change in useful lives of assets
Pursuant to the requirements of Schedule II of the Companies Act, 2013
("the Act"), the management has reassessed and changed, wherever
necessary the useful lives to compute depreciation from January 1,
2015, which is the effective date for application of Schedule II for
the Company. Accordingly, the carrying amount as at January, 1 2015 is
being depreciated over the revised remaining useful life of the assets.
The carrying value of Rs, 8.94 crores (net of deferred tax of Rs, 4.73
crores), in case of assets with nil revised remaining useful life as at
January 1, 2015 is reduced from the retained earnings. Further, had the
Company continued with the previously assessed useful lives, charge for
depreciation for the year would have been lower and the profit for the
year would have been higher by Rs, 37.96 crores.
2.4 Tangible and intangible assets
Fixed assets are stated at the cost of acquisition, less accumulated
depreciation / amortization and accumulated impairment losses, if any.
Cost of fixed assets comprises purchase price, duties, levies and any
directly attributable cost of bringing the asset to its working
condition for the intended use. Own manufactured assets are capitalized
at cost including an appropriate share of overheads. Borrowing costs
related to the acquisition or construction of the qualifying fixed
assets for the period up to the completion of their acquisition or
construction are capitalized, if capitalization criteria are met. Cost
of fixed assets not ready for their intended use before balance sheet
date are disclosed under capital work in progress.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
Gains or losses arising from de-recognition of fixed assets are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is derecognized.
Capitalized software includes costs on Enterprise Resource Planning
(ERP) Project and other costs relating to software, which provide
significant future economic benefits. ERP Project costs comprise
license fees and cost of system integration services. All costs
relating to up gradations / enhancements are generally charged off as
revenue expenditure unless they bring significant additional benefits
of lasting nature.
2.5 Depreciation / amortization
Depreciation on assets (except those described below) is provided on
the straight-line method at the rates and in the manner given in
Schedule II of the Companies Act, 2013, which management considers as
being representative of the useful economic lives of such assets.
Depreciation is provided from the date of capitalization till the date
of sale of assets.
The following assets are depreciated / amortized on the straight line
method over a period of their estimated useful lives:
 Leasehold land and leasehold improvements over the period of the
lease. Â Technical know-how fees over the period of three to six
years. Â Capitalized software costs over a period of five years.
Goodwill on business acquisition is not amortized but tested for
impairment.
2.6 Impairment of assets
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal / external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the asset's net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and risks
specific to the assets. In determining net selling price, recent market
transactions are taken into account, if available. If no such
transactions can be identified, an appropriate valuation model is used.
Impairment losses, including impairment on inventories, are recognized
in the statement of profit and loss. After impairment, depreciation is
provided on the revised carrying amount of the assets over its
remaining useful life.
A previously recognized impairment loss is reversed only if there has
been a change in the assumptions used to determine the asset's
recoverable amount since the last impairment loss was recognized. The
reversal is limited so that the carrying amount of the asset does not
exceed its recoverable amount, nor exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss
been recognized for the asset in prior years. Such reversal is
recognized in the statement of profit and loss.
2.7 Investments
Investments that are readily realizable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. However, provision for diminution in value is made to recognize a
decline other than temporary in the value of the investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
2.8 Inventories
Inventories are stated at the lower of cost and net realizable value.
The cost of various categories of inventories is arrived at as follows:
 Stores, spares, raw materials, components and traded goods - at rates
determined on the moving weighted average method. Â Goods in Transit Â
at actual cost.
 Work-in-progress and finished goods - at full absorption cost method
which includes direct materials, direct labour and manufacturing
overheads. Cost is determined on weighted average method. Excise duty
is included in the value of finished goods inventory.
Provision for obsolescence is made wherever necessary.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
2.9 Retirement and other employee benefits
Contribution to Superannuation Fund, a defined contribution scheme, is
made at pre-determined rates to the Superannuation Fund Trust and is
charged to the statement of profit and loss during the period in which
the employee renders the related services. There are no other
obligations other than the contribution payable to the Superannuation
Fund Trust.
Contributions to the recognized Provident Fund / Gratuity Fund, defined
benefits scheme, and provision for other long term employee benefits -
leave are made on the basis of actuarial valuations using the projected
unit credit method made at the end of each financial year and are
charged to the statement of profit and loss during the year.
Accumulated leave, which is expected to be utilized within the next 12
months, is treated as short-term employee benefits. The Company
measures the expected cost of such absences as the additional amount
that it expects to pay as a result of the unused entitlement that has
accumulated at the reporting date. The Company presents the entire
accumulated leave as a current liability in the balance sheet, since it
does not have an unconditional right to defer its settlement for 12
months after the reporting date.
Actuarial gains / losses are immediately taken to the statement of
profit and loss and are not deferred.
Expenses incurred towards voluntary retirement scheme are charged to
the statement of profit and loss immediately.
2.10 Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
 Sales of products and services are recognized when significant risks
and rewards of ownership of products are passed on to customers or when
the service has been provided. In case of large transformers, revenue
is recognized on achievement of contractual milestone. Revenue
recognized in excess of billing has been reflected under "Other current
assets" as unbilled revenue. Net sales are stated at contractual
realizable values, net of excise duty, sales tax, service tax, value
added tax and trade discounts.
 Revenues from long-term contracts are recognized on the percentage of
completion method, in proportion that the contract costs incurred for
work performed up to the reporting date bear to the estimated total
contract costs. Contract revenue earned in excess of billing has been
reflected under "Other current assets" and billing in excess of
contract revenue has been reflected under "Other current liabilities"
in the balance sheet. Full provision is made for any loss in the year
in which it is first foreseen.
 Liquidated damages / penalties are provided for as per the contract
terms wherever there is a delayed delivery attributable to the Company.
 Commission income is recognized as per contract terms and when
accrued.
 Income from development services are recognized on rendering of
service as per contract terms.
 Dividend income is recognized when the right to receive dividend is
established.
 Interest income is recognized on a time proportion method.
2.11 Provisions, contingent liabilities and contingent assets
A provision is recognized when the Company has a present obligation as
a result of past event and it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation,
in respect of which a reliable estimate can be made based on technical
evaluation and past experience. Provisions are not discounted to its
present value and are determined based on management 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
management estimates.
Disclosures for contingent liability are made when there is a possible
or present obligation for which it is not probable that there will be
an outflow of resources. When there is a possible or present obligation
in respect of which the likelihood of outflow of resources is remote,
no disclosure is made.
Contingent assets are neither recognized nor disclosed in the financial
statements.
2.12 Foreign currency transactions
Foreign currency transactions are recorded by applying the daily
exchange rates. Exchange differences arising on foreign currency
transactions settled during the year are recognized in the statement of
profit and loss for the year.
All foreign currency denominated monetary assets and liabilities are
translated at the exchange rates prevailing on the balance sheet date.
The resultant exchange differences are recognized in the statement of
profit and loss for the year. Non-monetary items, which are measured in
terms of historical cost denominated in a foreign currency, are
reported using the exchange rate at the date of the transaction.
Non-monetary items, which are measured at fair value or other similar
valuation denominated in a foreign currency, are translated using the
exchange rate at the date of transaction.
The Company uses derivative financial instruments such as forward
exchange contracts to hedge its risks associated with foreign currency
fluctuations.
Gain or loss on restatement of forward exchange contracts for hedging
underlying outstanding at the balance sheet date are recognized in the
statement of profit and loss for the year in which it occurs. The
premium or discount on such contracts is recognized in the statement of
profit and loss over the period of the contract.
Gain or loss on fair valuation of forward exchange contracts for
hedging highly probable forecasted transactions not covered under
Accounting Standard (AS) 11 "The effect of changes in foreign exchange
rates" are recognized in the statement of profit and loss for the year
in which it occurs.
The Company does not follow hedge accounting.
2.13 Taxation
Tax expense comprises current tax and deferred tax.
The current charge for income tax is measured at the amount expected to
be paid to the tax authorities in accordance with the Indian Income Tax
Act including probable adjustments, if any, for international
transactions with associated enterprises.
The deferred tax for timing differences between the book and tax
profits for the year is accounted for using the tax rates and laws that
have been enacted or substantively enacted as of the balance sheet
date. Deferred tax assets arising from timing differences are
recognized to the extent there is reasonable certainty that the assets
can be realized in future. Deferred tax assets are reviewed at each
balance sheet date for its reliability. The Company writes-down the
carrying amount of deferred tax assets to the extent it is no longer
reasonably certain of its realization.
2.14 Operating leases
Leases, where the less or effectively retains substantially all the
risks and benefits of ownership of the leased item, 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.
2.15 Operating cycle
A portion of the Company's activities (primarily long-term construction
activities) has an operating cycle that exceeds one year. Accordingly,
assets and liabilities related to these long-term contracts, which will
not be realized/paid within one year, have been classified as current.
