3. Summary of significant accounting policies
3.1 Property, Plant and Equipment (PPE)and depreciation and amortisation:
i) Recognition and Measurement:
Items of property, plant, and equipment are measured at cost less accumulated depreciation and impairment losses, if any.
The cost of an item of property, plant and equipment comprises:
• its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and
rebates; and
• Any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of
operating in the manner intended by management.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as
separate items (major components) of property, plant and equipment.
An asset under construction includes the cost of property, plant and equipment that are not ready to use at the balance sheet
date. Advances paid to acquire property; plant and equipment before the balance sheet date are disclosed under other non¬
current assets. Assets under construction are not depreciated as these assets are not yet ready for use.
ii) Subsequent expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure
will flow to the Company and the cost of the expenditure can be measured reliably.
iii) Depreciation and amortisation
Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value.
Depreciation on property, plant and equipment of the Company has been provided using the straight-line method based on
the useful lives specified in Schedule II to the Companies Act, 2013.
A summary of the policies applied to the Company’s tangible assets is, as follows:
iv) De-recognition:
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected
to arise from continued use of the asset. Any gain or loss arising on the disposal or retirement of property, plant and
equipment is determined as the difference between the sale proceeds and the carrying amount of the assets and is recognized
in Statement of Profit and Loss.
3.2 Intangible assets and amortisation
i) Recognition and measurement:
Items of Intangible Assets are measured at cost less accumulated amortisation and impairment losses, if any. The cost of
intangible assets comprises:
• its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discount sand
rebates; and
• Any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of
operating in the manner intended by management.
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 recognized in the Statement of Profit and Loss when the asset is
derecognized.
ii) Subsequent expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure
will flow to the Company and the cost of the expenditure can be measured reliably.
iii) Amortisation
The intangible assets of the Company are assessed to be of finite lives and are amortized over the useful economic life and
assessed for impairment whenever there is an indication that the intangible asset may be impaired. The Company reviews
amortization period on an annual basis. Intangible assets are amortized on straight line basis in accordance with IND AS 38
and Schedule II to the Companies Act, 2013 or based on technical estimates.
A summary of the policies applied to the Company’s Intangibles is, as follows:
Intangible assets Useful lives
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3.3 Impairment of non-financial assets
The carrying values of assets / cash generating units at each balance sheet date are reviewed for impairment if any indication of
impairment exists. If the carrying amount of the assets exceeds the estimated recoverable amount, an impairment loss is recognised
for such excess amount. The impairment loss is recognised as an expense in the Statement of Profit and Loss, unless the asset is
carried at revalued amount, in which case any impairment loss of the revalued asset is treated as a decrease to the extent a
revaluation reserve is available for that asset.
The recoverable amount is the greater of the net selling price and the value in use. Value in use is arrived at by discounting the
future cash flows to their present value based on an appropriate discount factor. When there is indication that an impairment loss
recognised for an asset (other than a revalued asset) in earlier accounting periods which no longer exists or may have decreased,
such reversal of impairment loss is recognised in the Statement of Profit and Loss, to the extent the amount was previously
charged to the Statement of Profit and Loss. In case of revalued assets, such reversal is not recognised.
3.4 Foreign currency transactions
Transactions in foreign currencies are translated into the Company’s functional currency at exchange rates at the dates of the
transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the
functional currency at the exchange rate at that date.
Non-monetary assets and liabilities that are measured based on historical cost in a foreign currency are translated at the exchange
rate at the date of the transaction.
Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at
which they were translated on initial recognition during the period or in previous Financial statements are recognised in the
Statement of Profit and Loss in the period in which they are settled.
3.5 Financial Instruments
I. Financial assets
Classification
The Company classifies financial assets as subsequently measured at amortised cost, fair value through other comprehen¬
sive income or fair value through profit or loss based on its business model for managing the financial assets and the
contractual cash flow characteristics of the financial asset.
Initial recognition and measurement
Trade receivables and debt securities issued are initially recognised when they originate.
The Company recognises financial assets (other than trade receivables and debt securities) when it becomes a party to the
contractual provisions of the instrument. All financial assets are recognised initially at fair value plus transaction costs that
are attributable to the acquisition of the financial asset.
Subsequent measurement
For subsequent measurement, the financial assets are classified in three categories:
• Equity investments
Equity investments
All equity investments other than investment in subsidiaries, joint ventures and associate are measured at fair value. For all
other equity instruments, the Company decides to classify the same at fair value through other comprehensive income
(FVTOCI). The Company makes such election on an instrument-by-instrument basis. The classification is made on initial
recognition and is irrevocable.
The Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding
dividends, are recognised in other comprehensive income (OCI). There is no recycling of the amounts from OCI to the
Statement of Profit and Loss, even on sale of such investments.
