1.3 MATERIAL ACCOUNTING POLICIES
A. Property, Plant and Equipment:
I. Recognition and measurement
Freehold land is carried at cost and not depreciated. All other items of property, plant and equipment are measured at cost
less accumulated depreciation any accumulated impairment losses. Cost includes expenditure that is directly attributable
to the acquisition of the items.
Income and expenses related to the incidental operations, not necessary to the item to the location and condition necessary
for it to be capable of operating in the manner intended by management, are recognized in the Statement Profit and Loss.
If material parts of an item of property, plant and equipment have different useful life, then they are accounted and
depreciated for as separate items (major components) of property, plant and equipment.
An Item of Property, Plant and Equipment is derecognized upon disposal when no future economic benefits are expected to
arise from the continued use of the asset. Any gain or loss on disposal of an item of property, plant equipment is recognized
in the Statement of Profit and Loss.
II. Subsequent Expenditure
Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure
will flow to the Company.
III. Capital Work-in-Progress
Plant and properties in the course of construction for production, supply or administrative purposes are carried at cost,
less any recognized impairment loss. Cost includes professional fees and, for qualifying asset, borrowing costs capitalized
in accordance with the Company's accounting policies. Such plant and Properties are classified and capitalized to the
appropriate categories of Property, Plant and Equipment when completed when ready for intended use. Depreciation of
these assets, on the same basis as other property assets, commences when the asset are ready for their intended use.
IV. Depreciation
Depreciation is recognised 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, using the written down value method as per the useful life prescribed in
schedule II to the Companies Act, 2013. The Estimated useful lives, residual values and depreciation method are reviewed
at the end of each reporting period, with the effect of any changes in the estimated accounted for on a prospective basis.
B. Intangible Assets:
I. Recognition and measurement
Intangible Assets are stated at cost of acquisition less accumulated amortization and accumulated impairment, if any.
Amortization is done over their estimated useful life on written down value basis from the date that they are available
intended use, subjected to impairment test.
II. Amortization
Software, which is not an integral part of the related hardware is classified as an intangible asset and is amortized over the
useful life of 10 years.
C. Impairment:
I. Non - financial assets
At each balance sheet date, the Company assesses whether there is indication that any property, plant and equipment and
intangible assets finite life may be impaired. If any such impairment exists, the recoverable amount of an asset is estimated
to determine the extent of impairment, if any. Where 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.
Recoverable amount is the higher of fair value less costs of disposal and value in use. If the recoverable amount of the
asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash¬
generating unit) is reduced to its recoverable amount. An impairment loss is recognised in statement of Profit and Loss.
D. Inventories:
Inventories are valued only for final products at the rates contained in customer's pro-forma invoice, as the sale is assured
under a contract.
E. Investments and Other Financial Assets:
Classification:
Company classifies its financial assets in the following measurement categories
(i) Those to be measured subsequently at fair value (either through other comprehensive income, or through Statement of
Profit and Loss), and
(ii) Those measured at amortized cost.
The classification depends on the Company's business model for managing the financial assets and the contractual terms
of the cash flows. For assets measured at fair value, gains and losses will either be recorded in Statement of Profit and loss
or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the
investment is held. For investments in equity instruments, this will depend on whether the
Company made an irrevocable election at the time of initial recognition to account for equity investment at fair value through
other comprehensive income.
The Company reclassifies debt or equity investments when and only when its business model for managing those assets
changes.
Measurement
At initial recognition, in case of a financial asset not at fair value through profit and loss, the Company measures a financial
asset at its fair value plus, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction
costs of financial assets carried at fair value through Statement of Profit and Loss are expensed in Statement of Profit and
Loss.
a) Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely
payments of principal and interest are measured at amortized cost.
b) Fair Value through Other Comprehensive Income (FVOCI): Assets that are held for collection of contractual cash flows
and for selling the financial assets, where the assets cash flows represent solely payments of principal and interest,
are measured at FVOCI. Movements in the carrying amount are taken through Other Comprehensive Income (OCI),
except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which
are recognized in Statement of Profit and Loss. When the financial asset is derecognized, the cumulative gain or loss
previously recognized in OCI is reclassified from equity to profit and loss and recognized in other gains/ losses. Interest
income from these financial assets is included in other income using the effective interest rate method.
c) Fair value through profit and loss: Assets that do not meet the criteria for amortized cost or FVOCI are measured at fair
value through Statement of Profit and Loss. Interest income from these financial assets is included in other income.
