2. 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.
Basis of Preparation
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 disclosure purposes in these
financial statements is determined on such a basis,
except for share-based payment transactions that are
within the scope of Ind AS 102 - Share-Based Payment,
leasing transactions that are within the scope of Ind
AS 116 - 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 Equipment - Tangible Assets
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 amortises 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 written-down value basis.
The estimated useful lives of property, plant and
equipment of the company are as follows:
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:
a. for assets acquired in a business combination or by
way of a government grant, at fair value on the date
of acquisition/grant.
b. for separately acquired assets, at cost comprising
the purchase price (including import duties and
nonrefundable taxes) and directly attributable costs
to prepare the asset for its intended use.
Internally generated assets for which the cost is clearly
identifiable are capitalised at cost. Research expenditure
is recognised as an expense when it is incurred.
Development costs are capitalised only after the technical
and commercial feasibility of the asset for sale or use
has been established. Thereafter, all directly attributable
expenditure incurred to prepare the asset for its intended
use are recognised as the cost of such assets. Internally
generated brands, websites and customer lists are not
recognised as intangible assets.
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 life of an intangible asset is considered finite
where the rights to such assets are limited to a specified
period of time by contract or law (e.g., patents, licenses,
trademarks, franchise and servicing rights) or the
likelihood of technical, technological obsolescence (e.g.,
computer software, design, prototypes) or commercial
obsolescence (e.g., lesser known brands are those
to which adequate marketing support may not be
provided). If, there are no such limitations, the useful life
is taken to be indefinite. Intangible assets that have finite
lives are amortises over their estimated useful lives by
the written-down value method unless it is practical to
reliably determine the pattern of benefits arising from
the asset. An intangible asset with an indefinite useful
life is not amortises.
All intangible assets are tested for impairment.
Amortisation expenses and impairment losses and
reversal of impairment losses are taken to the Statement
of Profit and Loss. Thus, after initial recognition, an
intangible asset is carried at its cost less accumulated
amortisation and/or impairment losses.
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 amortisation 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 FIFO basis. 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
The functional and presentation currency of the Company
is Indian Rupee.
Transactions in foreign currency are accounted for at the
exchange rate prevailing on the transaction date. Gains/
losses arising on settlement as also on translation of
monetary items are recognised in the statement of profit
and loss.
Exchange differences arising on monetary items that, in
substance, form part of the company's net investment in
a foreign operation (having a functional currency other
than Indian Rupee) are accumulated in foreign currency
translation reserve.
Investment in Subsidiary and Associate
Investment in subsidiary and associate are carried at
cost less accumulated impairment, if any.
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:
(a) amortised cost, where the financial assets are
held solely for collection of cash flows arising from
payments of principal and/or interest.
(b) fair value through other comprehensive income
(FVTOCI), where the financial assets are held not only
for collection of cash flows arising from payments of
principal and interest but also from the sale of such
assets. Such assets are subsequently measured at
fair value, with unrealised gains and losses arising
from changes in the fair value being recognised in
other comprehensive income.
(c) fair value through profit or loss (FVTPL), where the
assets are managed in accordance with an approved
investment strategy that triggers purchase and sale
decisions based on the fair value of such assets. Such
assets are subsequently measured at fair value, with
unrealised gains and losses arising from changes in
the fair value being recognised in the statement of
profit and loss in the period in which they arise.
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.
Impairment:
The Company assesses at each reporting date whether
a financial asset (or a group of financial assets) such as
investments, trade receivables, advances and security
deposits held at amortised cost and financial assets that
are measured at fair value through other comprehensive
income are tested for impairment based on evidence or
information that is available without undue cost or effort.
Expected credit losses are assessed and loss allowances
recognised if the credit quality of the financial asset has
deteriorated significantly since initial recognition.
Reclassification:
When and only when the business model is changed,
the Company shall reclassify all affected financial
assets prospectively from the reclassification date as
subsequently measured at amortised cost, fair value
through other comprehensive income, fair value
through profit or loss without restating the previously
recognised gains, losses or interest and in terms of the
reclassification principles laid down in the Ind AS relating
to financial instruments.
De-recognition:
Financial assets are derecognised when the right to
receive cash flows from the assets has expired, or has
been transferred, and the Company has transferred
substantially all of the risks and rewards of ownership.
