SIGNIFICANT ACCOUNTING POLICIES
Statement of Compliance
These financial statements have been prepared in accordance
with Indian Accounting Standards (Ind AS) notified under
Section 133 of the Companies Act, 2013.The financial
statements have also been prepared in accordance with the
relevant presentation requirements of the Companies Act,
2013. The Company adopted Ind AS from 1st April, 2017.
Basis of preparation and measurement
The financial statements are prepared in accordance with the
historical cost convention, except for certain items that are
measured at fair values, as explained in the accounting
policies.
Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between
market participants at the measurement date, regardless of
whether that price is directly observable or estimated using
another valuation technique. In estimating the fair value of an
asset or a liability, the Company takes into account the
characteristics of the asset or liability if market participants
would take those characteristics into account when pricing the
asset or liability at the measurement date. Fair value for
measurement and/ or disclosures in these financial statements
is determined on such a basis, except for leasing transactions
that are within the scope of Ind AS 17 - Leases, and
measurements that have some similarities to fair value but are
not fair value, such as net realisable value in Ind AS 2 -
Inventories or value in use in Ind AS 36 - Impairment of Assets.
The preparation of financial statements in conformity with Ind
AS requires management to make judgements, estimates and
assumptions that affect the application of the accounting
policies and the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues
and expenses during the year. Actual results could differ from
those estimates. The estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is
revised if the revision affects only that period; they are
recognised in the period of the revision and future periods if the
revision affects both current and future periods.
Operating Cycle
All assets and liabilities have been classified as current or non¬
current as per the Company's normal operating cycle and other
criteria set out in the Schedule III to the Companies Act, 2013
and Ind AS 1 - Presentation of Financial Statements based on
the nature of products and the time between the acquisition of
assets for processing and their realisation in cash and cash
equivalents.
Property, plant and equipments
Property, plant and equipment are stated at cost of acquisition
or construction less accumulated depreciation and
impairment, if any. For this purpose, cost includes deemed cost
which represents the carrying value of property, plant and
equipment recognised as at 1st April, 2016 measured as per
the previous GAAP.
Cost is inclusive of inward freight, duties and taxes and
incidental expenses related to acquisition. In respect of major
projects involving construction, related pre-operational
expenses form part of the value of assets capitalised.
Expenses capitalised also include applicable borrowing costs
for qualifying assets, if any. All up gradation / enhancements
are charged off as revenue expenditure unless they bring
similar significant additional benefits.
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefits are expected to
arise from the continued use of asset. Any gain or loss arising
on the disposal or retirement of an item of property, plant and
equipment is determined as the difference between the sales
proceeds and the carrying amount of the asset and is
recognised in the Statement of Profit and Loss.
Depreciation of these assets commences when the assets are
ready for their intended use which is generally on
commissioning. Items of property, plant and equipment are
depreciated in a manner that amortizes the cost (or other
amount substituted for cost) of the assets after commissioning,
less its residual value, over their useful lives as specified in
Schedule II of the Companies Act, 2013 on a straight line basis.
Land is not depreciated.
Assets held under finance leases are depreciated over their
expected useful lives on the same basis as owned assets or,
where shorter, the term of the relevant lease.
Property, plant and equipment's residual values and useful
lives are reviewed at each Balance Sheet date and changes, if
any, are treated as changes in accounting estimate.
Intangible Assets
Intangible Assets that the Company controls and from which it
expects future economic benefits are capitalised upon
acquisition and measured initially:
The carrying value of intangible assets includes deemed cost
which represents the carrying value of intangible assets
recognised as at 1st April, 2016 measured as per the previous
GAAP.
The useful lives of intangible assets are reviewed annually to
determine if a reset of such useful life is required for assets with
finite lives and to confirm that business circumstances
continue to support an indefinite useful life assessment for
assets so classified. Based on such review, the useful life may
change or the useful life assessment may change from
indefinite to finite. The impact of such changes is accounted for
as a change in accounting estimate.
Impairment of assets
Impairment loss, if any, is provided to the extent, the carrying
amount of assets or cash generating units exceed their
recoverable amount.
Recoverable amount is higher of an asset's net selling price
and its value in use. Value in use is the present value of
estimated future cash flows expected to arise from the
continuing use of an asset or cash generating unit and from its
disposal at the end of its useful life.
Impairment losses recognised in prior years are reversed
when there is an indication that the impairment losses
recognised no longer exist or have decreased. Such reversals
are recognised as an increase in carrying amounts of assets to
the extent that it does not exceed the carrying amounts that
would have been determined (net of amortization or
depreciation) had no impairment loss been recognised in
previous years.
Inventories
Inventories are stated at lower of cost and net realisable value.
