Nature and purpose of reserves
i) General reserve: Partof retaindd earnings was earlier utilised for daclaration of dividends ass per the erstwhile Companies Act, 1956i This is available for distribution to shareholders.
ii) Retained earnings: Company’s cumulative earnings since its formation minus the dividends/capitalisation and earnings transferred to general reserve
iii) Securities Premium: Securities premium reserve is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Companies Act 2013.
(ii) Gratuity
The Company extends defined benefit plans in the form of gratuity to employees. The Company has formed “Harita Seating Systems Limited Employees Group Gratuity Scheme” with Life Insurance Corporation of India (LIC). Contribution to gratuity is made to LIC in accordance with the scheme framed by the corporation. The Company has made contribution towards Gratuity based on the actuarial valuation.
(iii) Defined contribution plans
Contribution to provident fund is in the nature of defined contribution plan and are made to provident fund account maintained by the Government on its account.
Assumptions regarding future mortality for pension and medical benefits are set based on actuarial advice in accordance with published statistics and experience. These assumptions translate into an average life expectancy in years for a pensioner retiring at age :58 Years
(v) Sensitivity analysis
The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is:
(vi) Risk exposure
Through its defined benefit plans, the company is exposed to a number of risks, the most significant of which are detailed below:
Asset volatility
The plan liabilities are calculated using a discount rate set with reference to bond yields; if plan assets underperform this yield, this will create a deficit.
Changes in bond yields
A decrease in bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans’ bond holdings.
Fair value hierarchy
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value and (b) measured at amortised cost and for which fair values are disclosed in the financial statements.
Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments, traded bonds and mutual funds that have quoted price. The fair value of all equity instruments (including bonds) which are traded in the stock exchanges is valued using the closing price as at the reporting period. The mutual funds are valued using the closing NAV.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, traded bonds, over-the-counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities, contingent consideration and indemnification asset included in level 3.
There are no transfers between levels 1 and 2 during the year.
The company’s policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.
The carrying amounts of trade receivables, trade payables, loans, deposits, advances, borrowings, cash and cash equivalents and other current financial liabilities are considered to be the same as their fair values, due to their short-term nature.
1 FINANCIAL RISK MANAGEMENT
The company’s activities expose it to market risk, liquidity risk and credit risk.
(A) Credit risk
Company faces credit risk from cash and cash equivalents, deposits with banks and financial institutions and unsecured trade receivables. The company doesn’t face any credit risk with other financial assets
(i) Credit risk management
Credit risk on deposit is mitigated by the depositing the funds in reputed private sector bank.
For trade receivables, the primary source of credit risk is that these are unsecured.The Company sells the products to customers only when the collection of trade receivables is certain and whether there has been a significant increase in the credit risk on an on-going basis is monitored throughout each reporting period. As at the balance sheet date, based on the credit assessment the historical trend of low default is expected to continue. An impairment analysis is performed at each reporting date on an individual basis for major clients. Any recoverability of receivables is provided for based on the impairment assessment. Historical trends showed as at the transition date and 31st March 2016 company had no significant credit risk.
(ii) Provision for expected credit losses for trade receivables
The company provides for expected credit loss based on the following: Position as at 01st April 2016:
Expected credit loss for trade receivables under simplified approach
(B) Liquidity risk
Objective of liquidity risk management is to maintain sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. Management monitors rolling forecasts of The company’s liquidity position (comprising the undrawn borrowing facilities below) and cash and cash equivalents on the basis of expected cash flows. The company’s liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary to meet these, monitoring balance sheet liquidity ratios against internal requirements.
(i) Financing arrangements
The company had access to the following undrawn borrowing facilities at the end of the reporting period:
The bank overdraft facilities may be drawn at any time and may be terminated by the bank without notice. Subject to the continuance of satisfactory credit ratings, the bank loan facilities may be drawn at any time in INR and have an average maturity of 1 year
(ii) Maturities of financial liabilities
The tables below analyse The company’s financial liabilities into relevant maturity groupings based on their contractual maturities for:
a) all non-derivative financial liabilities, and
b) net and gross settled derivative financial instruments for which the contractual maturities are essential for an understanding of the timing of the cash flows.
The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.”
(C) Market risk
(i) Foreign currency risk
The company activities exposes it to foreign exchange risk arising from foreign currency transactions, primarily with respect to the USD and EURO Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the company’s functional currency (INR). The risk is measured through a forecast of highly probable foreign currency cash flows.
The company’s exposure to foreign currency risk at the end of the reporting period expressed in INR, are as follows
2 CAPITAL MANAGEMENT
(a) Risk management
The company’s objectives when managing capital are to
- safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and
- maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, The company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
Company is debt free currently and it intends to maintain a optimal gearing ratio for optimising shareholder value.
