NOTES TO ACCOUNTS

 Note No. 1 : COMPANY BACKGROUND 

Diffusion Engineers Limited is an ISO 14001 & 18001 & its associated companies are engaged in the manufacturing of eletrodes, flux cored wire, manufacturing of Durum products, Diffcor products, service welding and wear plates. Company is also engaged in trading of LSN Powder, Kjellgerg machines and CNC cutting machines. Company is expanding its business in overseas by exporting of manufacturing goods to Asian and other south African countries.

 Note No. 2 : SIGNIFICANT ACCOUNTING POLICIES 

(i)

Basis of Preparation of Financial Statements :

The financial statements are brpared in accordance with the Indian Generally Accepted Accounting Principles (GAAP) convention on an accrual basis. GAAP comprises mandatory accounting standards as brscribed by Companies (Accounting Standard) Rules, 2006 under the historical cost (as amended), provisions of Companies Act 2013 (to the extent notified) and the Companies Act 1956 (to the extent applicable). All Accounting policies have been consistently applied by the company and are consistent with those used in the brvious year 

(ii)

The financial statements of the holding company and its subsidiaries have been consolidated on a line-by-line basis by adding together the book values of like items of assets, liabilities, income and expenses, after eliminating intra-group balances and intra-group transactions.

(iii)

Significant accounting policies and notes to the Consolidated Financial Statements are intended to serve as a means of informative disclosure and a guide for better understanding of consolidated position of the Companies. Recognizing this purpose, the Company has disclosed only such Policies and Notes from the individual financial statements which fairly brsent the needed disclosure.

(iv)

Use of Estimates :

The brparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting period. Although these estimates are based on management's best estimate of current events and actions, actual results could differ from these estimates. Differences between actual results and estimates are recognised in the period in which the results are known / materialised.

(v)

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 realiably measured.

Revenue is recognized when the significant risk and rewards of ownership of the goods have passed to the buyer. Sales are recorded at invoice value, net of Goods & Service Tax (GST), returns and trade discounts. Revenue is recognized on accrual basis except in case of significant uncertainties. Export incentives are recognized on accrual basis in the year of export. The Job work revenue are recorded net of GST on accrual basis.

(vi)

Property, plant and equipment and Intangible assets and Debrciation

a)  Property, plant and equipment and Intangible assets are stated at cost of acquisition or construction less accumulated debrciation. All costs relating to the acqusition and installation of Property, plant and equipment and Intangible assets net of cenvat credits are capitalised. Subsequent expenditure incurred on assets put to use is capitalised only when it increases the future benefit functioning of capability from/or of such assets.

b)  In respect of the Property, plant and equipment and Intangible assets of holding company, debrciation on Property, plant and equipment  is consistently provided on straight line method at the rates specified in the Schedule III to the Companies Act, 2013. In respect of Plant & Machinery of Unit II (N78, N79), debrciation has been charged on double shift basis. Intangible assets are amortised over a period of five years. No debrciation has been charged on land.

c) In FY 19-20, Plant and Machimary was installed and however some part of it was wrongly added into Building. It has been correctly regrouped from Building to Plant and Machinery in current Financial Year.

(vii)

Inventories

Raw materials, Consumables, Stores and Spare parts are valued at lower of cost and net realizable value. However materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost.

Work in Progress and Finished goods are valued at lower of cost and net realizable value. Cost includes cost of conversion and other costs incurred in bringing the inventories to their brsent location and condition. Cost of finished goods includes excise duty.

The cost is computed on weighted average / FIFO basis. 

Net realizable value is the estimated selling price in the ordinary course of business, less estimated cost of completion and estimated cost necessary to make the sale.

(viii)

Investments

Trade Investments are the investments made to enhance company's business interests. Investments are classified either as current investments or non-current investments based on management's intention at the time of purchase. Current investments are carried at lower of cost and fair value of each investment individually. Cost for overseas investment comprises the Indian Rupee Value of the consideration paid for the investment translated at the exchange rate brvalent at the date of investment. Non-current investments are carried at cost less provisions recorded to recognise any decline, other than temporary, in the carrying value of each investment.

(ix)

Foreign Currency Transactions

a)  Transactions denominated in foreign currencies are recorded at the RBI Reference rates brvailing at the date of transaction. Items denominated in foreign currency at the year end are translated at year end rates. The exchange differences arising on settlement/translation are recognised in the Statement of Profit & Loss.

b)  Investment in equity of foreign subsidiary and Joint Ventures, measured at historical cost, are translated at the exchange rate brvalent at the date of transaction.

(x)

Borrowing Costs

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised. Other borrowing costs are recognised as an expense in the period in which they are incurred.