The cost is calculated on weighted average method. Cost
comprises expenditure incurred in the normal course of
business in bringing such inventories to its present location
and condition and includes, where applicable, appropriate
overheads based on normal level of activity. Net realisable
value is the estimated selling price less estimated costs for
completion and sale.
Obsolete, slow moving and defective inventories are identified
from time to time and, where necessary, a provision is made for
such inventories.
Foreign currency transactions
Transactions in foreign currency are recorded at the exchange
rate prevailing on the date of transaction.
Monetary assets and liabilities denominated in foreign
currency are translated at the rates of exchange at the balance
sheet date and resultant gain or loss arising out of fluctuations
in the exchange rates are recognized in the Statement of Profit
and Loss in the period in which they arise, except in respect of
fixed assets where exchange variance is adjusted in the
carrying amount of respective fixed assets.
To account for differences between the forward exchange rates
and the exchanges rates at the date of transactions as income
or expense over the life of the contracts.
To account for profit / loss arising on cancellation or renewal of
forward exchange contracts as income / expenses for the
period.
To recognize the net mark to market losses & gain in the
Statement of Profit and Loss on the outstanding portfolio of
forwards as at the Balance Sheet date.
Financial instruments, financial assets, financial liabilities
and Equity instruments
Financial assets and financial liabilities are recognised when
the Company becomes a party to the contractual provisions of
the relevant instrument and are initially measured at fair value.
Transaction costs that are directly attributable to the
acquisition or issue of financial assets and financial liabilities
(other than financial assets and financial liabilities measured at
fair value through profit or loss) are added to or deducted from
the fair value on initial recognition of financial assets or
financial liabilities. Purchase or sale of financial assets that
require delivery of assets within a time frame established by
regulation or convention in the market place (regular way
trades) are recognised on the trade date, i.e., the date when
the Company commits to purchase or sell the asset.
Financial Assets
Recognition: Financial assets include Investments, Trade
receivables, Advances, Security Deposits, Cash and cash
equivalents. Such assets are initially recognised at transaction
price when the Company becomes party to contractual
obligations. The transaction price includes transaction costs
unless the asset is being fair valued through the Statement of
Profit and Loss.
Classification: Management determines the classification of an
asset at initial recognition depending on the purpose for which
the assets were acquired. The subsequent measurement of
financial assets depends on such classification.
Financial assets are classified as those measured at :
amortised cost, where the financial assets are held solely for
collection of cash flows arising from payments of principal and/
or interest.
Trade receivables, Advances, Security Deposits, Cash and
cash equivalents etc. are classified for measurement at
amortised cost while investments may fall under any of the
aforesaid classes. However, in respect of particular
investments in equity instruments that would otherwise be
measured at fair value through profit or loss, an irrevocable
election at initial recognition may be made to present
subsequent changes in fair value through other
comprehensive income.
Revenue Recognition
Revenue from business and other activities consist primarily of
revenue earned on a “time and material” basis. The related
revenue is recognized as and when the material supplied /
services performed.
Sales & Export Incentives
Sales are recognized, net of return, on dispatch of goods to
customers and are reflected in the accounts at gross realizable
value net of taxes but exclusive of excise / customs duties.
Export incentives are accounted on accrual basis and include
estimated realizable value / benefits from Duty Drawback,
Rebate of State & Central Taxes and Levies (ROSCTL), and
Remission of Duties and Taxes on Exported Products
(RODTEP), etc.
Investment Income
To account for income from investments on an accrual basis,
inclusive of related tax deducted at source.
To account for Income from dividends when the right to receive
such dividends is established.
Government Grant
The Company may receive government grants that require
compliance with certain conditions related to the Company's
operating activities or are provided to the Company by way of
financial assistance on the basis of certain qualifying criteria.
Government grants are recognised when there is reasonable
assurance that the grant will be received, and the Company will
comply with the conditions attached to the grant.
Accordingly, government grants:
(a) related to or used for assets are included in the Balance
Sheet as deferred income and recognised as income over the
useful life of the assets.
(b) related to incurring specific expenditures are taken to the
Statement of Profit and Loss on the same basis and in the
same periods as the expenditures incurred.
(c) by way of financial assistance on the basis of certain
qualifying criteria are recognised as they become receivable.
In the unlikely event that a grant previously recognised is
ultimately not received, it is treated as a change in estimate and
the amount cumulatively recognised is expensed in the
Statement of Profit and Loss.
Dividend Distribution
Dividends paid is recognised in the period in which the interim
dividends are approved by the Board of Directors, or in respect
of the final dividend when approved by shareholders.
Employee Benefits
The Employee benefits are provided in accordance with
INDAS 19 and are dealt in the following manner:
(i) Contribution to Provident Fund and other Funds are
accounted on accrual basis.
(ii) Gratuity Liability is determined by actuarial valuation done
at the end of the year and the current year charge is
debited in the Statement of Profit and Loss.