For all other activities, the operating cycle is twelve months.
Dec 31, 2014
1.1 Basis of preparation of financial statements
The financial statements have been prepared to comply in all material
respects with the accounting standards notified by Companies Accounting
Standards Rules, 2006 (as amended) and the relevant provisions of the
Companies Act, 1956, read with General Circular 08/2014 dated April 04,
2014 issued by the Ministry of Corporate Affairs. The financial
statements have been prepared under the historical cost convention on
an accrual basis except for certain derivative instruments which are
measured at fair value in accordance with the accounting principles
generally accepted in India. The accounting policies have been
consistently applied and are consistent with those used in the previous
year.
2.2 Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles (GAAP) requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent liabilities as at the
date of the financial statements and reported amount of revenues and
expenses during the reporting period. Actual results could differ from
these estimates. Any revision to accounting estimates is recognized
prospectively in current and future periods.
2.3 Tangible and intangible assets
Fixed assets are stated at the cost of acquisition, less accumulated
depreciation / amortisation and accumulated impairment losses, if any.
Cost of fixed assets comprises purchase price, duties, levies and any
directly attributable cost of bringing the asset to its working
condition for the intended use. Own manufactured assets are capitalized
at cost including an appropriate share of overheads. Borrowing costs
related to the acquisition or construction of the qualifying fixed
assets for the period up to the completion of their acquisition or
construction are capitalized, if capitalization criteria are met. Cost
of fixed assets not ready for their intended use before balance sheet
date are disclosed under capital work in progress.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
Gains or losses arising from de-recognition of fixed assets are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss account when the asset is derecognized.
Capitalized software includes costs on Enterprise Resource Planning
(ERP) Project and other costs relating to software, which provide
significant future economic benefits. ERP Project costs comprise
license fees and cost of system integration services. All costs
relating to upgradations / enhancements are generally charged off as
revenue expenditure unless they bring significant additional benefits
of lasting nature.
2.4 Depreciation / amortization
Depreciation on assets (except those described below) is provided on
the straight-line method at the rates and in the manner prescribed in
Schedule XIV of the Companies Act, 1956, which management considers as
being representative of the useful economic lives of such assets.
Depreciation is provided from the date of capitalization till the date
of sale of assets.
The following assets are depreciated / amortized on the straight line
method over a period of their estimated useful lives:
- Leasehold land and leasehold improvements over the period of the
lease.
- Technical know-how fees over the period of three to six years.
- Capitalized software costs over a period of five years.
Goodwill on business acquisition is not amortized but tested for
impairment.
Assets individually costing Rs.5,000 or less are depreciated fully in
the year of purchase.
2.5 Impairment of assets
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal / external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the asset''s net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and risks
specific to the assets. After impairment, depreciation is provided on
the revised carrying amount of the assets over its remaining useful
life.
2.6 Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. However, provision for diminution in value is made to recognize a
decline other than temporary in the value of the investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
2.7 Inventories
Inventories are stated at the lower of cost and net realisable value.
The cost of various categories of inventories is arrived at as follows:
- Stores, spares, raw materials, components and traded goods - at rates
determined on the moving weighted average method.
- Goods in Transit - at actual cost.
- Work-in-progress and finished goods - at full absorption cost method
which includes direct materials, direct labour and manufacturing
overheads. Cost is determined on weighted average method. Excise duty
is included in the value of finished goods inventory.
Provision for obsolescence is made wherever necessary.
Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
2.8 Retirement and other employee benefits
Contribution to Superannuation Fund, a defined contribution scheme, is
made at pre-determined rates to the Superannuation Fund Trust and is
charged to the statement of profit and loss during the period in which
the employee renders the related services. There are no other
obligations other than the contribution payable to the Superannuation
Fund Trust.
Contributions to the recognized Provident Fund / Gratuity Fund, defined
benefits scheme, and provision for other long term employee benefits -
leave are made on the basis of actuarial valuations using the projected
unit credit method made at the end of each financial year and are
charged to the statement of profit and loss during the year.
Accumulated leave, which is expected to be utilised within the next 12
months, is treated as short-term employee benefits. The Company
measures the expected cost of such absences as the additional amount
that it expects to pay as a result of the unused entitlement that has
accumulated at the reporting date. The Company presents the entire
accumulated leave as a current liability in the balance sheet, since it
does not have an unconditional right to defer its settlement for 12
months after the reporting date.
Actuarial gains / losses are immediately taken to the statement of
profit and loss and are not deferred.
Expenses incurred towards voluntary retirement scheme are charged to
the statement of profit and loss immediately.
2.9 Revenue recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
- Sales of products and services are recognized when significant risks
and rewards of ownership of products are passed on to customers or when
the service has been provided. In case of large transformers, revenue
is recognized on achievement of contractual milestone. Revenue
recognized in excess of billing has been reflected under "Other
Current Assets" as Unbilled Revenue. Net sales are stated at
contractual realisable values, net of excise duty, sales tax, service
tax, value added tax and trade discounts.
- Revenues from long-term contracts are recognized on the percentage of
completion method, in proportion that the contract costs incurred for
work performed up to the reporting date bear to the estimated total
contract costs. Contract revenue earned in excess of billing has been
reflected under "Other Current Assets" and billing in excess of
contract revenue has been reflected under "Other Current
Liabilities" in the balance sheet. Full provision is made for any
loss in the year in which it is first foreseen.
- Liquidated damages / penalties are provided for as per the contract
terms wherever there is a delayed delivery attributable to the Company.
- Commission income is recognized as per contract terms.
- Income from development services are recognized on rendering of
service as per contract terms.
- Dividend income is recognized when the right to receive dividend is
established.
- Interest income is recognized on a time proportion method.
2.10 Provisions, contingent liabilities and contingent assets
A provision is recognized when the Company has a present obligation as
a result of past event and it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation,
in respect of which a reliable estimate can be made based on technical
evaluation and past experience. Provisions are not discounted to its
present value and are determined based on management 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
management estimates.
Disclosures for contingent liability are made when there is a possible
or present obligation for which it is not probable that there will be
an outflow of resources. When there is a possible or present obligation
in respect of which the likelihood of outflow of resources is remote,
no disclosure is made.
Contingent assets are neither recognized nor disclosed in the financial
statements.
2.11 Foreign currency transactions
Foreign currency transactions are recorded by applying the daily
exchange rates. Exchange differences arising on foreign currency
transactions settled during the year are recognized in the statement of
profit and loss for the year.
All foreign currency denominated monetary assets and liabilities are
translated at the exchange rates prevailing on the balance sheet date.
The resultant exchange differences are recognized in the statement of
profit and loss for the year.
The Company uses derivative financial instruments such as forward
exchange contracts to hedge its risks associated with foreign currency
fluctuations.
Gain or loss on restatement of forward exchange contracts for hedging
underlying outstandings at the balance sheet date are recognized in the
statement of profit and loss for the year in which it occurs. The
premium or discount on such contracts is recognized in the statement of
profit and loss over the period of the contract.
Gain or loss on fair valuation of forward exchange contracts for
hedging highly probable forecasted transactions not covered under
Accounting Standard (AS) 11 "The effect of changes in foreign
exchange rates" are recognized in the statement of profit and loss
for the year in which it occurs.
The Company does not follow hedge accounting.
2.12 Taxation
Tax expense comprises current tax and deferred tax.
The current charge for income tax is measured at the amount expected to
be paid to the tax authorities in accordance with the Indian Income Tax
Act including probable adjustments, if any, for international
transactions with associated enterprises.
The deferred tax for timing differences between the book and tax
profits for the year is accounted for using the tax rates and laws that
have been enacted or substantively enacted as of the balance sheet
date. Deferred tax assets arising from timing differences are
recognized to the extent there is reasonable certainty that the assets
can be realised in future. Deferred tax assets are reviewed at each
balance sheet date for its realisability. The Company writes-down the
carrying amount of deferred tax assets to the extent it is no longer
reasonably certain of its realisation.
2.13 Operating leases
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased item, 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.
2.14 Operating cycle
A portion of the Company''s activities (primarily long-term
construction activities) has an operating cycle that exceeds one year.
Accordingly, assets and liabilities related to these long-term
contracts, which will not be realized / paid within one year, have been
classified as current. For all other activities, the operating cycle is
twelve months.
Dec 31, 2013
2.1 Basis of preparation of financial statements
The financial statements have been prepared to comply in all material
respects with the notified accounting standards by Companies Accounting
Standards Rules, 2006 (as amended) and the relevant provisions of the
Companies Act, 1956, read with General Circular 15/2013 dated September
13, 2013 issued by the Ministry of Corporate Affairs, in respect of
section 133 of the Companies Act, 2013. The financial statements have
been prepared under the historical cost convention on an accrual basis
except for certain derivative instruments which are measured at fair
value in accordance with the accounting principles generally accepted
in India. The accounting policies have been consistently applied and
are consistent with those used in the previous year.