(xi)

Employee Benefits

i) Short Term Employee Benefits:

All the employees benefits payable wholly within twelve months of rendering services are classified as Short term employee benefits and recognised as expenses at undiscounted amount in Statement of Profit & Loss of the year in which the related services are rendered. 

ii) Defined Contribution Plan:

Employees benefits in the form of contribution to Provident Fund, ESIC, Labour Welfare Fund and Other Fund are considered to be defined contribution plan and the same are charged to Statement of Profit and Loss of the year when the contributions to the respective funds are due.

iii) Defined Benefits Plan & Other Long Term Benefits:

Retirement benefit in the form of gratuity is considered as defined benefit obligation. Company makes contribution to LIC Group Gratuity Scheme known as "Employees Group Gratuity Scheme".  The brsent value of the obligation is determined on the basis of acturial valuation as at the Balance Sheet date using the Projected Unit Credit Method. The fair value of the Plan Assets of the Trust, constituted for the benefit of the employees, is reduced from the gross obligation under the Defined Benefit Plans, to recognize the obligation on a net basis.

Long term compensated absences are provided on the basis of an actuarial valuation.

Termination benefits are recognized as and when incurred.

(xii)

Taxes on Income

Income tax expense comprises of current tax and deferred tax charge or credit. Provision for current tax is made on the basis of the estimated assessable income at the tax rate applicable to the relevant assessment year without considering ICDS. The deferred tax asset and deferred tax liability is calculated by applying tax rate and tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets arising mainly on account of brought forward losses and unabsorbed debrciation under tax laws, are recognised, only if there is a virtual certainty of its realisation, supported by convincing evidence. Deferred tax assets on account of other timing differences are recognised only to the extent there is reasonable certainty of its realisation. At each Balance Sheet date, the carrying amount of deferred tax assets are reviewed to reassure realisation.

(xiii)

Impairment of Assets:

The carrying amounts of the assets are reviewed at each balance sheet date if there is any indication of impairement based on internal / external factors. An impairment loss is recognized whenever the carrying amount of an asset exceeds its estimated recoverable amount. The recoverable amount is the greater of the asset's net selling price and value in use. In assessing the value in use, the estimated future cash flows are discounted to the brsent value at the weighted average cost of capital.

(xiv)

Provisions, Contingent Liabilities and Contingent Assets:

A provision is recognized when an enterprise has a brsent obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefit will be required  to settle the obligation, in respect of which reliable estimate can be made. Provision are not discounted to its brsent value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. A contingent liability is disclosed, unless the possibility of an outflow of resources embodying economic benefit is remote. Contingent assets are neither recognised nor disclosed in the financial statements.

(xv)

Classsification of Current/Non Current

All assets and liabilities are brsented as Current or Non Current as per the Company's normal operating cycle and other criteria set out in the  Revised Schedule III of the Companies Act, 2013. Based on the nature of the products and the time between the acquisition of assets for processing and their realisation, the Company has ascertained its operating cycle as 12 months for the purpose of Current/ Non-Current classification of assets & liabilities

Disclosure pursuant to Accounting Standard 15 - "Employee Benefits"

Disclosure of Defined Benefit Gratuity Plan

 Current Year 

 Previous Year 

1) Changes in Present value of Obligation:

Present Value of Obligations as at the begining of the year

                     171.17

                       142.03

Interest Cost

                       11.05

                           9.10

Current Service Cost

                       19.27

                         12.02

Benefits Paid

                      (15.87)

                       (10.90)

Acturial (gain) / Loss on obligations

                         8.70

                         18.92

Present Value of Obligations as at the end of the year

                     194.32

                       171.17

2) Changes in fair Value of Plan assets:

    Fair Value of Plan assets at the beginning of the year

                     192.07

                       154.51

    Expected return on plan assets

                       13.21

                         12.44

    Contributions

                       22.92

                         36.98

    Benefits Paid

                      (15.87)

                       (10.90)

    Acturial Gain / (Loss) On Plan assets

                        (0.24)

                         (0.97)

    Fair Value of Plan assets at the end of the year

                     212.08

                       192.07

3) The amount to be recognized in the Balance sheet:

    Present Value of Obligations as at the end of year

                     194.32

                       171.17

    Fair Value of Plan assets at the end of the year

                     212.08

                       192.07

    Net assets / (Liability) recognised in Balance sheet

                       17.76

                         20.89

4) Acturial Gain / Loss recognized:

    Acturial (Gain) / Loss on Obligations

                         8.70

                         18.92

    Acturial (Gain) / Loss for the year on plan assets

                        (0.24)

                           0.97

    Acturial (Gain) / Loss recognized in the year

                         8.46

                         19.89

5) Expenses recognized in Statement of Profit and Loss:

    Current Service cost

                       19.27

                         12.02

    Interest Cost

                       11.05

                           9.10

    Expected return on plan assets

                      (13.21)

                       (12.44)

    Net acturial (Gain) / Loss recognized in the year

                         8.94

                         19.89

    Expenses recognized in Statement of Profit and Loss

                       26.05

                         28.56

6) Assumption:

Discount Rate

7.11%

6.77%

6.66%

7.65%

Salary Escalation

5.00%

5.00%

5.00%

5.00%

31-Mar-22

31-Mar-21

31-Mar-20

31-Mar-19

Present Value of Obligations

                       194.32

                          171.17

                     142.03

                       117.26

Fair Value of Plan Assets

                       212.08

                          192.07

                     154.51

                       155.16

Surplus / (Deficit) in the plan

                         17.76

                            20.89

                       12.48

                         37.90

Experience Adjustment - Obligations

                           8.70

                            18.92

                       17.50

                         14.66

Experience Adjustment - Plan Assets

                         (0.24)

                            (0.97)

                         0.14

                         (0.26)

 Current Year 

 Previous Year 

Total amount of defined contribution plan during the year 

                     139.67

                       124.55

SEGMENT REPORTING UNDER ACCOUNTING STANDARD (AS) 17

Business Segment

Particulars

Manufactured Products

Trading Products

 Job Works 

 Eliminations / Unallocated 

 Consolidated Total 

 ` 

 ` 

 ` 

 ` 

 ` 

 2021-22 

 2020-21 

 2021-22 

 2020-21 

 2021-22 

 2020-21 

 2021-22 

 2020-21 

 2021-22 

 2020-21 

a) Revenues

External Sales (Net of excise duty)

Local

                       16,312.69

                11,871.67

                  1,325.86

                       863.08

              2,017.56

                   1,499.54

             19,656.11

             14,234.29

Export

                         1,603.45

                  1,838.79

                   13.95

                       43.00

               1,617.40

              1,881.80

Inter- Segment

                          (968.50)

                   (775.74)

                           -  

                              -  

                       -  

                            -  

                      -  

                (968.50)

               (775.74)

Total Revenue

                       16,947.64

                12,934.73

                  1,325.86

                       863.08

              2,031.51

                   1,542.55

                      -  

             20,305.01

             15,340.35

Identifiable Operating Expenses

                       11,160.86

                  8,142.29

                    893.57

                       649.24

                 298.00

                      200.92

                      -  

                      -  

             12,352.44

              8,992.45

b) Segment results before interest & tax

                         5,786.78

                  4,792.44

                    432.29

                       213.83

              1,733.51

                   1,341.63

                      -  

                      -  

               7,952.58

              6,347.90

c) Interest & Other Income

                  498.08

                 359.72

d) Unallocated expenses

               6,418.28

              5,064.53

e) Profit before tax after CSR

               2,032.37

              1,643.09

 f) Tax Expense

                  490.65

                 508.57

g) Minority Interest

                     2.14

                   (5.85)

h) Profit & Loss Shares Of Assosiates

                   87.53

               (203.00)

i) Net Profit after tax

               1,627.11

                 937.38

j) Segment assets

                         8,219.32

                  6,762.55

                    390.79

                       423.52

                 536.68

                      540.47

             9,263.08

             7,541.30

             18,409.88

             15,267.85

                              -  

                            -  

                      -  

k) Segment liabilities

                         2,962.80

                  2,372.69

                        0.53

                         38.32

                 122.02

                      129.80

             3,495.98

             2,384.31

               6,581.33

              4,925.12

l) Capital Expenditure

                           -  

                              -  

                       -  

                            -  

                      -  

                      -  

                        -  

                       -  

m) Debrciation and amortisation

                           258.90

                    213.82

                           -  

                              -  

                   30.29

                       24.47

               127.24

               151.57

                  416.44

                 389.86

n) Other Significant Non Cash Expenses

                                  -  

                           -  

                           -  

                              -  

                       -  

                            -  

                 32.74

                   1.41

                   32.74

                    1.41

Notes:

a)

The Company has disclosed business segment as the primary segment.

b)

Types of Products and Services in each business segment:

Business Segment

Types of Products and Services

Manufactured Products

Welding Electrodes, Flux Cord Wires, SOP, Diffcor, Wear Plates, etc.

Trading Products

TIG, MIG, Filler Wires, Thermal Spray Powders, Welding Eqipments, etc.

Job Works

Service Welding & Reconditioning Jobs.

c)

The segment Revenues, Expenses, Assets and Liabilities are allocated by the management to the extent directly identifiable to each segment on a reasonable basis.

d)

Unallocable Other Significant Non Cash Expenses for the current year include loss of investment in subsidiary on account of liquidation.