3 MATERIAL ACCOUNTING POLICIES
3.1 Classification of Current versus Non-Current:
All assets and liabilities in the financial statements
have been classified as current or non-current as
per the Company's normal operating cycle of up to
twelve months.
For the purpose of Balance Sheet, an asset is
classified as current if:
(i) It is expected to be realised, or is intended to
be sold or consumed, in the normal operating
cycle; or
(ii) It is held primarily for the purpose of trading; or
(iii) It is expected to realise the asset within twelve
months after the reporting period; or
(iv) The asset is a cash or cash equivalent unless it
is restricted from being exchanged or used to
settle a liability for at least twelve months after
the reporting period
All other assets are classified as non-current.
Similarly, a liability is classified as current if:
(i) I t is expected to be settled in the normal
operating cycle; or
(ii) It is held primarily for the purpose of trading; or
(iii) It is due to be settled within twelve months
after the reporting period; or
(iv) The Company does not have an unconditional
right to defer the settlement of the liability
for at least twelve months after the reporting
period. Terms of a liability that could result in its
settlement by the issue of equity instruments
at the option of the counterparty does not
affect this classification
All other liabilities are classified as non-current.
3.2 Property, Plant and Equipment (PPE)
PPE is recognised when it is probable that future
economic benefits associated with the item will
flow to the company and the cost of the item
can be measured reliably. The initial cost of PPE
comprises its purchase price, including import
duties and non-refundable purchase taxes, and any
directly attributable costs of bringing an asset to
working condition and location for its intended use
less accumulated depreciation and accumulated
impairment losses, if any Cost includes professional
fees related to the acquisition of PPE and for
qualifying assets, borrowing costs is capitalised in
accordance with the company's accounting policy.
Subsequent costs are included in the asset's
carrying amount or recognized as a separate asset,
as appropriate, only when it is probable that future
economic benefits associated with the item will
flow to the Company and the cost of the item can be
measured reliably. All other repairs and maintenance
cost are charged to the Statement of Profit and Loss
during the period in which they were incurred.
Long term lease arrangements of land are treated as
PPE, in case such arrangements result in transfer of
control and the present value of the lease payments
is likely to represent substantially all of the fair value
of the land.
An item of PPE and any significant part initially
recognised is derecognised upon disposal or when
no future economic benefits are expected with the
carrying amount of any component accounted for
as a separate asset is derecognised when replaced.
Gains or losses arising from de-recognition of a PPE
are measured as the difference between the net
disposal proceeds and the carrying amount of the
asset and are recognised in the Statement of Profit
and Loss when the asset is derecognised.
Depreciation methods, estimated useful lives and
residual value:
Depreciation is the systematic allocation of the
depreciable amount of PPE over its useful life and
is provided using straight line method, so as to
write off the cost of the assets (other than freehold
land and capital work-in-progress) less their
residual values over their useful lives specified in
Schedule II to the Companies Act, 2013, or in the
case of assets where the useful life was determined
by technical evaluation, over the useful life so
determined. Depreciation method is reviewed at
each financial year end to reflect the expected
pattern of consumption of the future economic
benefits embodied in the asset. The estimated
useful life and residual values are also reviewed
at each financial year end and the effect of any
change in the estimates of useful life/residual value
is accounted on prospective basis. Depreciation on
additions/ disposals is provided on a pro-rata basis
i.e. from/ upto the date on which asset is ready for
use/ disposed.
The Company uses different useful lives than those
prescribed in Schedule II to the Act for some of the
assets. The useful lives have been assessed based
on technical advice, taking into account the nature of
the PPE and the estimated usage of the asset on the
basis of management's best estimation of obtaining
economic benefits from those classes of assets.
The estimated useful life is reviewed periodically,
with the effect of any changes in estimate being
accounted for on a prospective basis.
The company has used the following useful lives to
provide depreciation on the following assets:
3.3 Capital Work-in-Progress
Capital Work-in-Progress represents expenditure
incurred on capital assets that are under construction
or are pending capitalisation and includes project
expenses pending allocation. The same is carried at
cost, comprising of direct costs, related incidental
expenses and attributable borrowing costs. Project
expenses pending allocation are apportioned to the
PPE of the project proportionately on capitalisation.
3.4 Intangible assets
Intangible assets are recognised when it is probable
that the future economic benefits that are attributable
to the asset will flow to the Company and the cost of
the asset can be measured reliably. Intangible assets
re stated at original cost net of tax/duty credits
availed,if any, less accumulated amortisation and
cumulative impairment. Administrative and other
general overhead expenses that are specifically
attributable to acquisition of intangible assets are
allocated and capitalised as a part of the cost of the
intangible assets. Intangible development costs are
capitalised as and when technical and commercial
feasibility of the asset is demonstrated and future
economic benefits are probable.
The useful lives of intangible assets are assessed as
either finite or indefinite. Intangible assets with finite
lives are amortized over the useful economic life
and assessed for impairment whenever there is an
indication that the intangible asset may be impaired.
The amortization period and the amortization
method for an intangible asset with a finite useful
life are reviewed at least at the end of each reporting
period.
Gains or losses arising from de-recognition of an
intangible asset are measured as the difference
between the net disposal proceeds and the carrying
amount of the asset and are recognised in the
Statement of Profit and Loss when the asset is
derecognised.
Amortisation:
I ntangible assets with finite lives are amortised
over the useful economic life and assessed for
impairment whenever there is an indication that the
intangible asset may be impaired. The amortisation
period and the amortisation method for an intangible
asset with a finite useful life are reviewed at least at
the end of each reporting period.