Derecognition
A financial asset (or, where applicable, a part of a financial asset) is primarily derecognised when:
(a) The rights to receive cash flows from the asset have expired, or
(b) The Company has transferred substantially all the risks and rewards of the asset, or
(c) The Company has neither transferred nor retained substantially all the risks and rewards of the asset but has transferred
control of the asset.
Impairment of financial assets
The Company applies ‘simplified approach’ measurement and recognition of impairment loss on the following financial
assets and credit risk exposure:
a) financial assets that are debt instruments, and are measured at amortised cost e.g., loans, debt securities, deposits, and
bank balance.
b) Trade receivables.
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises
impairment loss allowance based on lifetime Expected
Credit Loss at each reporting date, right from its initial recognition.
II. Financial Liabilities
Classification
The Company classifies all financial liabilities as subsequently measured at amortised cost.
Initial recognition and measurement
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of
directly attributable transaction costs.
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the
Effective Interest Rate (EIR) method. Gains and losses are recognised in the Statement of Profit and Loss when the liabilities
are derecognised.
Amortised cost is calculated by taking into account any discount or premium on acquisition and transactions costs. The EIR
amortisation is included as finance costs in the Statement of Profit and Loss.
This category generally applies to loans and borrowings.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an
existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the State¬
ment of Profit and Loss.
III. Offsetting of financial instruments
Financial assets and financial liabilities are offset, and the net amount is reported in the balance sheet if there is an enforce¬
able legal right to offset the recognised amounts and there is an intention to settle them on a net basis or to realise the assets
and settle the liabilities simultaneously.
3.6 Revenue recognition
The Company derives its revenue primarily from its core business operations, including the sale of goods and/or rendering of
services, as applicable.
Revenue from services is recognised as they are rendered based on agreements/arrangements with the concerned parties and
recognised net of Goods and Service Tax (GST) (as applicable).
The Company recognises revenue when it satisfies a performance obligation by transferring control of a good or service to the
customer. Control is considered transferred when the customer has the ability to direct the use of and obtain substantially all of the
remaining benefits from the asset. Revenue is recognised either at a point in time or over time, based on the nature of the
performance obligation and enforceability of the right to payment for performance completed to date.
Revenue is measured at the fair value of consideration received or receivable considering of discounts, incentives, volume
rebates, and outgoing taxes on sales. Any amounts receivable from the customers are recognised as revenue after the control over
the goods sold are transferred to the customer which is generally on dispatch of goods.
Interest income
Interest income is accounted on an accrual basis at effective interest rate. Interest on delayed payment and forfeiture income are
accounted based upon underlying agreements with customers.
3.7 Leases
At the inception of a contract, the Company assesses whether a contract is or contains, a lease. A contract is or contains a lease
if the contract conveys the right to control the use of an identified asset for a period of time in exchange of consideration. To
assess whether a contract conveys the right to control the use of an asset the Company assesses whether:
• The contracts involve the use of an identified asset - this may be specified explicitly or implicitly and should be physically
distinct or represent substantially all of the capability of a physical distinct asset. If the supplier has a substantive substitu¬
tion right, then the asset is not identified
• The Company has the right to obtain substantially all of the economic benefits from use of the asset throughout the period
of use; and
• The Company has the right to direct the use of the asset. The Company has this right when it has the decision-making rights
that are most relevant to changing how and for what purpose the asset is used.
As a Lessee
Right-of-use Asset
The Company recognises a right-of-use asset and a lease liability at the lease commencement date. At the commencement date, a
lessee shall measure the right-of-use asset at cost which comprises initial measurement of the lease liability, any lease payments
made at or before the commencement date, less any lease incentives received, any initial direct costs incurred by the lessee; and
an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it
is located or restoring the underlying asset to the condition required by the terms and conditions of the lease.
Lease Liability
At the commencement date, a lessee shall measure the lease liability at the present value of the lease payments that are not paid
at that date. The lease payments shall be discounted using the interest rate implicit in the lease, if that rate can be readily
determined. If that rate cannot be readily determined, the lessee shall use the lessee’s incremental borrowing rate.
Short-term lease and leases of low-value assets
The Company has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of
less than 12 months or less and leases of low-value assets. The Company recognises the lease payments associated with these
leases as an expense on a straight-line basis over the lease term.
The election for short-term leases shall be made by class of underlying asset to which the right of use relates. A class of underlying
asset is a grouping of underlying assets of a similar nature and use in Company’s operations. The election for leases for which the
underlying asset is of low value can be made on a lease-by-lease basis.
3.8 Income tax
Income tax expense comprises current tax and deferred tax. It is recognised in the Statement of Profit and Loss except to the extent
that it relates to items recognised directly in equity or in OCI.
Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the
tax payable or receivable in respect of previous years.
It is measured using tax rates enacted or substantively enacted at the reporting date.