Concomitantly, if the asset is one that is measured at:
(a) amortised cost, the gain or loss is recognised in the
statement of profit and loss;
(b) fair value through other comprehensive income,
the cumulative fair value adjustments previously
taken to reserves are reclassified to the statement
of profit and loss unless the asset represents an
equity investment in which case the cumulative fair
value adjustments previously taken to reserves is
reclassified within equity.
Income Recognition:
Interest income is recognised in the statement of profit
and loss using the effective interest method. Dividend
income is recognised in the statement of profit and loss
when the right to receive dividend is established.
Financial Liabilities
Borrowings, trade payables and other financial liabilities
are initially recognised at the value of the respective
contractual obligations. They are subsequently
measured at amortised cost. Any discount or premium on
redemption/settlement is recognised in the statement of
profit and loss as finance cost over the life of the liability
using the effective interest method and adjusted to the
liability figure disclosed in the balance sheet.
Financial liabilities are derecognised when the liability is
extinguished, that is, when the contractual obligation is
discharged, cancelled and on expiry.
Offsetting Financial Instruments
Financial assets and liabilities are offset and the net
amount is included in the balance aheet where there
is a legally enforceable right to offset the recognised
amounts and there is an intention to settle on a net basis
or realise the asset and settle the liability simultaneously.
Equity Instruments
Equity instruments are recognised at the value of the
proceeds, net of direct costs of the capital issue.
Revenue
Revenue is measured at the fair value of the consideration
received or receivable for goods supplied and services
rendered, net of returns and discounts to customers.
Revenue from the sale of goods includes excise and
other duties which the company pays as a principal but
excludes amounts collected on behalf of third parties,
such as good and services tax.
Revenue from the sale of goods is recognised when
significant risks and rewards of ownership have been
transferred to the customer, which is mainly upon
delivery, the amount of revenue can be measured reliably
and recovery of the consideration is probable. Revenue
from services is recognised in the periods in which the
services are rendered.
Employee Benefits
i) Short-term employee benefits liabilities for wages
and salaries including non monetary benefits that
are expected to be settled wholly within twelve
months after the end of the period in which the
employees render the related service are classified
as short term employee benefits and are recognised
as an expense in the Statement of Profit and Loss
as the related service is provided. A liability is
recognised for the amount expected to be paid if
the company has a present legal or constructive
obligation to pay this amount as a result of past
service provided by the employee and the obligation
can be estimated reliably.
Defined Benefit Plans
Gratuity Fund
The Company has an obligation towards gratuity,
a defined benefit retirement plan covering eligible
employees. Gratuity is payable to all eligible employees
on death or on separation/termination in terms of the
provisions of The Payment of Gratuity (Amendment) Act,
1997 or as per the company's scheme whichever is more
beneficial to the employees.
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.
Company as a Lessee
Assets used under finance leases are recognised as
property, plant and equipment in the balance sheet for
an amount that corresponds to the lower of fair value
and the present value of minimum lease payments
determined at the inception of the lease and a liability is
recognised for an equivalent amount.
The minimum lease payments are apportioned between
finance charges and reduction of the lease liability so as
to achieve a constant rate of interest on the remaining
balance of the liability. Finance charges are recognised in
the statement of profit and loss.
Rentals payable under operating leases are charged to
the statement of profit and loss on a straight-line basis
over the term of the relevant lease unless the payments
to the lessor are structured to increase in line with
expected general inflation to compensate for the lessor's
expected inflationary cost increases.
Company as a Lessor
Leases in which the company does not transfer
substantially all the risks and rewards of ownership of
an asset are classified as operating leases. Where the
company is a lessor under an operating lease, the asset
is capitalised within property, plant and equipment and
depreciated over its useful economic life. Payments
received under operating leases are recognised in the
Statement of Profit and Loss on a straight-line basis over
the term of the lease.
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 realise the asset and settle the liability
simultaneously.
Dividend
The Company recognises a liability for any dividend
declared but not distributed at the end of the reporting
period, when the distribution is authorised and the
distribution is no longer at the discretion of the Company
on or before the end of the reporting period. As per the
corporate laws in India, a distribution is authorised when
it is approved by the shareholders. A corresponding
amount is recognised directly in equity.
Claims against the Company not acknowledged as debts
are disclosed after a careful evaluation of the facts and
legal aspects of the matter involved.
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