2.2 Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles (GAAP) requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent liabilities as at the
date of the financial statements and reported amount of revenues and
expenses during the reporting period. Actual results could differ from
these estimates. Any revision to accounting estimates is recognized
prospectively in current and future periods.
2.3 Tangible and intangible assets
Fixed assets are stated at the cost of acquisition, less accumulated
depreciation / amortisation and accumulated impairment losses, if any.
Cost of fixed assets comprises purchase price, duties, levies and any
directly attributable cost of bringing the asset to its working
condition for the intended use. Own manufactured assets are capitalized
at cost including an appropriate share of overheads. Borrowing costs
related to the acquisition or construction of the qualifying fixed
assets for the period up to the completion of their acquisition or
construction are capitalized, if capitalization criteria are met. Cost
of fixed assets not ready for their intended use before balance sheet
date are disclosed under capital work in progress.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
Gains or losses arising from de-recognition of fixed assets are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is derecognized.
Capitalized software includes costs on Enterprise Resource Planning
(ERP) Project and other costs relating to software, which provide
significant future economic benefits. ERP Project costs comprise
license fees and cost of system integration services. All costs
relating to up gradations / enhancements are generally charged off as
revenue expenditure unless they bring significant additional benefits
of lasting nature.
2.4 Depreciation / amortization
Depreciation on assets (except those described below) is provided on
the straight-line method at the rates and in the manner prescribed in
Schedule XIV of the Companies Act, 1956, which management considers as
being representative of the useful economic lives of such assets.
Depreciation is provided from the date of capitalization till the date
of sale of assets.
The following assets are depreciated / amortized on the straight line
method over a period of their estimated useful lives:
- Leasehold land and leasehold improvements over the period of the
lease.
- Technical know-how fees over the period of three to six years.
- Capitalized software costs over a period of five years.
Goodwill on business acquisition is not amortized but tested for
impairment.
Assets individually costing Rs 5,000 or less are depreciated fully in
the year of purchase.
2.5 Impairment of assets
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal / external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the asset''s net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and risks
specific to the assets. After impairment, depreciation is provided on
the revised carrying amount of the assets over its remaining useful
life.
2.6 Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. However, provision for diminution in value is made to recognize a
decline other than temporary in the value of the investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
2.7 Inventories
Inventories are stated at the lower of cost and net realisable value.
The cost of various categories of inventories is arrived at as follows:
- Stores, spares, raw materials, components and traded goods - at rates
determined on the moving weighted average method.
- Goods in Transit - at actual cost.
- Work-in-progress and finished goods - at full absorption cost method
which includes direct materials, direct labor and manufacturing
overheads. Cost is determined on weighted average method. Excise duty
is included in the value of finished goods inventory.
Provision for obsolescence is made wherever necessary.
Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
2.8 Retirement and other employee benefits
Contribution to Superannuation Fund, a defined contribution scheme, is
made at pre-determined rates to the Superannuation Fund Trust and is
charged to the statement of profit and loss. There are no other
obligations other than the contribution payable to the Superannuation
Fund Trust.
Contributions to the recognized Provident Fund / Gratuity Fund and
provision for other long term employee benefits - leave, defined
benefit schemes, are made on the basis of actuarial valuations made at
the end of each financial year and are charged to statement of profit
and loss during the year.
Accumulated leave, which is expected to be utilised within the next 12
months, is treated as short-term employee benefit. The Company measures
the expected cost of such absences as the additional amount that it
expects to pay as a result of the unused entitlement that has
accumulated at the reporting date. The Company presents the entire
accumulated leave as a current liability in the balance sheet, since it
does not have an unconditional right to defer its settlement for 12
months after the reporting date.
Actuarial gains / losses are immediately taken to the statement of
profit and loss and are not deferred.
Expenses incurred towards voluntary retirement scheme are charged to
the statement of profit and loss immediately.
2.9 Revenue recognition
- Sales of products and services are recognized when significant risks
and rewards of ownership of products are passed on to customers or when
the service has been provided. In case of large transformers, revenue
is recognized on achievement of contractual milestone. Revenue
recognized in excess of billing has been reflected under "Other
Current Assets" as Unbilled Revenue. Net sales are stated at
contractual realisable values, net of excise duty, sales tax, service
tax, value added tax and trade discounts.
- Revenues from long-term contracts are recognized on the percentage of
completion method, in proportion that the contract costs incurred for
work performed up to the reporting date bear to the estimated total
contract costs. Contract revenue earned in excess of billing has been
reflected under "Other Current Assets" and billing in excess of
contract revenue has been reflected under "Other Current
Liabilities" in the balance sheet. Full provision is made for any
loss in the year in which it is first foreseen.
- Liquidated damages / penalties are provided for as per the contract
terms wherever there is a delayed delivery attributable to the Company.
- Commission income is recognized as per contracts.
- Income from development services are recognized on rendering of
service as per contract.
- Dividend income is recognized when the right to receive dividend is
established.
- Interest income is recognized on the time proportion method.
2.10 Provisions, contingent liabilities and contingent assets
A provision is recognized when the Company has a present obligation as
a result of past event and it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation,
in respect of which a reliable estimate can be made based on technical
evaluation and past experience. Provisions are not discounted to its
present value and are determined based on management 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
management estimates.
Disclosures for contingent liability are made when there is a possible
or present obligation for which it is not probable that there will be
an outflow of resources. When there is a possible or present obligation
in respect of which the likelihood of outflow of resources is remote,
no disclosure is made.
Contingent assets are neither recognized nor disclosed in the financial
statements.
2.11 Research and Development
All revenue expenditure pertaining to research are charged to statement
of profit and loss in the year in which they are incurred. Development
expenditure of capital nature is capitalized as fixed assets, and
depreciated as per the Company''s policy.
2.12 Foreign currency transactions
Foreign currency transactions are recorded by applying the daily
exchange rates. Exchange differences arising on foreign currency
transactions settled during the year are recognized in the statement of
profit and loss for the year.
All foreign currency denominated monetary assets and liabilities are
translated at the exchange rates prevailing on the balance sheet date.
The resultant exchange differences are recognized in the statement of
profit and loss for the year.
The Company uses derivative financial instruments such as forward
exchange contracts to hedge its risks associated with foreign currency
fluctuations.
Gain or loss on restatement of forward exchange contracts for hedging
underlying outstandings at the balance sheet date are recognized in the
statement of profit and loss for the year in which it occurs. The
premium or discount on such contracts is recognized in the statement of
profit and loss over the period of the contract.
Gain or loss on fair valuation of forward exchange contracts for
hedging highly probable forecasted transactions not covered under
Accounting Standard (AS) 11 "The effect of changes in foreign
exchange rates" are recognized in the statement of profit and loss
for the year in which it occurs.
The Company does not follow hedge accounting.
2.13 Taxation
Tax expense comprises current tax and deferred tax.
The current charge for income tax is measured at the amount expected to
be paid to the tax authorities in accordance with the Indian Income Tax
Act including probable adjustments, if any, for international
transactions with associated enterprises.
The deferred tax for timing differences between the book and tax
profits for the year is accounted for using the tax rates and laws that
have been enacted or substantively enacted as of the balance sheet
date. Deferred tax assets arising from timing differences are
recognized to the extent there is reasonable certainty that the assets
can be realised in future. Deferred tax assets are reviewed at each
balance sheet date for its realisability. The Company writes-down the
carrying amount of deferred tax assets to the extent it is no longer
reasonably certain of its realisation.
2.14 Operating leases
Leases, where the lesser effectively retains substantially all the
risks and benefits of ownership of the leased item, 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.
2.15 Operating cycle
A portion of the Company''s activities (primarily long-term
construction activities) has an operating cycle that exceeds one year.
Accordingly, assets and liabilities related to these long-term
contracts, which will not be realized / paid within one year, have been
classified as current. For all other activities, the operating cycle is
twelve months.
Dec 31, 2012
1.1 Basis of preparation of fnancial statements
The fnancial statements have been prepared to comply in all material
respects with the notifed accounting standards by Companies Accounting
Standards Rules, 2006 (as amended) and the relevant provisions of the
Companies Act, 1956. The fnancial statements have been prepared under
the historical cost convention on an accrual basis except for certain
derivative instruments which are measured at fair value in accordance
with the accounting principles generally accepted in India. The
accounting policies have been consistently applied by the Company,
except for the change in accounting policy discussed more fully below,
and are consistent with those used in the previous year.