Leases
Leases are recognised as a finance lease whenever the terms
of the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as
operating leases.
Taxes on Income
Taxes on income comprises of current taxes and deferred
taxes. Current tax in the Statement of Profit and Loss is
provided as the amount of tax payable in respect of taxable
income for the period using tax rates and tax laws enacted
during the period, together with any adjustment to tax payable
in respect of previous years.
Deferred tax is recognised on temporary differences between
the carrying amounts of assets and liabilities and the amounts
used for taxation purposes (tax base), at the tax rates and tax
laws enacted or substantively enacted by the end of the
reporting period.
Deferred tax assets are recognised for the future tax
consequences to the extent it is probable that future taxable
profits will be available against which the deductible temporary
differences can be utilised.
Income tax, in so far as it relates to items disclosed under other
comprehensive income or equity, are disclosed separately
under other comprehensive income or equity, as applicable.
Deferred tax assets and liabilities are offset when there is
legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances related 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 net basis, or to realize the
asset and settle the liability simultaneously.
Claims
Claims against the Company not acknowledged as debts are
disclosed after a careful evaluation of the facts and legal
aspects of the matter involved.
Provisions
Provisions are recognised when, as a result of a past event, the
Company has a legal or constructive obligation; it is probable
that an outflow of resources will be required to settle the
obligation; and the amount can be reliably estimated. The
amount so recognised is a best estimate of the consideration
required to settle the obligation at the reporting date, taking into
account the risks and uncertainties surrounding the obligation.
In an event when the time value of money is material, the
provision is carried at the present value of the cash flows
estimated to settle the obligation.
Operating Segments
Operating segments are reported in a manner consistent with
the internal reporting provided to the chief operating decision¬
maker (CODM). The CODM, who is responsible for allocating
resources and assessing performance of the operating
segments, has been identified as the Corporate Management
Committee.
Segments are organised based on business which have
similar economic characteristics as well as exhibit similarities
in nature of products and services offered, the nature of
production processes, the type and class of customer and
distribution methods.
Segment revenue arising from third party customers is
reported on the same basis as revenue in the financial
statements. Inter-segment revenue is reported on the basis of
transactions which are primarily market led. Segment results
represent profits before finance charges, unallocated
corporate expenses and taxes.
“Unallocated Corporate Expenses” include revenue and
expenses that relate to initiatives/costs attributable to the
enterprise as a whole and are not attributable to segments.
Financial and Management Information Systems
The Company's Accounting System is designed to unify the
Financial and Cost Records and also to comply with the
relevant provisions of the Companies Act, 2013, to provide
financial and cost information appropriate to the businesses
and facilitate Internal Control.
Note 2
Significant Accounting policies
Use of Estimate and Judgement
The preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts 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 end.
Although these estimates are based upon management's best
knowledge of current events and actions, actual results could
differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the
revision affects only that period, or in the period of the revision
and future periods if the revision affects both current and future
periods.
A. Judgements in applying accounting policies
The judgements, apart from those involving estimations (see
note below), that the Company has made in the process of
applying its accounting policies and that have a significant
effect on the amounts recognised in these financial statements
pertain to useful life of intangible assets. The Company is
required to determine whether its intangible assets have
indefinite or finite life which is a subject matter of judgement.
Certain trademarks have been considered of having an
indefinite useful life taking into account that there are no
technical, technological or commercial risks of obsolescence
or limitations under contract or law. Other trademarks have
been amortized over their useful economic life. Refer notes to
the financial statements.
B. Key sources of estimation uncertainty
The following are the key assumptions concerning the future,
and other key sources of estimation uncertainty at the end of
the reporting period that may have a significant risk of causing a
material adjustment to the carrying amounts of assets and
liabilities within the next financial year.
1. Useful lives of property, plant and equipment and
intangible assets:
As described in the significant accounting policies, the
Company reviews the estimated useful lives of property, plant
and equipment and intangible assets at the end of each
reporting period.
2. Fair value measurements and valuation processes
Some of the Company's assets and liabilities are measured at
fair value for financial reporting purposes. In estimating the fair
value of an asset or a liability, the Company uses market-
observable data to the extent it is available. Where Level 1
inputs are not available, the Company engages third party
valuers, where required, to perform the valuation. Information
about the valuation techniques and inputs used in determining
the fair value of various assets, liabilities and share based
payments are disclosed in the notes to the financial
statements.
3. Actuarial Valuation:
The determination of Company's liability towards defined
benefit obligation to employees is made through independent
actuarial valuation including determination of amounts to be
recognised in the Statement of Profit and Loss and in other
comprehensive income. Such valuation depends upon
assumptions determined after taking into account inflation,
seniority, promotion and other relevant factors such as supply
and demand factors in the employment market. Information
about such valuation is provided in notes to the financial
statements.
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