1. Related party disclosures :
As per IND AS 24, the disclosures of transactions with the related parties are given below:
List of related parties where control exists and related parties with whom transactions have taken place and relationships:
a) Enterprises where control exits:
Pokarna Engineered Stone Limited — wholly owned subsidiary
b) Names of the associates:
Pokarna Fabrics Pvt Limited, Pokarna Fashions Pvt Limited, Pokarna Marketing Pvt Limited, Southend, Southend Extension
c) Enterprises over which key managerial personnel are able to exercise significant influence Adam ‘N’ Eve
d) Names of Key management personnel
Gautam Chand Jain, Rahul Jain, Apurva Jain, Vishwanath Reddy
e) Names of relatives
Vidya Jain, Rekha Jain, Anju Jain, Ritu Jain, Pratik Jain, Neha Jain, Nidhi Jain, Gautam Chand Jain (HUF), Prakash Chand Jain (HUF), Bharathi Pulluru, Karvy Data Management Services, Karvy Computershare Pvt Ltd
f) Name of non-executive director
Prakash Chand Jain, Mahender Chand Chordia, Meka Yugandhar, T.V.Chowdary, Vinayak Rao Juvvadi, Dhanji Lakhamsi Sawla
A. Compensation of key management personnel of the company
The amount mentioned below represents remuneration paid and debited to the company. The compensation includes salary, employer’s contribution to PF, LTA, bonus, medical benefits, gratuity & leave encashment. All amounts mentioned below are inclusive of service tax and GST. The CMD, MD, Non-Executive Directors, CFO and Company Secretary are regarded as Key management personnel in terms of Companies act, 2013.
* Expenses towards gratuity and leave encashment provisions are determined actuarially on an overall Company basis at the end of each year and, accordingly, have not been considered in the above information.
B. Transactions with key management personnel and other related parties 2017-18 (2016-17 & 2015-16)
Other commitments:
x) Granite processing units of the company situated at Aliabad and Toopronpet village are registered as a 100% export oriented units (“EOU”), and are exempted from customs and central excise duties, GST and levies on imported & indigenous capital goods and stores
& spares. The company has executed a bond cum legal undertaking to pay customs duty, central excise duty, GST, levies and liquidated damages payable, if any, in respect of imported and indigenous capital goods and stores & spares, consumed duty free, in the event that certain terms and conditions are not fulfilled. As on 31 March, 2018, the company has a positive net foreign exchange earnings, as defined in the foreign trade policy 2009-2014 and 2015-2020 wherever applicable.
xi) The company is also involved in other lawsuits, claims, investigations and proceedings, including trade mark and commercial matters, which arise in the ordinary course of business. However, there are no material claims on such cases.
2. Discontinued operations
The Board of Directors (“Board”) in their meeting held on 8 May, 2017 approved the transfer, sale, lease, exchange, hive-off or otherwise disposing off of Apparel Business on a going concern basis. In the opinion of the Board, all assets of Apparel Business are realizable in the ordinary course of business at the value at which they are stated in the Financial Statements. The transfer, sale or otherwise disposing off of Apparel Business is subject to finding the buyer / investor and receipt of acceptable offer and which is subject to such other requisite approvals, consents and clearance from the Company’s Bankers, Company’s Shareholders and other Institutions or bodies and statutory authorities if and wherever necessary, and as may be required. The Company has initiated necessary steps and expects to complete the process in near future. The financials of Apparel Division is considered as ‘Assets held for sale and discontinued operations’ as per IND AS 105 and corresponding previous year figures of Statement of Profit and loss account has been restated accordingly.
3. In accordance with IND AS-108 “Operating segment”, segment information has been given in the consolidated financial statements of Pokarna Limited and therefore no separate disclosure on segment information is given in these financial statements.
4. Capital management
1. The board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The board of directors monitors the return on capital, which the company defines as result from operating activities divided by total shareholders’ equity.