1.2 Change in accounting policies
During the year ended December 31, 2012, the revised Schedule VI
notifed under the Companies Act, 1956, has become applicable to the
Company, for preparation and presentation of its fnancial statements.
The adoption of revised Schedule VI does not impact recognition and
measurement principles followed for preparation of fnancial statements.
However, it has signifcant impact on presentation and disclosures made
in the fnancial statements. The Company has also reclassifed the
previous year fgures in accordance with the requirements applicable in
the current year.
During the year ended December 31, 2012, the Company has decided to
discontinue accounting for changes in fair value of embedded derivative
contracts, to better present the operating performance of the Company
and to align its accounting in line with the policy followed by other
peer group companies. Consequent to such change in accounting policy,
proft before tax for the current year ended December 31, 2012 is lower
by Rs 1.85 Crore.
1.3 Use of estimates
The preparation of fnancial statements in conformity with generally
accepted accounting principles (GAAP) requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent liabilities as at the
date of the fnancial statements and reported amount of revenues and
expenses during the reporting period. Actual results could differ from
these estimates. Any revision to accounting estimates is recognized
prospectively in current and future periods.
1.4 Tangible and intangible assets
Fixed assets are stated at the cost of acquisition, less accumulated
depreciation / amortisation and accumulated impairment losses, if any.
Cost of fxed assets comprises purchase price, duties, levies and any
directly attributable cost of bringing the asset to its working
condition for the intended use. Own manufactured assets are capitalized
at cost including an appropriate share of overheads. Borrowing costs
related to the acquisition or construction of the qualifying fxed
assets for the period up to the completion of their acquisition or
construction are capitalized, if capitalization criteria are met. Cost
of fxed assets not ready for their intended use before balance sheet
date are disclosed under capital work in progress.
Subsequent expenditure related to an item of fxed asset is added to its
book value only if it increases the future benefts from the existing
asset beyond its previously assessed standard of performance. All other
expenses on existing fxed assets, including day-to-day repair and
maintenance expenditure and cost of replacing parts, are charged to the
statement of proft and loss for the period during which such expenses
are incurred.
Gains or losses arising from de-recognition of fxed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of proft and
loss when the asset is derecognized.
Capitalised software includes costs on Enterprise Resource Planning
(ERP) project and other costs relating to software, which provide
signifcant future economic benefts. ERP project costs comprise license
fees and cost of system integration services. All costs relating to
upgradations / enhancements are generally charged off as revenue
expenditure unless they bring signifcant additional benefts of lasting
nature.
Assets acquired under fnance lease are capitalised at the lower of
their fair value and the present value of the minimum lease payments.
1.5 Depreciation / amortisation
Depreciation on assets (except those described below) is provided on
the straight-line method at the rates and in the manner prescribed in
Schedule XIV of the Companies Act, 1956, which management considers as
being representative of the useful economic lives of such assets.
Depreciation is provided from the date of capitalization till the date
of sale of assets.
The following assets are depreciated / amortised on the straight line
method over a period of their estimated useful lives:
 Leasehold land and leasehold improvements over the period of the
lease.
 Technical know-how fees over a period of six years.
 Capitalized software costs over a period of fve years.
Goodwill on business acquisition is not amortised but tested for
impairment.
Assets individually costing Rs 5,000 or less are depreciated fully in
the year of purchase.
Assets under fnance lease are depreciated over the lower of the lease
term or the useful life of the asset unless there is reasonable
certainty that the Company will obtain ownership, wherein such assets
are depreciated on the straight-line method at the rates prescribed in
Schedule XIV of the Companies Act, 1956.
1.6 Impairment of assets
The carrying amount of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal / external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the asset-s net selling price and value in use. In
assessing value in use, the estimated future cash fows are discounted
to their present value using a pre-tax discount rate that refects
current market assessments of the time value of money and risks specifc
to the assets. After impairment, depreciation is provided on the
revised carrying amount of the assets over its remaining useful life.
1.7 Investments
Investments that are readily realisable and intended to be held for not
more than a year are classifed as current investments. All other
investments are classifed as long-term investments. Current investments
are carried at lower of cost and fair value determined on an individual
investment basis. Long-term investments are carried at cost. However,
provision for diminution in value is made to recognize a decline other
than temporary in the value of the investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of proft and loss.
1.8 Inventories
Inventories are stated at the lower of cost and net realisable value.
The cost of various categories of inventories is arrived at as follows:
 Stores, spares, raw materials, components and traded goods - at rates
determined on the moving weighted average method.
 Goods in Transit - at actual cost.
 Work-in-progress and fnished goods - at full absorption cost method
which includes direct materials, direct labour and manufacturing
overheads. Cost is determined on weighted average method. Excise duty
is included in the value of fnished goods inventory.
Provision for obsolescence is made wherever necessary.
Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
1.9 Retirement and other employee benefts
Contribution to Superannuation Fund, a defned contribution scheme, is
made at pre-determined rates to the Superannuation Fund Trust and is
charged to the statement of proft and loss. There are no other
obligations other than the contribution payable to the Superannuation
Fund Trust.
Contributions to the recognized Provident Fund / Gratuity Fund and
provision for other long term employee benefts - leave, defned beneft
schemes, are made on the basis of actuarial valuations made at the end
of each fnancial year and are charged to statement of proft and loss
during the year.
Accumulated leave, which is expected to be utilised within the next 12
months, is treated as short-term employee beneft. The Company measures
the expected cost of such absences as the additional amount that it
expects to pay as a result of the unused entitlement that has
accumulated at the reporting date. The Company presents the entire
accumulated leave as a current liability in the balance sheet, since it
does not have an unconditional right to defer its settlement for 12
months after the reporting date.
Actuarial gains / losses are immediately taken to the statement of
proft and loss and are not deferred.
Expenses incurred towards voluntary retirement scheme are charged to
the statement of proft and loss immediately.
1.10 Revenue recognition
 Sales of products and services are recognized when signifcant risks
and rewards of ownership of products are passed on to customers or when
the service has been provided. In case of large transformers, revenue
is recognized on achievement of contractual milestone. Revenue
recognized in excess of billing has been refected under "Other current
assets" as unbilled revenue. Net sales are stated at contractual
realisable values, net of excise duty, sales tax, service tax, value
added tax and trade discounts.
 Revenues from long-term contracts are recognized on the percentage of
completion method, in proportion that the contract costs incurred for
work performed up to the reporting date bear to the estimated total
contract costs. Contract revenue earned in excess of billing has been
refected under "Other current assets" and billing in excess of contract
revenue has been refected under "Other current liabilities" in the
balance sheet. Full provision is made for any loss in the year in which
it is frst foreseen.
 Liquidated damages / penalties are provided for as per the contract
terms wherever there is a delayed delivery attributable to the Company.
 Commission income is recognized as per contracts.
 Income from development services are recognized on rendering of
service as per contract.
 Dividend income is recognized when the right to receive dividend is
established.
 Interest income is recognized on the time proportion method.
1.11 Provisions, contingent liabilities and contingent assets
A provision is recognized when the Company has a present obligation as
a result of past event and it is probable that an outfow of resources
embodying economic benefts will be required to settle the obligation,
in respect of which a reliable estimates can be made based on technical
evaluation and past experience. Provisions are not discounted to its
present value and are determined based on management estimate required
to settle the obligation at the balance sheet date. These are reviewed
at each balance sheet date and adjusted to refect the current
management estimates.
Disclosures for contingent liability are made when there is a possible
or present obligation for which it is not probable that there will be
an outfow of resources. When there is a possible or present obligation
in respect of which the likelihood of outfow of resources is remote, no
disclosure is made.
Contingent assets are neither recognized nor disclosed in the fnancial
statements.
1.12 Research and Development
All revenue expenditure pertaining to research are charged to statement
of proft and loss in the year in which they are incurred. Development
expenditure of capital nature is capitalized as fxed assets, and
depreciated as per the Company-s policy.
1.13 Foreign currency transactions
Foreign currency transactions are recorded by applying the daily
exchange rates. Exchange differences arising on foreign currency
transactions settled during the year are recognized in the statement of
proft and loss for the year.
All foreign currency denominated monetary assets and liabilities are
translated at the exchange rates prevailing on the balance sheet date.
The resultant exchange differences are recognized in the statement of
proft and loss for the year.
The Company uses derivative fnancial instruments such as forward
exchange contracts to hedge its risks associated with foreign currency
fuctuations.
Gain or loss on restatement of forward exchange contracts for hedging
underlying outstandings at the balance sheet date are recognized in the
statement of proft and loss for the year in which it occurs. The
premium or discount on such contracts is recognized in the statement of
proft and loss over the period of the contract.
Gain or loss on fair valuation of forward exchange contracts for
hedging highly forecasted transactions are recognized in the statement
of proft and loss for the year in which it occurs.