3 RELATED PARTY DISCLOSURE
Disclosure is made as per the requirements of the standard and the same is furnished below:
A) List of Related Parties where control exists
Reporting entity : Harita Seating Systems Ltd
Holding Company : Nil
Subsidiary Company : Harita Fehrer Limited
4 SEGMENT INFORMATION
(a) Description of segments
The Board of Directors of the Company has been identified as the Chief Operating Decision Maker (CODM). They evaluate the Company performance allocate resources based on the analysis of various performance indicators of the Company as a single unit. Therefore there is no reportable segment for the company. The Company is domiciled in India.
(b) Entity wise disclosures
(i) Revenue from geographical areas
The entire revenue from operation are derived from India All non current assets are with in India.
(ii) Information about major customers
Revenues of approximately FIs.6980 Lakhs (31st March 2017 - Rs.5580 LakhSi) are derived from a single externol customer.
5 FIRST-TIME ADOPTION OF IND AS Transition to Ind AS
These are the Company’s first financial statements prepared in accordance with Ind AS.
The accounting policies set out in note 1 have been applied in preparing the financial statements for the year ended 31 March 2017, the comparative information presented in these financial statements for the year ended 31 March 2016 and in the preparation of an opening Ind AS balance sheet at 1 April 2015 (The company’s date of transition). In preparing its opening Ind AS balance sheet, The company has adjusted the amounts reported previously in financial statements prepared in accordance with the accounting standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act (previous GAAP or Indian GAAP).
An explanation of how the transition from previous GAAP to Ind AS has affected The company’s financial position, financial performance and cash flows is set out in the following tables and notes.
A. Exemptions and exceptions availed
Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from previous GAAP to Ind AS.
A.1 Ind AS optional exemptions
A.1.1 Deemed cost
Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for de-commissioning liabilities. This exemption can also be used for intangible assets covered by Ind AS 38 Intangible Assets and investment property covered by Ind AS 40 Investment Properties.
Accordingly, The company has elected to measure all of its property, plant and equipment, intangible assets and investment property at their previous GAAP carrying value.
A.2 Ind AS mandatory exceptions
A.2.1 Estimates
An entity’s estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error. Ind AS estimates as at 1 April 2015 are consistent with the estimates as at the same date made in conformity with previous GAAP. The company made estimates for following items in accordance with Ind AS at the date of transition as these were not required under previous GAAP:
- Impairment of financial assets based on expected credit loss model.
B. Notes to first- time adoption:
B.1 Security deposits
Under the previous GAAP, interest free lease security deposits (that are refundable in cash on completion of the lease term) are recorded at their transaction value. Under Ind AS, all financial assets are required to be recognised at fair value. Accordingly, The company has fair valued these security deposits under Ind AS. Difference between the fair value and transaction value of the security deposit has been recognised as prepaid rent. Consequent to this change, the amount of security deposits decreased by INR 12.30 as at 31 March 2017 (1 April 2016 - INR 14.40). The prepaid rent increased by INR 11.13 as at 31 March 2017 (1 April 2016 - INR 13.47). Total equity decreased by INR 1.00 as on 1 April 2016. The profit for the year and total equity as at 31 March 2017 decreased by INR 0.25 due to amortisation of the prepaid rent of INR 4.57 which is partially off-set by the notional interest income of INR 4.33 recognised on security deposits.
B.2 Fair valuation of investments
Under Previous GAAP, investment in annuity fund were carried at nominal value, under the Ind-AS same investments are carried at day one fair valuation was done and subsequently carried at amortised cost, Consequent to this change, the amount of investments decreased by INR 37.53 as at 31 March 2017 (1 April 2016 - INR 44.21). The profit for the year 31 March 2017 increased by INR 6.57
B.3 Captialisation of Spares
Under Previous GAAP, certain non critical spares were treated as inventory, Under Ind-AS the same has been recognised as PPE, correspondingly the amount of inventory decreased by INR 20.00 as at 31 March 2017 (1 April 2016 - INR 20.00) and PPE increased by INR 13.16 as at 31 March 2017 (1 April 2016 - INR 17.54) The profit for the year 31 March 2017 decreased by INR 4.38 and equity reduced by INR 6.83 as at 31 March 2017 (1 April 2016 by 2.45)
B.4 Mark to Market of Forward contracts
Under previous GAAP premium on forward contracts were amortised over the tenor, under Ind AS the forward contracts are marked to market, Profit for the year 31 March 2017 decreased by INR 6.70 and equity reduced by INR 8.17 as at 31 March 2017 (1 April 2016 by 1.47)
B.5 Remeasurements of post-employment benefit obligations
Under Ind AS, remeasurements i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognised in other comprehensive income instead of profit or loss. Under the previous GAAP, these remeasurements were forming part of the profit or loss for the year. There is no impact on the total equity as at 31 March 2016.
B.6 Deferred tax
Deferred tax have been recognised on the adjustments made on transition to Ind AS.
| 