1 CORPORATE INFORMATION:
The Tokyo Plast International Limited ('The Company') was incorporated on 11th November, 1992under the provisions of the Companies Act 1956.The Company is having registered office at 363/1(1,2,3), Shree Gamesh Industrial Estate, Kachigam Road, Daman- 396 210 (U.T.) and engaged in the business of Manufactuers of Plastic Thermoware Products
2 CRITICAL ESTIMATES AND JUDGEMENTS:
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the group’s accounting policies. This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgements is included in relevant notes together with information about the basis of calculation for each affected line item in the financial statements.
The preparation of the financial statements in conformity with GAAP requires the Management to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to contingent assets and liabilities as at the date of the financial statements and reported amounts ofincome and expenses during the period. These estimates and associated assumptions are based on historical experience and management’s best knowledge of current events and actions the Company may take in future.
Information about criticalestimates and assumptions that havea significant riskofcausing materialadjustment to the carrying amounts ofassets and liabilities are included in the following notes:
2.1 Impairment of financial assets and investment in subsidiaries (including trade receivable) (Note42)
2.2 Estimation of defined benefit obligations (Note 38)
2.3 Estimation of current taxexpenses and payable (Note 34)
2.4 Estimation of provisions and contingencies (Note 23 and 35)
2.5 Recognition of deferred taxassets (Note 25)
2.6 Recognition of MAT credit entitlements (Note 34)
3.1 Impairment of financial assets andinvestment in subsidiaries (including trade receivable)
Impairment testing for financial assets including investment in subsidiaries (other than trade receivables) is done at least once annually and upon occurrence of an indication of impairment. The recoverable amount of the individual financial asset is determined based on value-in-use calculations which required use of assumptions.
Allowance for doubtful receivables represent the estimate oflosses that could arise due to inability of the Customer to make payments when due. These estimates are based on the customer ageing, customer category, specific credit circumstances and the historical experience of the company as well as forward looking estimates at the end of each reporting period.
3.2 Estimation of defined benefit obligations
The liabilities of the company arising from employee benefit obligations and the related current service cost, are determined on an actuarial basis using various assumptions. Refer note 38 for significant assumptions used.
3.3 Estimation of current and deferred tax expenses and payable
The Company’s tax charge is the sum of total current and deferred tax charges. Taxes recognized in the financial statements reflect management’s best estimate of the outcome based on the facts known at the balance sheet date. These facts include but are not limited to interpretation of tax laws of various jurisdictions where the company operates. Any difference between the estimates and final tax assessments will impact the income tax as well as the resulting assets and liabilities.
3.4 Estimation of provisions and contingencies:
Provisions are liabilities ofuncertain amount or timing recognised where a legal or constructive obligation exists at the balance sheet date, as a result of a past event, where the amount of the obligation can be reliably estimated and where the outflow of economic benefit is probable. Contingent liabilities are possible obligations that may arise from past event whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events which are not fully within the control of the company. The Company exercises judgement and estimates in recognizing the provisions and assessing the exposure to contingent liabilities relating to pending litigations. Judgement is necessary in assessing the likelihood of the success of the pending claim and to quantify the possible range of financial settlement. Due to this inherent uncertainty in the evaluation process, actual losses may be different fromoriginally estimated provision.
3.5 Recognition of deferred tax assets:
The recognition of deferred tax assets is based upon whether it is more likely than not that sufficient and suitable taxable profits will be available in the future against which the reversal oftemporary differences can be deducted. Where the temporary differences are related to losses, relevant taxlaw is considered to determine the availability of the losses to offset against the future taxable profits. Deferred taxassets are reviewed at each reporting date and reduced to the extent that it is no longer probable that the related taxbenefit will be realised.
3.6 Recognition of MAT credit entitlements:
The credit availed under MAT is recognised as an assetonly when and to the extent there is convincing evidence that the company willpay normal income taxduring the period for which the MAT credit can be carried forward for set off against the normal taxliability. This requires significant management judgement in determining the expected availment of the credit based on business plans and future cash flows of the Company.
i) Rights, preferences and restrictions attaching to each class of shares:
The company has only one class of equity shares having a parvalue ofRs. 10per share. Each holderof equity shares is entitled to one vote per share. The dividend has not been proposed by the Board of Directors.In the event ofliquidation ofthe Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amount, in proportion to their shareholding.
4 SEGMENT INFORMATION
A. Operating Segments:
An operating segment is a component of an entity:
(a) that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity),
(b) whose operating results are regularly reviewed by the entity’s chief operating decision maker (CODM)to make decisions about resources to be allocated to the segment and assess its performance, and
(c) for which discrete financial information is available.