The Company does not follow hedge accounting.
1.14 Taxation
Tax expense comprises current tax and deferred tax.
The current charge for income tax is measured at the amount expected to
be paid to the tax authorities in accordance with the Indian Income Tax
Act including probable adjustments, if any, for international
transactions with associated enterprises.
The deferred tax for timing differences between the book and tax profts
for the year is accounted for using the tax rates and laws that have
been enacted or substantively enacted as of the balance sheet date.
Deferred tax assets arising from timing differences are recognized to
the extent there is reasonable certainty that the assets can be
realised in future. Deferred tax assets are reviewed at each balance
sheet date for its realisability. The Company writes-down the carrying
amount of deferred tax assets to the extent it is no longer reasonably
certain of its realisation.
1.15 Operating leases
Leases, where the lessor effectively retains substantially all the
risks and benefts of ownership of the leased item, are classifed as
operating leases. Operating lease payments are recognized as an expense
in the statement of proft and loss on a straight-line basis over the
lease term.
1.16 Operating cycle
A portion of the Company-s activities (primarily long-term construction
activities) has an operating cycle that exceeds one year. Accordingly,
assets and liabilities related to these long-term contracts, which will
not be realized / paid within one year, have been classifed as current.
For all other activities, the operating cycle is twelve months.
Dec 31, 2011
1. Nature of Operations
ABB Limited ('the Company') has served utility and industry
customers for over 60 years with the complete range of engineering,
products, solutions and services in areas of Automation and Power
technology. The Company has extensive installed base for manufacturing
and a countrywide marketing and service presence. Besides catering to
Indian domestic market, the Company is also playing an increasing role
in the global market.
2. Significant Accounting Policies
2.1 Basis of Preparation of Financial Statements
The financial statements have been prepared to comply in all material
respects with the notified accounting standards by Companies Accounting
Standards Rules, 2006 (as amended) and the relevant provisions of the
Companies Act, 1956. The financial statements have been prepared under
the historical cost convention on an accrual basis in accordance with
the accounting principles generally accepted in India. The accounting
policies have been consistently applied by the Company, except for the
change in accounting policy discussed more fully below, and are
consistent with those used in the previous year.
2.2 Change in Accounting Policy
The Company has revised its accounting policy for goodwill arising on
acquisition of businesses effective January 1, 2011 from amortisation
to testing for impairment. Management believes this change in
accounting policy aligns with leading international practices and
reflects enduring benefits to be derived from goodwill arising on
acquisitions. Consequent to this change in accounting policy, the
profit for the year is higher by Rs 81,629 thousand.
2.3 Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles (GAAP) requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent liabilities as at the
date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
these estimates. Any revision to accounting estimates is recognized
prospectively in current and future periods.
2.4 Fixed Assets (Tangible and Intangible)
Fixed assets are stated at the cost of acquisition, less accumulated
depreciation / amortization and impairment losses, if any. Cost of
fixed assets comprises purchase price, duties, levies and any directly
attributable cost of bringing the asset to its working condition for
the intended use. Own manufactured assets are capitalized at cost
including an appropriate share of overheads. Borrowing costs related to
the acquisition or construction of the qualifying fixed assets for the
period up to the completion of their acquisition or construction are
capitalized. Advances paid towards the acquisition of fixed assets
outstanding at each balance sheet date and the cost of fixed assets not
ready for their intended use before such date are disclosed under
capital work in progress.
Capitalized software includes costs on Enterprise Resource Planning
(ERP) Project and other costs relating to software, which provide
significant future economic benefits. ERP Project costs comprise
license fees and cost of system integration services. All costs
relating to up gradations / enhancements are generally charged off as
revenue expenditure unless they bring significant additional benefits
of lasting nature.
Assets acquired under finance lease are capitalized at the lower of
their fair value and the present value of the minimum lease payments.
2.5 Depreciation / Amortization
Depreciation on assets (except those described below) is provided on
the straight-line method at the rates and in the manner prescribed in
Schedule XIV of the Companies Act, 1956, which management considers as
being representative of the useful economic lives of such assets.
Depreciation is provided from the date of capitalization till the date
of sale of assets.
The following assets are depreciated / amortized on the straight line
method over a period of their estimated useful lives:
Leasehold land and leasehold improvements over the period of the lease.
Technical know-how fees over a period of six years.
Capitalized software costs over a period of five years.
Goodwill on acquisition is not amortized but tested for impairment.
Assets individually costing Rs 5,000 or less are depreciated fully in
the year of purchase.
Assets under finance lease are depreciated over the lower of the lease
term or the useful life of the asset unless there is reasonable
certainty that the Company will obtain ownership, wherein such assets
are depreciated on the straight-line method at the rates prescribed in
Schedule XIV of the Companies Act, 1956.
2.6 Impairment of assets
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal / external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the asset's net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and risks
specific to the assets. After impairment, depreciation is provided on
the revised carrying amount of the assets over its remaining useful
life.
2.7 Investments
Investments that are readily realizable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value. Long-term
investments are carried at cost. However, provision for diminution in
value is made to recognize a decline other than temporary in the value
of the investments.
2.8 Inventories
Inventories are stated at the lower of cost and net realizable value.
The cost of various categories of inventories is arrived at as follows:
Stores, spares, raw materials and components - at rates determined on
the moving weighted average method.
Goods in Transit - at actual cost.
Work-in-progress and finished goods - at full absorption cost method
based on annual average cost of production which includes direct
materials, direct labour and manufacturing overheads. Excise duty is
included in the value of finished goods inventory.
Provision for obsolescence is made wherever necessary.
2.9 Employee Benefits
Contribution to Superannuation Fund, a defined contribution scheme, is
made at pre-determined rates to the Superannuation Fund Trust and is
charged to the profit and loss account. There are no other obligations
other than the contribution payable to the Superannuation Fund Trust.
Contributions to the recognized Provident Fund / Gratuity Fund and
provision for other long term employee benefits - leave, defined
benefit schemes, are made on the basis of actuarial valuations using
the projected unit credit method made at the end of each financial year
and are charged to the profit and loss account during the year.
Actuarial gains and losses are recognized immediately in the profit and
loss account.
2.10 Revenue Recognition
Sales of products and services are recognized when significant risks
and rewards of ownership of products are passed on to customers or when
the service has been provided. In case of large transformers, revenue
is recognized on achievement of contractual milestone. Revenue
recognized in excess of billing has been reflected under "Other
Current Assets" as Unbilled Revenue. Net sales are stated at
contractual realizable values, net of excise duty, sales tax, service
tax, value added tax and trade discounts.
Revenues from long-term contracts are recognized on the percentage of
completion method, in proportion that the contract costs incurred for
work performed up to the reporting date bear to the estimated total
contract costs. Contract revenue earned in excess of billing has been
reflected under "Other Current Assets" and billing in excess of
contract revenue has been reflected under "Current Liabilities" in
the balance sheet.
Full provision is made for any loss in the year in which it is first
foreseen.
Liquidated damages / penalties are provided for as per the contract
terms wherever there is a delayed delivery attributable to the Company.
Commission income is recognized as per contracts / receipt of credit
note. Dividend income is recognized when the right to receive
dividend is established.
Interest income is recognized on the time proportion method.
2.11 Provisions
A provision is recognized when the Company has a present 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 a
reliable estimate can be made based on technical evaluation and past
experience. Provisions are not discounted to its present value and are
determined based on management 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 management
estimates.
Disclosures for contingent liability are made when there is a possible
or present obligation for which it is not probable that there will be
an outflow of resources. When there is a possible or present obligation
in respect of which the likelihood of outflow of resources is remote,
no disclosure is made. Contingent assets are neither recognized nor
disclosed in the financial statements.
2.12 Research and Development
All revenue expenditure pertaining to research are charged to the
profit and loss account in the year in which they are incurred and
development expenditure of capital nature is capitalized as fixed
assets, and depreciated as per the Company's policy.
2.13 Foreign Currency Transactions
Foreign currency transactions are recorded by applying the daily
exchange rates. Exchange differences arising on foreign currency
transactions settled during the year are recognized in the profit and
loss account for the year.
All foreign currency denominated monetary assets and liabilities are
translated at the exchange rates prevailing on the balance sheet date.
The resultant exchange differences are recognized in the profit and
loss account for the year.
The Company uses derivative financial instruments such as forward
exchange contracts to hedge its risks associated with foreign currency
fluctuations.
Gain or loss on restatement of forward exchange contracts for hedging
underlying outstanding at the balance sheet date are in the recognized
in the profit and loss account for the year in which it occurs. The
premium or discount on such contracts is recognised in the profit and
loss account over the period of the contract.