2. The board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position.
5. Financial risk management objectives and policies
1. Overview
The company has exposure to the following risks from its use of financial instruments:
- Credit risk
- Liquidity risk
- Market risk
- Operational risk
This note presents information about the company’s exposure to each of the above risks, the company’s objectives, policies and processes for measuring and managing risk, and the company’s management of capital. Further quantitative disclosures are included throughout these financial statements.
2. Risk management framework:
The Board of Directors has overall responsibility for the establishment and oversight of the company’s risk management framework. The Board is responsible for developing and monitoring the company’s risk management policies.
- Credit risk
i) Credit risk is the risk of financial loss to the company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the company’s receivables from customers.
ii) Trade and other receivables: The company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period.
3. Cash and cash equivalents: The company held cash and cash equivalents of J 221.45 Lakhs (31 March 2017: H 196.31 Lakhs and 1 April 2016: H 166.65 Lakhs). The cash and cash equivalents are held with public sector banks. There is no impairment on cash and cash equivalents as on the reporting date and the comparative period.
- Liquidity risk
i) Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the company’s reputation.
ii) The company aims to maintain the level of its cash and cash equivalents and investments at an amount in excess of expected cash outflows on financial liabilities (other than trade payables) over the next six months. The company also monitors the level of level of expected cash inflows on trade receivables and loans together with expected cash outflows on trade payables and other financial liabilities. This excludes potential impact of extreme circumstances that cannot be reasonably predicted, such as natural disasters.
iii) Exposure to Liquidity risk
The following are the remaining contractual maturities of financial liabilities at the reporting date.
- Market risk
i) Market risk is the risk that changes in market prices such as foreign exchange rates and interest rates prices, will affect the company’s income or the value of its financial instruments. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables and payables, long term debt and commodity prices. The company is exposed to market risk primarily related to foreign exchange rate risk and interest rate risk.
ii) Currency risk: The company is exposed to foreign exchange risk arising from foreign currency transaction. The company also imports and the risk is managed by regular follow up . The company has a policy which is implemented when the foreign currency risk become significant.
A 10% appreciation/depreciation of the foreign currencies with respect to functional currency of the Company would result in an increase/decrease in the Company’s net profit before tax by approximately J301.30 Lakhs (March 31, 2017: H 153.17 Lakhs).
iii) Interest rate risk: Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing investments because of fluctuations in the interest rates, in cases where the borrowings are measured at fair value through the statement of profit and loss. Cash flow interest rate risk is the risk that the future cash flows of floating interest bearing investments will fluctuate because of fluctuations in the interest rates.
A reasonably possible change of 100 basis points in interest rate at the reporting date would have increased or decreased profit or loss by J57.50 Lakhs ( 31 March 2017: H 55.25 Lakhs). This analysis assumes that all other variables remain constant.
- Operational risk
i) Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the company’s processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behavior. Operational risks arise from all of the company’s operations.
ii) The Company’s objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the company’s reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity.
iii) The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior management within each business unit. This responsibility is supported by the development of overall company standards for the management of operational risk in the following areas:
- Requirements for appropriate segregation of duties, including the independent authorization of transactions
- Requirements for the reconciliation and monitoring of transactions
- Compliance with regulatory and other legal requirements
- Documentation of controls and procedures
- Requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures to address the risks identified
- Requirements for the reporting of operational losses and proposed remedial action
- Development of contingency plans
- Training and professional development
- Ethical and business standards
- Risk mitigation, including insurance when this is effective.
iv) Compliance with company’s standards is supported by a programme of periodic reviews undertaken by internal audit. The results of internal audit reviews are discussed with the management of the business unit to which they relate, with summaries submitted to the audit committee and board of the company.
7. Previous year figures are regrouped, rearranged and reclassified wherever considered necessary in order to confirm to the current years presentation.