Current tax assets and liabilities are offset only if, the Company:
a) Has a legally enforceable right to set off the recognised amounts; and
b) Intends either to realise the asset or settle the liability on a net basis or simultaneously.
Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. Deferred tax assets are recognised for unused tax losses, unused
tax credits and deductible temporary differences to the extent there is convincing evidence that sufficient taxable profit will be
available against which such deferred tax asset can be realised.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related
tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improves. Deferred tax
liabilities are recognised for taxable temporary differences Unrecognised deferred tax assets are reassessed at each reporting date
and recognised to the extent that it has become probable that future taxable profits will be available against which they can be
used.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates
enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or
the liability is settled, based on tax rates (and tax laws), that have been enacted or substantively enacted at the reporting date.
Deferred tax, relating to items recognised outside profit or loss, is recognised outside profit or loss (either in Other Comprehensive
Income or in other equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly
in other equity.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against
current tax liabilities, and the deferred taxes relate to the same taxable entity and the same taxation authority.
3.9 Employee benefits
• Short-Term Employee Benefits
The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by
employees are recognised as an expense during the period when the employees render the services.
Accumulated leave, which is expected to be utilised within the next 12 months, is treated as short-term employee benefit. The
Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the
unused entitlement that has accumulated at the reporting date. The Company recognizes expected cost of short-term em¬
ployee benefit as an expense, when an employee renders the related service.
The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit
for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using
the projected unit credit method at the reporting date. Actuarial gains/ losses are immediately taken to the statement of profit
and loss and are not deferred. The obligations are presented as current liabilities in the balance sheet if the entity does not
have an unconditional right to defer the settlement for at least twelve months after the reporting date.
• Post-Employment Benefits
• Defined Contribution Plans
A defined contribution plan is a post-employment benefit plan under which the Company pays specified contributions to a
separate entity. The Company makes specified monthly contributions towards Provident Fund. The Company’s contribution
is recognised as an expense in the Statement of Profit and Loss during the period in which the employee renders the related
service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution
already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid.
• Defined Benefits Plans
The Company operates a defined benefit gratuity plan, which requires contributions to be made to Life Insurance Corpora¬
tion of India.
The cost of the defined benefit plan and other post-employment benefits and the present value of such obligations are
determined using actuarial valuations being carried out at the end of each annual reporting period. An actuarial valuation
involves making various assumptions that may differ from actual developments in the future. These include the determina¬
tion of the discount rate, future salary increases, mortality rates and future pension increases. Due to the complexities
involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these
assumptions. All assumptions are reviewed at each reporting date.
The Company pays gratuity to the employees whoever has completed five years of service with the Company at the time of
resignation/superannuation. The gratuity is paid @15 days salary for every completed year of service as per the Payment of
Gratuity Act, 1972.
The liability in respect of gratuity and other post-employment benefits is calculated using the Projected Unit Credit Method
and spread over the period during which the benefit is expected to be derived from employees’ services.
Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net
interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the
net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to retained
earnings through OCI in the period in which they occur.
Remeasurements are not reclassified to profit or loss in subsequent periods.
Past service costs are recognised in profit or loss on the earlier of:
• The date of the plan amendment or curtailment, and
• The date that the Company recognises related restructuring costs.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company
recognises the following changes in the net defined benefit obligation as an expense in the Consolidated statement of
profit and loss:
Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine
settlements; and net interest expense or income.
3.10 Borrowing costs
Borrowing cost includes interest expense, amortisation of discounts, hedge - related cost incurred in connection with foreign
currency borrowings, ancillary costs incurred in connection with borrowing of funds and exchange difference, arising from foreign
currency borrowings to the extent they are regarded as an adjustment to the interest cost.
Borrowing costs, that are attributable to the acquisition or construction or production of a qualifying asset, are capitalised as part
of the cost of such asset till such time the asset is ready for its intended use. A qualifying asset is an asset that necessarily takes
a substantial period to get ready for its intended use.
All other borrowing costs are recognised as an expense in the period in which they are incurred.
3.11 Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at banks and on hand and short-term deposits with an original
maturity of three months or less, which are subject to an insignificant risk of changes in value.
For the Statement of Cash Flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of
outstanding bank overdrafts as they are considered an integral part of the Company’s cash management.
3.12 Statement of Cash flow
Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non¬
cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses
associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the
Company are segregated.
3.13 Earnings per share
Basic earnings per share are computed by dividing the profit / (loss) after tax by the weighted average number of equity shares
outstanding during the year. Diluted earnings per share is computed by dividing the profit / (loss) after tax as adjusted for
dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity
shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted
average number of equity shares which could have been issued on conversion of all dilutive potential equity shares. If potential
equity shares converted into equity shares increases the earnings per share, then they are treated as anti-dilutive and anti-dilutive
earning per share is computed.
Basic and diluted earnings per share are computed and presented in accordance with Ind AS 33 - Earnings per Share
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