Gain or loss on fair valuation of forward exchange contracts for
hedging highly forecasted transactions and embedded derivative
contracts are recognized in the profit and loss account for the year in
which it occurs.
2.14 Taxation
The current charge for income tax is measured at the amount expected to
be paid to the tax authorities in accordance with the Indian Income Tax
Act including probable adjustments, if any, for international
transactions with associated enterprises. Provision for current income
tax is made on the basis of the results of the year although the actual
liability will be computed and paid on the basis of the results for the
year ending March 31, 2012.
The deferred tax for timing differences between the book and tax
profits for the year is accounted for using the tax rates and laws that
have been enacted or substantively enacted as of the balance sheet
date. Deferred tax assets arising from timing differences are
recognized to the extent there is reasonable certainty that the assets
can be realized in future. Deferred tax assets are reviewed at each
balance sheet date for its reliability.
2.15 Operating Leases
Leases, where the lesser effectively retains substantially all the
risks and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the profit and loss account on a straight-line basis over the lease
term.
3. Acquisitions
a) The Company has acquired with effect from April 1, 2011 three
businesses; (a) Transformer Insulation - Boards and Components, (b) Low
Voltage Breakers and Switches and (c) Vacuum Interrupters from M/s ABB
Global Industries and Services Limited, for an aggregate consideration
of Rs 4,000,000 thousand on a slump sale basis. Net Assets acquired is
Rs 3,535,797 thousand and goodwill capitalized on acquisition is Rs
464,203 thousand.
b) During the year the Company has acquired 100% equity shares of
Baldur Electric India Private Limited, Pane (Baldur) from Baldur
Holdings Inc., USA and Baldur Electric Switzerland AG, Switzerland, for
a total consideration of Rs 339,000 thousand. Baldur became a wholly
owned subsidiary of the Company effective December 1, 2011. The Company
is in the process of acquiring the preference shares in Baldur at
consideration of Rs 18,458 thousand from Baldur Holdings Inc., USA.
5. Segment Reporting A) Primary Segment Reporting (by Business
Segments) i) Composition of Business Segments
The Company's business segments are organized around products and
system solutions provided to its customers, which include utilities,
industries, channel partners and original equipment manufacturers.
Power Systems Segment (PS) offers turnkey systems and services for
transmission and distributions for power grid and power plants. The
segment offers the instrumentation, control and the entire balance of
power plants, which improve performance and energy efficiency through
flexible alternating current transmission systems, high voltage direct
current systems, network management systems and utility communications.
Power Products Segment (PP) manufactures, engineers, supplies key
components to transmit and distribute electricity, improving power
supply and energy efficiency. The segment produces transformers, high
and medium voltage switchgears, circuit breakers, capacitors,
distribution relays, insulation paper and paper board components etc.
Process Automation Segment (PA) provides customers with integrated
solutions for control, plant optimization and industry specific
application knowledge. The industries served include oil and gas,
power, chemicals and pharmaceuticals, pulps and paper, metals and
minerals, marine and turbo charging.
Discrete Automation and Motion Segment (DM) provides products, with
related services, that are used as components in machinery and
automation systems. The segment covers a wide range of products and
services including power electronics systems, motors and generators,
drives, robots etc.
Low Voltage Products Segment (LP) manufactures products and systems
that provide protection, control and measurement for electrical
installations, enclosures, switchboards, electronics and
electromechanical devices for industrial machines, plants and related
service.
ii) The accounting policies used in the preparation of the financial
statements of the Company are also applied for segment reporting.
iii) Segment revenues, expenses, assets and liabilities are those,
which are directly attributable to the segment or are allocated on an
appropriate basis. Corporate and other revenues, expenses, assets and
liabilities to the extent not allocable to segments are disclosed in
the reconciliation of reportable segments with the financial
statements.
iv) Inter Segment Transfer Pricing
Inter segment prices are normally negotiated amongst the segments with
reference to the costs, market prices and business risks, within an
overall optimization objective for the Company.
v) Figures in brackets are in respect of the previous year.
9. The Company has taken several premises and equipments under
cancellable and non-cancellable operating leases. These lease
agreements are normally for one to ten years and have option of
renewal on expiry of lease period based on mutual agreement. The
Company has non-cancellable operating lease obligations of Rs 42,560
thousand (Previous year Rs 48,448 thousand) payable within one year
and Rs 83,119 thousand (Previous Year Rs 104,802 thousand) payable
later than one year but not later than five years and Rs 34,447
thousand (Previous Year Rs 55,325 thousand) payable later than five
years as on December 31, 2011. Rental expenses towards cancellable
and non- cancellable operating lease charged to the profit and loss
account amounts of Rs 295,558 thousand (Previous Year Rs 298,413
thousand).
There are no assets given on operating leases.
Some of the lease agreements have escalation clause ranging from 5% to
15%. There are no exceptional / restrictive covenants in the lease
agreements.
10. Deferred Tax
The breakup of net deferred tax assets / liability as at December 31,
2011 is as follows: (Figures in brackets are in respect of the previous
year):
11. Capacities, Production, Stock and Turnover (Refer Schedule 12)
11.1 Capacities
a) Installed capacities are as certified by the Management, but not
verified by the auditors, being a technical matter.
11.2 Production
a) Production of finished goods is inclusive of production for captive
use.
b)there represent internally manufactured components, sold during the
year. The Company considers these 'meant for sale'
when actually sold. Since the quantitative denominations of these items
are dissimilar, it is impracticable to disclose the quantitative
information in respect of production and turnover.
11.3 Project items
a) These comprise sale of equipment and miscellaneous items meant for
execution of projects and trading items. Since the quantitative
denominations of these items are dissimilar, it is impracticable to
disclose the quantitative information in respect thereof.
b) Purchases of these items during the year aggregated to Rs 22,298,357
thousand (Previous Year Rs 20,958,914 thousand) Individual items of
purchases are not more than 10% of the total purchases.
11.4 Work-in-Progress
a) The Work-in-Progress at the beginning of the year amounted to Rs
2,278,992 thousand (Previous Year Rs 2,219,033 thousand).
Dec 31, 2010
1.1 Basis of Preparation of Financial Statements
The financial statements have been prepared to comply in all material
respects with the notified accounting standards by Companies Accounting
Standards Rules, 2006 (as amended) and the relevant provisions of the
Companies Act, 1956. The financial statements have been prepared under
the historical cost convention on an accrual basis in accordance with
the accounting principles generally accepted in India. The accounting
policies have been consistently applied by the Company, except for the
change in accounting policy discussed more fully below, and are
consistent with those used in the previous year.
1.2 Change in Accounting Policy
Certain freehold and leasehold land, factory and other buildings and
residential quarters were revalued during 1985,1986 and 1996. During
the year the management has decided to restate such assets at
historical cost effective from 1st October, 2010. As a result an amount
of Rs 138,036 thousand net of depreciation has been adjusted against
book value of fixed assets and corresponding revaluation reserve. This
has no impact on the profit for the year.
1.3 Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles (GAAP) requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent liabilities as at the
date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
these estimates. Any revision to accounting estimates is recognised
prospectively in current and future periods.
1.4 Fixed Assets (Tangible and Intangible)
Fixed assets are stated at the cost of acquisition, less accumulated
depreciation and impairment losses, if any. Cost of fixed assets
comprises purchase price, duties, levies and any directly attributable
cost of bringing the asset to its working condition for the intended
use. Own manufactured assets are capitalised at cost including an
appropriate share of overheads. Borrowing costs related to the
acquisition or construction of the qualifying fixed assets for the
period up to the completion of their acquisition or construction are
capitalised. Advances paid towards the acquisition of fixed assets
outstanding at each balance sheet date and the cost of fixed assets not
ready for their intended use before such date are disclosed under
capital work in progress.
Capitalised software includes costs on Enterprise Resource Planning
(ERP) Project and other costs relating to software, which provide
significant future economic benefits. ERP Project costs comprise
license fees and cost of system integration services. All costs
relating to upgradations / enhancements are generally charged off as
revenue expenditure unless they bring significant additional benefits
of lasting nature.
Assets acquired under finance lease are capitalised at the lower of
theirfair value and the present value of the minimum lease payments.
The carrying amounts are reviewed at each balance sheet date when
required to assess whether they are recorded in excess of their
recoverable amounts, and where carrying values exceed this estimated
recoverable amount, assets are written down to their recoverable
amount. The recoverable amount is the greater of the assets net
selling price and value in use.
1.5 Depreciation/Amortisation
Depreciation on assets (except those described below) is provided on
the straight-line method at the rates and in the manner prescribed in
Schedule XIV of the Companies Act, 1956, which management considers as
being representative of the useful economic lives of such assets.
Depreciation is provided from the date of capitalisation till the date
of sale of assets.