The Company is undertaking export of plastic thermoware products and the risks and rewards are predominantly affected to some extent of the customers proffle. The Finance director of the Company has been identified as the Chief Operating Decision Maker (CODM). The CODM evaluates the segments based on their revenue growth, earnings before interest, tax and depreciation and return on capital employed.
The company reviews its fnancials only based on it products sales and profit. Thus, based on such the Company’s assessment, the Company has identified Plastic Thermoware Products as its only primary reportable segment.
5 RELATED PARTY TRANSACTIONS
(i) Name of related parties and nature of relationship:
a. Subsidiary Company Tokyo Plast Global FZE Vimalnath Impex FZE
b. Key management personnel (KMP):
Haresh V. Shah Velji L. Shah
Meghana Mistiy (from 31-Aug-2017)
Parul Gupta (upto 28-Feb-2017)
c. Others - Entities in which above (c) has significant influence :
Tokyo Finance Limited Tokyo Constructions Limited Siddh International Trishla distributors Inc.
Tokyo Exim Limited Mahavir Houseware Distributors Inc (ii) Transactions with related parties:
a. Management Compebnsation :
6 FINANCIAL RISK MANAGEMENT
Financial risk factors
The Company activities exposes it to a variety of financial risk namely market risk, credit risk and liquidity risk. The Company's focus is to foresee the unpredictability of financial markets and seek to minimise potential adverse effect on its financial perfomance.
(a) Market Risk
Market risk is the risk that the fair value of future cash flows of a financial instruments will fluctuate because of changes in market factors. Market risk in case of the Company comprises of Interest rate risk and Currency risk.
i) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the its long-term debt obligations with floating interest rates.
The exposure of the company's borrowings to interest rate changes as at 31 March, 2018, 31 March, 2017 and 01 April 2016 are as follows:
Interest rate sensitivity
The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected. With all other variables held constant, the Company's profit before tax is affected through the impact on variable rate borrowings, as follows:
ii) Foreign Currency Risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates.
(b) Credit Risk
CTedit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. Credit risk primarily arises from Trade receivables and Loans, Cash and cash equivalents and Deposit with banks.
The Company exposure to the credit risk is limited as follows:
Trade Receivables
i)The Company's customerbase consists ofa large corporate customers. Formajority ofits customers,the paymentterms is partly in advance and balance at the time of shipment reaches at customers location. Company is dealing with many customers regularly last many years and they are regular in paying debts. Hence credit risk is low.
ii) Customer credit riskis managed by the company's established policies, procedures and control relating to customer credit riskmanagement. Before accepting any new customer, the Company has appropriate level of control procedures to assess the potential customer’s credit quality. The credit-worthiness of its customers are reviewed based on their financial position, past experience and other factors. The credit period provided by the Company to its customers generally ranges from 0-90 days. Outstanding customer receivables are regularly monitored.The credit risk related to the trade receivables is mitigated by taking letter of credit as and where considered necessary, setting appropriate payment terms and credit period, and by setting and monitoring internal limits on exposure to individual customers.
iii) On the basis ofthe the historical experience, the riskof default in case of trade receivable is low. Provision is made for doubtfulreceivables on individual basis depending on the customer ageing, customer category, specific credit circumstances & the historical experience of the
iv) The gross carrying amount of Trade Receivables is Rs. 231940055 as at 31st March, 2018, Rs. 220161764 as at 31st March, 2017 and Rs. 130699926 as at 1st April, 2016
Financial Assets other than Trade Receivables
i) The Company places its cash and cash equivalents and deposits with banks with high investment grade ratings which limits the amount of credit exposure with bank and conducts ongoing evaluation of the credit worthiness of the bank with which it does business. Given the high credit ratings of these financial institutions, the Company does not e^ect these financial institutions to fail in meeting their obligations.
ii) In case of Investments, security deposits, advances and receivables given by the company provision is taken on a case to case basis depending on circumstances with respect to non recoverability of the amount.
iii) The gross carrying amount of Financial Assets other than Trade Receivables is Rs. 245512376 as at 31st March, 2018, Rs. 234344787 as at 31st March, 2017 and Rs. 265388990 as at 1st April, 2016
7 CAPITAL MANAGEMENT
The capital structure of the Company consists of net debt and total equity of the Company. The Company manages its capitalto ensure that the Company will be able to continue as going concern while maximis ing the return to stakeholders through an optimum mix of debt and equity within the overall capital structure. The Company’s riskmanagement committee reviews the capital structure of the Company considering the cost of capital and the risks associated with each class of capital.
