1 SIGNIFICANT ACCOUNTING POLICIES
The Significant accounting policies have been
predominantly presented below in the order of the
Accounting Standards (AS) specified under Section 133
of the Companies Act, 2013, read with Rule 7 of the
Companies (Accounts) Rules, 2014.
1.1 Basis of Accounting and Preparation of Financial
Statements
The financial statements of the Company have been
prepared in accordance with the Generally Accepted
Accounting Principles in India (Indian GAAP) to comply
with the Accounting Standards specified under section
133 of the Companies Act, 2013 ("the Act"), read with
rule 7 of the Companies (Accounts) Rules 2014 and the
relevant provisions of the Act as applicable. The financial
statements have been prepared on an accrual basis and
under the historical cost convention. The accounting
policies adopted in the preparation of financial statements
are consistent with those of previous years.
1.2 Use of estimates
The preparation of financial statements in conformity with
Indian GAAP requires management to make judgements,
estimates and assumptions that affect the reported
amount of assets, liabilities, revenues and expenses and
disclosure of contingent liabilities as on the date of the
reporting period. The estimates and assumptions used
in the accompanying financial statements are based
upon management's evaluation of the relevant facts
and circumstances as of the date of financial statements
which in management's opinion are prudent and
reasonable. Actual results may differ from the estimates
used in preparing the accompanying financial statements.
Any revision to accounting estimates is recognized
prospectively in current and future periods.
1.3 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 reliably measured. The following specific
recognition criteria must also be met before revenue is
recognized:
i) Sales
Revenue from sale of goods is recognized when all
the significant risks and rewards of ownership of the
goods have been passed to the buyer, usually on
delivery of the goods. The Company collects Goods
and Service tax (GST) on behalf of the government
and, therefore, these are not economic benefits
flowing to the Company. Hence, they are excluded
from revenue.
ii) Interest
Interest income is recognized on a time proportion
basis taking into account the amount outstanding
and the applicable interest rate. Interest income
is included under the head "other income" in the
statement of profit and loss..
iii) Export Benefit
Export Incentives in form of MEIS \ RoDTEP (effective
from 01/01/2022) Income is recognized in books of
account on accrual basis.
iv) Dividend Income
Dividend income on investments is accounted for
when the right to receive the payment is established."
1.4 Property, Plant & Equipment and Capital Work in
Progress
Tangible Assets are stated at cost of acquisition/
construction less accumulated depreciation, amortization
and impairment loss (if any). Cost comprises of purchase
price, import duties and other non-refundable taxes or
levies and any directly attributable cost to bring the assets
ready for their intended use. Direct expenses, as well as
pro rata identifiable indirect expenses on projects during
the year of construction are capitalized. Only expenditures
that increase the future economic benefits from the
existing asset beyond its previously assessed standard of
performance is included in the gross book value, e.g., an
increase in capacity. The cost of an addition or extension
to an existing asset which is of a capital nature and which
becomes an integral part of the existing asset is added to
its gross book value. Any addition or extension, which has
a separate identity and is capable of being used after the
existing asset is disposed off, is accounted for separately.
The fixed assets retired from active use are stated at net
book value or net realizable value, whichever is lower.
The loss arising due to write-down is recognized in the
statement of profit and loss. An item of fixed asset is
eliminated from the financial statements on disposal.
Gains or losses arising on disposal are recognized in the
statement of profit and loss.
Capital Work In progresses stated at cost less impairment
losses, if any, cost comprises of expenditures incurred
in respect of capital projects under development and
includes any attributable/allocable cost and other
incidental expenses.
1.5 Depreciation /Amortization
Depreciable amount for assets is the cost of an asset,
or other amount substituted for cost, less its estimated
residual value. Depreciation on all the tangible fixed assets
is provided on Written Down Value (WDV) Method as per
the useful life prescribed in Schedule II to the Companies
Act, 2013.
Any addition or extension to an existing asset which is of a
capital nature and which becomes an integral part of the
existing asset is depreciated at the rate which is applied to
the existing asset.
Depreciation on sale of assets is provided till the date of
sale. Depreciation on tangible assets is ceased when a fixed
asset is retired from active use and held for disposal or is
disposed off.
Intangible fixed assets in the nature of software are
amortized over a period of time from the date of
addition. Goodwill is amortized over a period of 10 years.