The following assets are depreciated / amortised on the straight line
method over a period of their estimated useful lives:
- Leasehold land and leasehold improvements over the period of the
lease.
- Technical know - how fees over a period of six years.
- Capitalised software costs over a period of five years.
- Goodwill on acquisition over a period of five years.
Assets individually costing Rs 5,000 or less are depreciated fully in
the year of purchase.
Assets under finance lease are depreciated over the lower of the lease
term or the useful life of the asset unless there is reasonable
certainty that the Company will obtain ownership, wherein such assets
are depreciated on the straight-line method at the rates prescribed in
Schedule XIV of the Companies Act, 1956.
1.6 Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value. Long-term
investments are carried at cost. However, provision for diminution in
value is made to recognise a decline other than temporary in the value
of the investments.
1.7 Inventories
Inventories are stated at the lower of cost and net realisable value.
The cost of various categories of inventories is arrived at as follows:
- Stores, spares, raw materials and components - at rates determined on
the moving weighted average method.
Goods in Transit - at actual cost.
<- Work-in-progress and finished goods - at full absorption cost method
based on annual average cost of production which includes direct
materials, direct labour and manufacturing overheads. Excise duty is
included in the value of finished goods inventory.
Provision for obsolescence is made wherever necessary.
1.8 Employee Benefits
Contribution to Superannuation Fund, a defined contribution scheme, is
made at pre - determined rates to the Superannuation Fund Trust and is
charged to the profit and loss account. There are no other obligations
other than the contribution payable to the Superannuation Fund Trust.
Contributions to the recognised Provident Fund/ Gratuity Fund and
provision for other long term employee benefits - leave, defined
benefit schemes, are made on the basis of actuarial valuations made at
the end of each financial year and are charged to the profit and loss
account during the year.
Actuarial gains and losses are recognised immediately in the profit and
loss account.
1.9 Revenue Recognition
- Sales of products and services are recognised when significant risks
and rewards of ownership of products are passed on to customers or when
the service has been provided. In case of large transformers, revenue
is recognised on achievement of contractual milestone. Revenue
recognised in excess of billing has been reflected under "Other Current
Assets" as Unbilled Revenue. Net sales are stated at contractual
realisable values, net of excise duty, sales tax, sen/ice tax, value
added tax and trade discounts.
- Revenues from long-term contracts are recognised on the percentage of
completion method, in proportion that the contract costs incurred for
work performed up to the reporting date bear to the estimated total
contract costs. Contract revenue earned in excess of billing has been
reflected under "Other Current Assets" and billing in excess of
contract revenue has been reflected under "Current Liabilities" in the
balance sheet.
- Full provision is made for any loss in the year in which it is first
foreseen.
- Liquidated damages/penalties are provided for as per the contract
terms wherever there is a delayed delivery attributable to the Company.
- Commission income is recognised as per contracts/receipt of credit
note.
- Dividend income is recognised when the right to receive dividend is
established.
- Interest income is recognised on the time proportion method.
1.10 Provisions
A provision is recognised when the Company has a present 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 a
reliable estimate can be made based on technical evaluation and past
experience. Provisions are not discounted to its present value and are
determined based on management 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 management
estimates.
1.11 Research and Development
All revenue expenditure pertaining to research are charged to the
profit and loss account in the year in which they are incurred and
development expenditure of capital nature is capitalised as fixed
assets, and depreciated as per the Companys policy.
1.12 Foreign Currency Transactions
Foreign currency transactions are recorded by applying the daily
exchange rates. Exchange differences arising on foreign currency
transactions settled during the year are recognised in the profit and
loss account for the year.
All foreign currency denominated monetary assets and liabilities are
translated at the exchange rates prevailing on the balance sheet date.
The resultant exchange differences are recognised in the profit and
loss account for the year.
The Company uses derivative financial instruments such as forward
exchange contracts to hedge its risks associated with foreign currency
fluctuations.
Gain or loss on restatement of forward exchange contracts for hedging
underlying outstandings at the balance sheet date are recognised in the
profit and loss account for the year in which it occurs. The premium or
discount on such contracts is recognised in the profit and loss account
over the period of the contract.
Gain or loss on fair valuation of forward exchange contracts for
hedging highly forecasted transactions and embedded derivative
contracts are recognised in the profit and loss account for the year in
which it occurs.
1.13 Taxation
Tax expense comprises current tax, deferred tax and fringe benefits
tax.
The current charge for income tax and fringe benefits tax is measured
at the amount expected to be paid to the tax authorities in accordance
with the Indian Income Tax Act including probable adjustments, if any,
for international transactions with associated enterprises. Provision
for current income tax is made on the basis of the results of the year
although the actual liability will be computed and paid on the basis of
the results for the year ending March 31,2011.
The deferred tax for timing differences between the book and tax
profits for the year is accounted for using the tax rates and laws that
have been enacted or substantively enacted as of the balance sheet
date. Deferred tax assets arising from timing differences are
recognised to the extent there is reasonable certainty that the assets
can be realised in future. Deferred tax assets are reviewed at each
balance sheet date for its readability.
The Finance Act, 2009 has withdrawn Fringe Benefits Tax with effect
from April 1,2009.
1.14 Operating Leases
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognised as an
expense in the profit and loss account on a straight - line basis over
the lease term.
2. During the year the Company has acquired the business of M/s Metsys
Engineering and Consultancy Private Limited, for a consideration of Rs
84,621 thousand plus applicable taxes. Assets purchased includes
Inventories of Rs 9,621 thousand and plant and machinery of Rs 3,087
thousand. Excess of consideration over assets acquired amounting to Rs
58,403 thousand has been capitalised as goodwill.
3. Segment Reporting
A) Primary Segment Reporting (by Business Segments)
i) Composition of Business Segments
The Companys business segments are organized around products and
system solutions provided to its customers, which include utilities,
industries, channel partners and original equipment manufacturers.
Power Systems Segment (PS) offers turnkey systems and services for
transmission and distributions for power grid and power plants. The
segment offers the instrumentation, control and the entire balance of
power plants, which improve performance and energy efficiency through
flexible alternating current transmission systems, high voltage direct
current systems, network management systems and utility communications.
Power Products Segment (PP) manufactures, engineers, supplies key
components to transmit and distribute electricity, improving power
supply and energy efficiency. The segment produces transformers, high
and medium voltage switchgears, circuit breakers, capacitors,
distribution relays etc.
Process Automation Segment (PA) provides customers with integrated
solutions for control, plant optimization and industry specific
application knowledge. The industries served include oil and gas,
power, chemicals and pharmaceuticals, pulps and paper, metals and
minerals, marine and turbo charging.
Discrete Automation and Motion Segment (DM) provides products, with
related services, that are used as components in machinery and
automation systems. The segment covers a wide range of products and
services including power electronics systems, motors and generators,
drives, robots etc.
Low Voltage Products Segment (LP) manufactures products and systems
that provide protection, control and measurement for electrical
installations, enclosures, switchboards, electronics and
electromechanical devices for industrial machines, plants and related
service.
ii) The accounting policies used in the preparation of the financial
statements of the Company are also applied for segment reporting.
iii) Segment revenues, expenses, assets and liabilities are those,
which are directly attributable to the segment or are allocated on an
appropriate basis. Corporate and other revenues, expenses, assets and
liabilities to the extent not allocable to segments are disclosed in
the reconciliation of reportable segments with the financial
statements.
iv) Inter Segment Transfer Pricing
Inter segment prices are normally negotiated amongst the segments with
reference to the costs, market prices and business risks, within an
overall optimisation objective for the Company.
v) Figures in brackets are in respect of the previous year.
vi) The segment disclosures have been revised in the current year
effective January 1, 2010 and presented in line with Companys new
organisation structure.
Erstwhile Automation Product segment has been split into Discrete
Automation and Motion segment and Low Voltage Product segment.
Instrumentation business from erstwhile Automation Product segment has
been merged with Process Automation segment. Robotics systems which was
included in erstwhile Others segment has been merged with Discrete
Automation and Motion segment. Previous year figures have been
reclassified in accordance with revised segment disclosures wherever
necessary.
Dec 31, 2009
1.1. Basis of Preparation of Financial Statements
The financial statements have been prepared to comply in all material
respects with the notified accounting standards by Companies Accounting
Standards Rules, 2006 (as amended) and the relevant provisions of the
Companies Act, 1956. The financial statements have been prepared under
the historical cost convention on an accrual basis except for
revaluation of certain fixed assets, in accordance with the accounting
principles generally accepted in India. The accounting policies have
been consistently applied by the Company and are consistent with those
used in the previous year.
1.2. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles (GAAP) requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent liabilities as at the
date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
these estimates. Any revision to accounting estimates is recognised
prospectively in current and future periods.
