LG Electronics India Ltd. కంపెనీ అకౌంటింగ్ విధానాలు

2.3 Material accounting policies

The material accounting policies applied by the Company
in the preparation of its financial statements are listed
below. Such accounting policies have been applied
consistently to the year presented in these financial
statements, unless otherwise indicated.

A) Revenue recognition

The Company recognises revenue when the amount
of revenue can be reliably measured; when it is
probable that future economic benefits will flow to
the entity; and specific criteria have been met for
each of the Company''s activities as described below:

Sales of products

Revenue from sale of finished goods, stock-in-trade,
raw material, service components and spares is
recognised when control of the goods is transferred
to the customers (retailers, distributors and large
format stores etc.) being when the products are
delivered to the customer. Delivery does not occur
until the products have been shipped to the specified
location and the risk of loss (i.e. control) has been
transferred to the customer.

Revenue is recognised based on the consideration
specified in a contract with a customer (transaction
price) and is net of discounts and Goods and Services
Tax (GST).

The products are often sold with discounts and
rebates and customers have a right to return
faulty products. Accumulated experience is used to
estimate and provide for the discounts and returns.
The discounts and rebates are assessed based on
expected cost. The Company recognises contract
liabilities for sales return (hereinafter referred to as
''refund liability'') based on reasonable expectation
reflecting sale return rate incurred historically.
The Company estimates an amount of variable

consideration by using the expected value approach
which the Company expects to better predict the
amount of consideration. The Company recognises
revenue with transaction price including variable
consideration to the extent that it is highly probable
that a significant reversal in the accumulated
amount of revenue will not occur when the refund
period has lapsed.

The transaction price is allocated to each
performance obligation based on relative stand alone
selling price of the goods or services being provided
to a customer. The Company determines the stand
alone price for each performance obligation by using
''adjusted market assessment approach''. In limited
circumstances, the Company uses an ''expected cost
plus a margin approach'' to estimate stand alone
selling price.

Refund liability for the expected returns from
customers is recognised as an adjustment to
revenue. The Company has a right to recover the
products from the customer when the customer
exercises his right of return and recognises an asset
and a corresponding adjustment to cost of sales.
A right to recover the products is measured at the
former carrying amount of the product.

The Company''s obligation to repair or replace faulty
products under the standard warranty terms is
recognised as a provision and disclosed in Note No
13.

Revenue from sale of scrap arising during the
manufacturing is recognised when control is
transferred being when the scrap materials are
collected by the scrap dealer.

Sales, installation and commissioning contracts
The fixed price contract of sales, installation
and commissioning are integrated contracts and
revenue is recognised at a point in time when the
performance obligation is met basis the output
oriented method (i.e. milestone completion) and
where no significant uncertainty exists regarding
the amount of consideration that will be derived on
completion of the contract. Milestone is determined
on the basis of survey of work performed up to the
reporting date.

Provision for anticipated loss is recognised where it
is probable that the estimated contract costs are
likely to exceed the total contract revenue. Provision
is made for liquidated damages and penalties in

terms of the contract wherever there is a delayed
delivery attributable to the Company.

Maintenance service contracts

Revenue from maintenance contracts are recognised

on a pro-rata basis over the period of the contract.

Financing components

The Company does not have any contracts where
the period between the transfer of promised goods
or services to the customer and payment by the
customer exceeds one year. As a consequence, the
Company does not adjust any of the transaction
prices for the time value of money.

3) Inventories

Inventories are valued at lower of cost and net
realisable value after providing for obsolescence and
other losses, wherever considered necessary.

Cost of raw materials and traded goods comprises
cost of purchases. Cost of work-in-progress and
finished goods comprises direct materials, direct
labour and an appropriate proportion of variable
and fixed overhead expenditure, the latter being
allocated on the basis of normal operating capacity.
Cost of inventories also include all other costs
incurred in bringing the inventories to their present
location and condition. Goods in transit are valued at
lower of cost and net realisable value. Net realisable
value is estimated selling price in the ordinary course
of business less the estimated cost of completion
and costs necessary to make the sales. The basis
for determination of cost of various categories of
inventory are as follows:

Provision for obsolescence on surplus stores and
spares held to support servicing of discontinued
models and cost of certain obsolete/dormant models
is accrued at lower of carrying value and estimated
fair value. The recoverability of all other inventories
is periodically reviewed and an impairment loss is
recognised only when carrying value exceeds the fair
value.