Amortization of an intangible asset commences when
the asset is available for use and ceases when the asset
is retired from active use or is disposed off. Residual value
for the purpose of amortization is taken as zero. At each
balance sheet date, the company reviews the amortization
period and amortization method"
1.6 I mpairment of property plant and equipment (PPE)
and intangible assets (IA)
The company assesses at each reporting date whether
there is an indication that an asset may be impaired. If any
indication exists, or when annual impairment testing for
an asset is required, the company estimates the assets
recoverable amount. An assets recoverable amount is the
higher of an assets or cash-generating units (CGU) net
selling price and its value in use. The recoverable amount
is determined for an individual asset, unless the asset does
not generate cash inflows that are largely independent of
those from other assets or groups of assets. Where the
carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written
down to its recoverable amount. In assessing value in use,
the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects
current market assessments of the time value of money
and the risks specific to the asset. In determining net selling
price, recent market transactions are taken into account,
if available. If no such transactions can be identified, an
appropriate valuation model is used.
The company bases its impairment calculation on detailed
budgets and forecast calculations which are prepared
separately for each of the company's cash-generating units
to which the individual assets are allocated. These budgets
and forecast calculations are generally covering a period
of five years. For longer periods, a long-term growth rate
is calculated and applied to project future cash flows after
the fifth year.
Impairment losses, including impairment on PPE and IA,
are recognized in the statement of profit and loss.
1.7 Investments
Investments which are intended for sale/maturing within
twelve months are classified as Current Investments.
Others are classified as Long-Term Investments.
Cost of Investments comprises of the purchase price and
any directly attributable expenses incurred.
Current Investments are carried at the lower of cost and
fair value computed individually. Long term investments
are carried at cost. Provision for diminution in value of
long-term investments is made, only if, in the opinion of
the management, such a decline is regarded as being other
than temporary.
On disposal of an investment, the difference between its
carrying amount and net disposal proceeds is charged or
credited to the statement of profit and loss.
1.8 Inventories
Cost of inventories comprises of cost of purchase and all
costs incurred in bringing them to their respective present
location and condition.
Cost has been determined as under:
i) Raw Material on FIFO basis
ii) Packing Material is valued on FIFO basis.
iii) Stock in process- Raw material cost and proportionate
conversion cost
iv) Goods-in-Transit is valued at purchase cost.
v) Finished Goods - at cost or net realizable value
whichever is less.
1.9 Foreign Currency Transactions
Initial Recognition
Foreign currency transactions are recorded, on initial
recognition in the reporting currency, by applying to the
foreign currency amount the exchange rate between the
reporting currency and the foreign currency at the date of
the transaction.
Subsequent Measurement
Foreign currency monetary items are retranslated using
the exchange rate prevailing at the reporting date.
Non-monetary items, which are measured in terms of
historical cost denominated in a foreign currency, are
reported using the exchange rate at the date of the
transaction. Non-monetary items, which are measured
at fair value or other similar valuation denominated in a
foreign currency, are translated using the exchange rate
at the date when such value was determined. All other
exchange differences are recognized as income or as
expenses in the period in which they arise.
2.0 Leases
Rent, Rates and Taxes (including lease rent) represent
operating leases which are recognized as an expense
respectively in the Statement of Profit and Loss.
Erstwhile, Lease charges paid at the onset of the agreement
is amortized over the period of lease on straight line basis.
2.1 Borrowing Costs
Borrowing cost includes interest, amortization of ancillary
costs incurred in connection with the arrangement of
borrowings and exchange differences arising from foreign
currency borrowings to the extent they are regarded as an
adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition,
construction or production of an asset that necessarily
takes a substantial period of time to get ready for its
intended use or sale are capitalized as part of the cost
of the respective asset. All other borrowing costs are
expensed in the period they occur.
2.2 Taxation
Tax expense comprises of current and deferred tax.
Current Tax
Provision for current tax is made for the tax liability payable
on taxable income after considering tax allowances,
deductions and exemptions determined in accordance
with the prevailing tax laws.
In accordance with and subject to fulfilment of conditions
as laid out under Section 10AA of the Income-Tax Act, 1961
('IT Act') the Company is entitled to claim deduction for
profit and gains derived from export of goods provided
by its unit set up in special economic zone, subject to
fulfillment of the conditions prescribed under the law in
this regard.
Deferred Tax
Deferred tax liability or asset is recognized for timing
differences between the profits / losses offered for income
tax and profits / losses as per the financial statements.
Deferred tax assets and liabilities are measured using
the tax rates and tax laws that have been enacted or
substantively enacted at the Balance Sheet date.
Deferred tax asset is recognized only to the extent there
is reasonable certainty that the assets can be realized in
future; however, where there is unabsorbed depreciation
or carried forward loss under taxation laws, deferred tax
asset is recognized only if there is a virtual certainty of
realization of such asset. Deferred tax asset is reviewed as
at each Balance Sheet date and written down or written up
to reflect the amount that is reasonably / virtually certain
to be realized.
|