Changes in the expected useful life or the expected
pattern of consumption of future economic benefits
embodied in the assets are considered to modify
the amortisation period or method, as appropriate,
and are treated as change in accounting estimates.
Amortisation expense on intangible assets with
finite lives is recognised in the statement of profit
and loss unless such expenditure forms part of
carrying value of another assets.
Intangible Assets without finite life are tested
for impairment at each Balance sheet date and
impairment provision, if any are debited to profit and
loss.
The estimated useful lives of the amortisable
intangible assets are as follows:
3.5 impairment of Non-Financial Assets:
The Company assesses at each reporting date,
whether there is an indication that a non-financial
asset may be impaired. If any indication exists, or
when annual impairment testing for such asset
is required, the Company estimates the asset's
recoverable amount in order to determine the
extent of the impairment loss (if any). When it is
not possible to estimate the recoverable amount
of an individual asset, the Company estimates the
recoverable amount of the cash-generating unit to
which the asset belongs. Goodwill and the intangible
assets with indefinite life are tested for impairment
each year.
Impairment loss is recognised when the carrying
amount of an asset (or cash generating unit)
exceeds its recoverable amount which is higher of
asset's (or cash generating unit's) net selling price
or the value in use. The amount of value in use is
determined as the present value of estimated future
cash flows from the continuing use of an asset (or
cash generating unit) and from its disposal at the
end of its useful life. For this purpose, the discount
rate (pre-tax) is determined based on the weighted
average cost of capital of the company suitably
adjusted for risks specified to the estimated cash
flows of the asset (or cash generating units).
If recoverable amount of an asset (or cash generating
unit) is estimated to be less than its carrying
amount, such deficit is recognised immediately in
the Statement of Profit and Loss as impairment
loss and the carrying amount of the asset (or
cash generating unit) is reduced to its recoverable
amount.
When an impairment loss subsequently reverses,
the carrying amount of the asset (or cash generating
unit) is increased to the revised estimate of its
recoverable amount, but so that the increased
carrying amount does not exceed the carrying
amount that would have been determined had no
impairment loss is recognised for the asset (or cash
generating unit). A reversal of an impairment loss is
recognised immediately in the Statement of Profit
and Loss.
3.6 Inventories:
Inventories are valued, after providing for
obsolescence as given below:
Raw Materials, Packing Materials and Stores and
Spares:
(i) Raw Materials, Packing Materials and Stores
and Spares:
Raw materials, packing materials and stores
and spares are valued at lower of Cost or
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. Costs are determined on Weighted
Average Basis method.
(ii) Work-in-process:
Work-in-process is valued at the lower of cost
and net realizable value. The cost is computed
on Weighted Average Basis method.
(iii) Finished Goods, Semi-Finished Goods and
Traded Goods:
Finished goods, Semi-finished goods and
traded goods are valued at lower of cost and
net realisable value. The cost is computed on
Weighted Average Basis method.
Cost is determined on Weighted Average
Basis method which includes expenditure
incurred for acquiring inventories like purchase
price, import duties, taxes (net of tax credit),
cost of conversion and other costs incurred
in acquiring the inventories to their present
location and condition.
Net realisable value is the estimated selling
price in the ordinary course of business, less
the estimated costs of completion and the
estimated costs necessary to make the sale.
3.7 Cash and Cash Equivalents
Cash and cash equivalents in the balance sheet
comprise cash at banks and on hand and highly
liquid financial instruments, which are readily
convertible into known amounts of cash, that are
subject to an insignificant risk of change in value
with an original maturity of three months or less.
3.8 Employee Benefits:
(i) Short-term employee benefits:
All employee benefits payable wholly within
twelve months of rendering the services are
classified as short-term employee benefits.
Benefits such as salaries, wages short-term
compensated absences, expected cost of
bonus, etc. are recognised in the period in which
the employee renders the related services.
(ii) Post-employment benefits:
(a) Defined Contribution Plan:
The Company makes defined contribution
to Employee Provident Fund, Employee
Pension Fund, Employee Deposit Linked
Insurance, and Superannuation Schemes.
The contribution paid/payable under
these schemes is recognised during the
period in which the employee renders
the related service which are recognised
in the Statement of Profit and Loss on
accrual basis during the period in which
the employee renders the services.
(b) Defined Benefit Plan
The gratuity liability of the company is
funded through a Group Gratuity Scheme
with Life Insurance Corporation of India
(LIC) under which the annual contribution
is paid to LIC. The Company's liability under
Payment of Gratuity Act is determined
on the basis of actuarial valuation made
at the end of each financial year using
the projected unit credit method. The
obligation is measured at the present
value of the estimated future cash flows
using a discount rate based on the market
yield on government securities where
the terms of government securities are
consistent with the estimated terms
of the defined benefit obligations at
the Balance Sheet date. The Company
recognizes the net obligation of a defined
benefit plan in its Balance Sheet as an
asset or liability. Gains and losses through
re-measurements of the net defined
benefit liability / (asset) are recognized in
other comprehensive income and are not
reclassified to profit or loss in subsequent
periods.
(iii) Long term employee benefits:
Compensated absences which are not
expected to occur within twelve months after
the end of the period in which the employee
renders the related services are recognised
as a liability. The cost of providing benefits
is actuarially determined using the projected
unit credit method, actuarial valuations being
carried out at each Balance Sheet date.
(iv) Performance Stock Option Plan:
The Company recognizes compensation
expense relating to share-based payments
based on estimated fair-values of the awards
on the grant date. The estimated fair value of
awards is recognized as an expense in the
Statement of Profit and Loss on a straight-line
basis over the requisite service period for each
separately vesting portion of the award as if
the award was in-substance, multiple awards
with a corresponding increase to share options
outstanding accounts.
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