Equity Instruments
The Company measures all equity investments at fair value. Where the Company's management has elected to present fair
value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses
to Statement of Profit and Loss. Dividends from such investments are recognized in Statement of Profit and Loss as other
income when the Company's right to receive payment is established.
Changes in the fair value of financial assets at fair value through profit and loss are recognized in other gain/losses in the
Statement of Profit and Loss. Impairment losses (and reversal of impairment losses) on equity investments measured at
FVOCI are not reported separately from other changes in fair value.
Derecognition
A financial asset is derecognized only when
(i) The Company has transferred the rights to receive cash flows from the financial asset or
(ii) Retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to
pay the cash flows to one or more recipients.
F. Cash and Cash Equivalents:
Cash and cash equivalents in the balance sheet comprise cash at banks and on hand and highly liquid investments with an
original maturity of three months or less, which are subject to an insignificant risk of changes in value.
G. Financial Liabilities:
Measurement
All financial liabilities are recognized initially at fair value and in the case of loans, borrowings and payables recognized net
of directly attributable transaction costs.
The Company's financial liabilities include trade and other payables, loans and borrowings.
Derecognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. Gains and
losses are recognized in Statement of Profit and Loss when the liabilities are derecognized as well as through the Effective
Interest rate (EIR) amortization process.
H. Foreign Currency Translation:
Items included in the financial statements of the Company are measured using the currency of the primary economic
environment in which the entity operates ('the functional currency'). The Indian Rupee (INR) is the functional and presentation
currency of the Company.
Foreign currency transactions are recorded on initial recognition in the functional currency, using the exchange rate at
the date of the transaction. At each balance sheet date, foreign currency monetary items are reported using the closing
exchange rate. Exchange differences that arise on settlement of monetary items or on reporting at each balance sheet date
of the Company's monetary items at the closing rate are recognized as income and expenses in the Statement of Profit and
Loss, in the period in which they arise.
I. Revenue recognition:
Revenue is recognized to the extent that it is possible that the economic benefits will flow to the Company and the revenue
can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable, taking into the
account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government.
I. Revenue from software services
Revenue from software service is recognized when the rendering of services under a contract is completed.
II. Dividend income
Dividend income from investments is recognized when the Company's right to receive dividend is established provided it is
probable that the economic benefits associated with the dividend will flow to the Company as also the amount of dividend
income can be reliably measured.
III. Interest income
Interest income from the financial assets is recognized on a time basis, by reference to the principle outstanding using the
effective interest method provided it is probable that the economic benefits associated with the interest will flow to the
Company and the amount of interest can be measured reliably. The effective interest rate is the rate that exactly discounts
estimated future cash receipts through the expected life of the financial asset to the gross carrying amount of that financial
asset.
IV. Other Income:
(i) Other income is accounted for on accrual basis except where the receipt of income is uncertain in which case it is
accounted for on receipt basis.
(ii) Claims/Insurance Claim etc, are accounted for when no significant uncertainties are attached to their eventual receipts.
J. Employee benefits:
Short-term obligations:
Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12 months
after the end of the period in which the employees render the related service are recognised in respect of employee's
services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are
settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
Provident Fund:
Contribution towards provident fund for employees is made to the regulatory authorities, where the Company has no further
obligations. Such benefits are classified as Defined Contribution Schemes as the Company does not carry any further
obligations, apart from the contributions made on a monthly basis.
Gratuity
Incremental expenditure on gratuity for each year is arrived at as per actuarial valuation and is recognised and charged to
the statement of profit and loss in the year in which employee has rendered services.
K. Borrowing costs:
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised
during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are
assets that necessarily take a substantial period of time to get ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying
assets is deducted from the borrowing costs eligible for capitalization. Other borrowing costs are expensed in the period in
which they are incurred.
L. Income tax:
The income tax expense or credit for the period is the tax payable on the current period's taxable income based on the
applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of
the reporting period in India. Management periodically evaluates positions taken in tax returns with respect to situations
in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of
amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the standalone financial statements. Deferred income
tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting nor taxable profit nor loss. Deferred income
tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting
period and are expected to apply when the related deferred income tax asset is realised or tire deferred income tax
liability is settled.
Deferred tax assets are recognised for all deductible temporary differences only if it is probable that future taxable amounts
will be available to utilise those temporary differences.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities
and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset
where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset
and settle the liability simultaneously Current and deferred tax is recognised in profit or loss, except to the extent that it
relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in
other comprehensive income or directly in equity, respectively.
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