8. First time IND AS adoption
As stated in Note 2A, these are the Company’s first standalone financial statements prepared in accordance with Ind AS. For the year ended 31 March 2017, the Company had prepared its standalone financial statements in accordance with Companies (Accounting Standards) Rules, 2006, notified under Section 133 of the Act and other relevant provisions of the Act (‘previous GAAP’).
The accounting policies set out in Note 2 have been applied in preparing these standalone financial statements for the year ended 31 March 2018 including the comparative information for the year ended 31 March 2017 and the opening Ind AS balance sheet on the date of transition i.e. 1 April 2016.
In preparing the Ind AS balance sheet as at 1 April 2016 and in presenting the comparative information for the year ended 31 March 2017, the Company has adjusted amounts reported previously in standalone financial statements prepared in accordance with previous GAAP. This note explains the principal adjustments made by the Company in restating its financial statements prepared in accordance with previous GAAP, and how the transition from previous GAAP to Ind AS has affected the Company’s financial position and financial performance.
Optional exemptions availed and mandatory exceptions
In preparing these financial statements, the Company has applied the below mentioned optional exemptions and mandatory exceptions.
A. Optional exemptions availed
Property plant and equipment, capital work-in-progress and intangible assets
As per Ind AS 101 an entity may elect to:
i) Measure an item of property, plant and equipment at the date of transition at its fair value and use that fair value as its deemed cost at that date.
ii) Use a previous GAAP revaluation of an item of property, plant and equipment at or before the date of transition as deemed cost at the date of the revaluation, provided the revaluation was, at the date of the revaluation, broadly comparable to
- fair value;
- or cost or depreciated cost under Ind AS adjusted to reflect, for example, changes in a general or specific price index
The elections under (i) and (ii) above are also available for intangible assets that meets the recognition criteria in Ind AS 38, Intangible Assets, (including reliable measurement of original cost); and criteria in Ind AS 38 for revaluation (including the existence of an active market).
iii) Use carrying values of property, plant and equipment, intangible assets and investment properties as on the date of transition to Ind AS (which are measured in accordance with previous GAAP and after making adjustments relating to decommissioning liabilities prescribed under Ind AS 101) if there has been no change in its functional currency on the date of transition.
As permitted by Ind AS 101, the Company has elected to continue with the carrying values under previous GAAP for all the items of property, plant and equipment. The same election has been made in respect of capital work-in-progress and intangible assets also. The carrying values of property, plant and equipment as aforesaid are after making adjustments relating to decommissioning liabilities.
B. Mandatory exceptions
1. Estimates
As per Ind AS 101, where application of Ind AS requires an entity to make certain estimates that were not required under previous GAAP, those estimates should be made to reflect conditions that existed at the date of transition (for preparing opening Ind AS balance sheet) or at the end of the comparative period (for presenting comparative information as per Ind AS).
The Company’s estimates under Ind AS are consistent with the above requirement. Key estimates considered in preparation of the standalone financial statements that were not required under the previous GAAP are listed below:
a) Determination of the discounted value for financial instruments carried at amortized cost.
b) Impairment of financial assets based on the expected credit loss model.
2. Derecognition of financial assets and liabilities
As per Ind AS 101, an entity should apply the derecognition requirements in Ind AS 109, Financial Instruments, prospectively for transactions occurring on or after the date of transition to Ind AS. However, an entity may apply the derecognition requirements retrospectively from a date chosen by it if the information needed to apply Ind AS 109 to financial assets and financial liabilities derecognized as a result of past transactions was obtained at the time of initially accounting for those transactions.
The Company has elected to apply the derecognition principles of Ind AS 109 prospectively as reliable information was not available at the time of initially accounting for these transactions.
9. Classification and measurement of financial assets
Ind AS 101 requires an entity to assess classification of financial assets on the basis of facts and circumstances existing as on the date of transition. Further, the standard permits measurement of financial assets accounted at amortized cost based on facts and circumstances existing at the date of transition if retrospective application is impracticable.