1.3. Fixed Assets (Tangible and Intangible)
Fixed assets are stated at the cost of acquisition, except for
revaluation of certain land and building, less accumulated depreciation
and impairment losses, if any. Cost of fixed assets comprises purchase
price, duties, levies and any directly attributable cost of bringing
the asset to its working condition for the intended use. Own
manufactured assets are capitalised at cost including an appropriate
share of overheads. Borrowing costs related to the acquisition or
construction of the qualifying fixed assets for the period up to the
completion of their acquisition or construction are capitalised.
Advances paid towards the acquisition of fixed assets outstanding at
each balance sheet date and the cost of fixed assets not ready for
their intended use before such date are disclosed under capital work in
progress.
Capitalised software includes costs on Enterprise Resource Planning
(ERP) Project and other costs relating to software, which provide
significant future economic benefits. ERP Project costs comprise
license fees and cost of system integration services. All costs
relating to upgradations/ enhancements are generally charged off as
revenue expenditure unless they bring significant additional benefits
of lasting nature.
Assets acquired under finance lease from April 1, 2001 are capitalised
at the lower of their fair value and the present value of the minimum
lease payments.
The carrying amounts are reviewed at each balance sheet date when
required to assess whether they are recorded in excess of their
recoverable amounts, and where carrying values exceed this estimated
recoverable amount, assets are written down to their recoverable
amount. The recoverable amount is the greater of the assets net
selling price and value in use.
1.4. Depreciation/Amortisation
Depreciation on assets (except those described below) is provided on
the straight-line method at the rates and in tlje manner prescribed in
Schedule XIV to the Companies Act, 1956, which management considers as
being representative of the useful economic lives of such assets.
Depreciation is provided from the date of capitalisation till the date
of sale of assets.
The following assets are depreciated / amortised on the straight line
method over a period of their estimated useful lives:
à Leasehold land and leasehold improvements over the remaining period
of the lease.
à Technical know-how fees over a period of six years.
à Capitalised software costs over a period of five years.
Assets individually costing Rs 5,000 or less are depreciated fully in
the year of purchase.
Assets under finance lease are depreciated over the lower of the lease
term or the useful life of the asset unless there is reasonable
certainty that the Company will obtain ownership, wherein such assets
are depreciated on the straight-line method at the rates prescribed in
Schedule XIV to the Companies Act, 1956.
1.5. Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value. Long-term
investments are carried at cost. However, provision for diminution in
value is made to recognise a decline other than temporary in the value
of the investments.
1.6. Inventories
Inventories are stated at the lower of cost and net realisable value.
The cost of various categories of inventories is arrived at as follows:
à Stores, spares, raw materials and components - at rates determined on
the moving weighted average method.
à Goods in Transit - at actual cost.
à Work-in-progress and finished goods - at full absorption cost method
based on annual average cost of production which includes direct
materials, direct labour and manufacturing overheads. Excise duty is
included in the value of finished goods inventory.
Provision for obsolescence is made wherever necessary.
1.7. Employee Benefits
Contribution to Superannuation Fund, a defined contribution scheme, is
made at pre-determined rates to the Superannuation Fund Trust and is
charged to the profit and loss account. There are no other obligations
other than the contribution payable to the Superannuation Fund Trust.
Contributions to the recognised Provident Fund/ Gratuity Fund and
provision for other long term employee benefits - leave, defined
benefit schemes, are made on the basis of actuarial valuations made at
the end of each financial year and are charged to the profit and loss
account during the year.
Actuarial gains and losses are recognised immediately in the profit and
loss account.
1.8. Revenue Recognition
à Sales of products and services are recognised when significant risks
and rewards of ownership of products are passed on to customers or when
the service has been provided. In case of large transformers, revenue
is recognised on achievement of contractual milestone. Revenue
recognised in excess of billing has been reflected under "Other Current
Assets" as Unbilled Revenue. Net sales are stated at contractual
realisable values, net of excise duty, sales tax, service tax, value
added tax and trade discounts.
à Revenues from long-term contracts are recognised on the percentage of
completion method, in proportion that the contract costs incurred for
work performed up to the reporting date bear to the estimated total
contract costs. Contract revenue earned in excess of billing has been
reflected under "Other Current Assets" and billing in excess of
contract revenue has been reflected under "Current Liabilities" in the
balance sheet.
à Full provision is made for any loss in the year in which it is first
foreseen.
à Liquidated damages/ penalties are provided for as per the contract
terms wherever there is a delayed delivery attributable to the Company.
à Commission income is recognised as per contracts/receipt of credit
note.
à Dividend income is recognised when the right to receive dividend is
established.
à Interest income is recognised on the time proportion method.
1.9. Provisions
A provision is recognised when the Company has a present 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 a
reliable estimate can be made based on technical evaluation and past
experience. Provisions are not discounted to its present value and are
determined based on management 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 management
estimates.
1.10. Research and Development
All revenue expenses pertaining to research and development are charged
to the profit and loss account in the year in which they are incurred
and development expenditure of capital nature is capitalised as fixed
assets, and depreciated as per the Companys policy.
1.11. Foreign Currency Transactions
Foreign currency transactions are recorded by applying the daily
exchange rates. Exchange differences arising on foreign currency
transactions settled during the year are recognised in the profit and
loss account for the year.
All foreign currency denominated monetary assets and liabilities are
translated at the exchange rates prevailing on the balance sheet date.
The resultant exchange differences are recognised in the profit and
loss account for the year.
The Company uses derivative financial instruments such as forward
exchange contracts to hedge its risks associated with foreign currency
fluctuations.
Gain or loss on restatement of forward exchange contracts for hedging
underlying outstandings at the balance sheet date are recognised in the
profit and loss account for the year in which it occurs. The premium or
discount on such contracts is recognised in the profit and loss account
over the period of the contract.
Gain or loss on fair valuation of forward exchange contracts for
hedging highly forecasted transactions and embedded derivative
contracts are recognised in the profit and loss account for the year in
which it occurs.
1.12. Taxation
Tax expense comprises current tax, deferred tax and fringe benefits
tax.
The current charge for income tax and fringe benefits tax is measured
at the amount expected to be paid to the tax authorities in accordance
with the Indian Income Tax Act. Provision for current income tax is
made on the basis of the results of the year although the actual
liability will be computed and paid on the basis of the results for the
year ending March 31, 2010.
The deferred tax for timing differences between the book and tax
profits for the year is accounted for using the tax rates and laws that
have been enacted or substantively enacted as of the balance sheet
date. Deferred tax assets arising from timing differences are
recognised to the extent there is reasonable certainty that the assets
can be realised in future. Deferred tax assets are reviewed at each
balance sheet date for its realisability.
The Company provides for and discloses the fringe benefits tax (FBT) in
accordance with the provisions of section 115WC of the Income Tax Act,
1961. The Finance Act, 2009 has withdrawn FBT with effect from April 1,
2009.
1.13. Operating Leases
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognised as an
expense in the profit and loss account on a straight-line basis over
the lease term.
2. Segment Reporting
A) Primary Segment Reporting (by Business Segments)
i) Composition of Business Segments
The Companys business segments are organized around products and
system solutions provided to its customers, which include utilities,
industries, channel partners and original equipment manufacturers.
Power Systems Segment (PS) offers turnkey systems and services for
transmission and distributions for power grid and power plants. The
segment offers the instrumentation, control and the entire balance of
power plants, which improve performance and energy efficiency through
flexible alternating current transmission systems, high voltage direct
current systems, network management systems and utility communications.
Power Products Segment (PP) manufactures, engineers, supplies key
components to transmit and distribute electricity, improving power
supply and energy efficiency. The segment produces transformers, high
and medium voltage switchgears, circuit breakers, capacitors,
distribution relays etc.
Process Automation Segment (PA) provides customers with integrated
solutions for control, plant optimization and industry specific
application knowledge. The industries served include oil and gas,
power, chemicals and pharmaceuticals, pulps and paper, metals and
minerals, marine and turbo charging.
Automation Products Segment (AP) provides products to improve
customers productivity with high efficiency motors, variable speed
drives, low voltage products, instrumentation and power electronics.
Others Segment consist of robotics systems.
ii) The accounting policies used in the preparation of the financial
statements of the Company are also applied for segment reporting.
iii) Segment revenues, expenses, assets and liabilities are those,
which are directly attributable to the segment or are allocated on an
appropriate basis. Corporate and other revenues, expenses, assets and
liabilities to the extent not allocable to segments are disclosed in
the reconciliation of reportable segments with the financial
statements.
iv) Inter Segment Transfer Pricing
Inter segment prices are normally negotiated amongst the segments with
reference to the costs, market prices and business risks, within an
overall optimisation objective for the Company.
v) Figures in brackets are in respect of the previous year.
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