8 First-time adoption of Ind-AS
These are the Company’s first financial statements prepared in accordance with Ind AS.
The accounting policies set out in note 2 have been applied in preparing the financial statements for the year ended 31st March, 2018, the comparative information presented in these financial statements for the year ended 31st March, 2017 and in the preparation of an opening Ind AS Balance Sheet at 1st April, 2016 (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:
a) Ind AS optional exemptions :
i. 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.
Accordingly, the Company has elected to measure all of its property, plant and equipment at their previous GAAP carrying value.
ii. Investments in subsidiaries :
When an entity prepares separate financial statements, Ind AS 27 requires it to account for its investments in subsidiaries, joint ventures and associates either at cost; or in accordance with Ind AS 109.
Ifafirst-time adoptermeasures such an investment at cost in accordance with Ind AS 27, it shallmeasure that investment at one ofthe following amounts in its separate opening Ind AS Balance Sheet:
a) cost determined in accordance with Ind AS 27; or
b) deemed cost
The deemed cost of such an investment shall be its:
(i) fair value at the entity’s date of transition to Ind ASs in its separate financial statements;
(ii) previous GAAP carrying amount at that date.
A first-time adopter may choose either (i) or (ii) above to measure its investment in each subsidiary, joint venture or associate that it elects to measure using a deemed cost.
The Company has availed the exemption and has measured its investment in subsidiaries at deemed cost being the previous GAAP carrying amount at that date.
b) Ind AS mandatory exemptions : i. Estimates:
An entity’s estimates in accordance with Ind ASs 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 April 1, 2016 are consistent with the estimates as at the same date made in conformity with previous GAAP.
Company continiues to impair its financial assets based on its estimates done in accordance with previous GAAP
ii. Classification and measurement of financial assets:
Ind AS 101 requires an entity to assess classification and measurement of financialassets (debt instruments) on the basis of the facts and circumstances that exist at the date of transition to Ind AS.
The Company has applied the above assessment based on facts and circumstances exist at the transition date.
iii. Derecognition of Financial Assets andFinancial Liabilities :
Ind AS 101 requires a first-time adopter to apply the de-recognition provisions ofInd AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS. However, Ind AS 101 allows a first-time adopter to apply the de-recognition requirement provided that the information needed to apply Ind AS 109 to financial assets and financial liabilities derecognised 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 provisions of Ind AS 109 prospectively from the date of transition to Ind AS.
iv. Hedge accounting :
Hedge accounting can only be applied prospectively fromthe transition date to transactions that satisfy the hedge accounting criteria in Ind AS 109, at that date. Hedging relationships cannot be designated retrospectively, and the supporting documentation can not be created retrospectively. As a result, only hedging relationships that satisfied the hedge accounting criteria as of 1st April, 2015 are reflected as hedges in the company’s result under Ind AS.
The Company has applied the above assessment based on facts and circumstances exist at the transition date.
Reconciliations
The following reconciliations provide the effect of transition to Ind AS from Previous GAAP in accordance with Ind AS 101
a. Reconciliation of Equity as at 1 April 2016 and 31 March 2017
b. Reconciliation of Total Equity as at 1 April 2016 and 31 March 2017
c. Reconciliation of Total Comprehensive Income for the year ended 31 March 2017
d. Impact of Ind AS on the Statement of Cash Flows for the year ended 31 March 2017
* The previous GAAP figures have been reclassified to conform to Ind AS presentation requirements for the purposes of this note.
Explanations for reconciliation of Total Comprehensive Income as previously reported under Previous GAAP to IND AS
(a) As per Ind AS 19 - "EMPLOYEE BENEFITS", actuarial gains and losses are recognised in Other Comprehensive Income and not reclassified to Profit and Loss in a subsequent period.
(b) Adjustment reflects tax effect of items classifed under Other Comprehensive Income.
(c) Under Ind AS, all items of income and expense recognised in a period should be included in profit or loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognised in profit or loss but are shown in the statement of profit and loss includes remeasurements of defined benefit plans, effective portion of gains and losses on cash flow hedging instruments. The concept of other comprehensive income did not exist under previous GAAP.
Explanations for reconciliation of Total Equity as previously reported under Previous GAAP to IND AS
(a) Adjument is for provision of dividend proposed after reporting period created as per Previous GAAP can not be recognised as a liability in the financial statements as it dose not meet the criteria of a present obligation as per Ind AS 37.
* The previous GAAP figures have been reclas s ified to conform to Ind AS pres entation requirements for the purpos es of this note.
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