Accordingly, the Company has determined the classification of financial assets based on facts and circumstances that exist on the date of transition. Measurement of the financial assets accounted at mortised cost has been done retrospectively except where the same is impracticable.
10. Notes for Balance sheet and profit and loss
i) Restatement of prior period items
Under Ind AS, the Company is required to retrospectively present the material prior period errors identified by:
a) restating the comparative amounts for the prior period(s) presented in which the error occurred;
b) if the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and equity for the earliest prior period presented.
Under the previous GAAP, prior period items were recognized in the statement of profit and loss in the year in which identified.
ii) Re-classification of financial assets and liabilities
Under Ind AS, all financial assets and liabilities are to be disclosed separately on the face of the Balance Sheet. Under previous GAAP, there was no such requirement. Thus, all the assets and liabilities meeting the recognition criteria of financial asset or liability as per Ind AS 32 and Ind AS 109 have been re-classified and shown separately on the face of the Balance Sheet.
iii) Proposed dividend
Under previous GAAP, proposed dividends including dividend distribution tax thereon were recognized as a liability in the period to which they relate, irrespective of when they are declared. Under Ind AS, a proposed dividend is recognized as liability in the period in which it is declared by the company (usually when approved by shareholders in a general meeting) or paid. In the case of the company, the declaration of dividend occurs after period end. Therefore, the liability recognized towards dividend as at March 31, 2017 and April
01, 2016 has been derecognized against retained earnings and recognized in the year of payment.
iv) Actuarial gain and loss
Under Ind AS, all actuarial gains and losses are recognized in other comprehensive income. Under previous GAAP the Company recognized actuarial gains and losses in profit or loss. However, this has no impact on the total comprehensive income and total equity as on 1 April 2016 or as on 31 March 2017. As per para 122 of Ind AS19, company has transferred all re-measurement cost recognized in the past within accumulated profits.
v) Borrowings at amortised cost
Based on Ind AS 109, financial liabilities in the form of borrowings have been accounted at amortised cost using the effective interest rate method.
vi) Excise duty
Under previous GAAP, revenue from sale of goods was presented net of the excise duty on sales. Under Ind AS, revenue from sale of goods is presented inclusive of excise duty. Excise duty is presented in the Statement of Profit and Loss as an expense. This has resulted in an increase in the revenue from operations and expenses for the year ended 31 March 2017. The total comprehensive income for the year ended and equity as at 31 March 2017 has remained unchanged.
vii) Stripping cost
Recognition of Stripping Cost in the production phase of surface mine:
The impact on account of change in accounting policy from charging the stripping cost to statement of profit and loss to capitalizing as Intangible Asset as ‘Stripping Activity Asset’ is recognized in the Reserves and consequential impact of depletion and write offs/ amortization is recognized in the Statement of Profit and Loss.
viii) Other comprehensive income (OCI)
Under Indian GAAP, the company had not presented other comprehensive income separately. Hence, it has reconciled Indian GAAP profit or loss to or profit or loss as per Ind AS. Further, Indian GAAP profit or loss is reconciled to total comprehensive income as per Ind AS.
ix) Restoration liability
The Company has estimated the asset restoration liability as per Ind AS of past years at the transition date, recognized in reserves and such obligation is recognized and measured at present value by attributing time value of money. The impact for the periods subsequent to the date of transition is reflected in the Statement of Profit and Loss.
x) Fair value of Financial assets
The Company has valued financial assets (other than investment in subsidiaries, which are accounted at cost), at fair value. Impact of fair value changes as on the date of transition, is recognized in reserves and changes thereafter are recognized in Statement of Profit and Loss or Other Comprehensive Income, as the case may be.
xi) Trade receivables
Under Ind AS, impairment allowance has been determined based on expected credit loss model (ECL).
xii) Deferred tax
The above Ind AS adjustments has resulted in changes in the deferred tax liability.
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