2 SIGNIFICANT ACCOUNTING POLICIES:
i Basis for Accounting
These financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles
(GAAP) under the historical cost convention on accrual basis and comply with the relevant provisions of the
Companies Act, 2013 (‘the Act’). GAAP comprises mandatory accounting standards as prescribed under
Section 133 of the Act read with Rule 7 of the Companies (Accounts) Rules, 2014 read with Companies
(Accounting Standards) Amendment Rule, 2016 applicable with effect from 1 April 2016 and other generally
accepted accounting principles. Accounting policies have been consistently applied except where a newly-
issued accounting standard is initially adopted or a revision to an existing accounting standard requires a
change in the accounting policy hitherto in use. The financial statements are presented in Indian rupees in
lakhs.
ii Use of Estimates
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 reported amounts of
revenues and expenses during the reporting period. Application of accounting policies that require critical
accounting estimates involving complex and subjective judgments and the use of assumptions in these
financial statements are, useful lives of Property, plant and equipment, Provisions and contingencies, Income
tax and deferred tax, Measurement of defined employee benefit obligations. The estimates & assumptions
used in these financial statements are based upon management’s evaluation of relevant events & circumstances
of the data of the financial statements. Actual results could differ from these estimates. Estimates and
underlying assumptions are reviewed on an ongoing basis, any revision to accounting estimates is recognized
prospectively in current and future periods.
iii Current versus non-current classication
The Schedule III to the Act requires assets and liabilities to be classified as either Current or Non-current.
An asset is treated as current when it is:
- Expected to be realized or intended to be sold or consumed in normal operating cycle;
- Held primarily for the purpose of trading;
- Expected to be realized within twelve months after the reporting period, or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least
twelve months after the reporting period.
All other assets are classiLed as non-current.
A liability is current when:
- It is expected to be settled in normal operating cycle; or
- It is held primarily for the purpose of trading; or
- It is due to be settled within twelve months after the reporting period; or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after
the reporting period.
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classiLed as non-current assets and liabilities respectively.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash
or cash equivalents. The Company has identiLed twelve months as its operating cycle.
iv Revenue Recognition
Sales are recorded net of trade discounts, rebates, Goods and Services Tax (GST) as applicable. Revenue
from sale of products is recognised when all the significant risks and rewards of ownership of the goods have
passed to the buyer. Revenue from contracts is recognised to the extent that it is probable that the economic
benefits will flow to the company and can be reliably measured.
v Property, Plant and Equipment, Depreciation and Amortisation
Property, Plant and Equipment
Tangible assets are carried at cost less accumulated depreciation, amortisation and impairment loss, if any.
Cost comprises of purchase price including inward freight, non rebatable duties & taxes and expenses
directly related to the acquisition, construction and installation of the Property, Plant and Equipment.
Borrowing costs directly attributable to acquisition or construction of those Property, Plant and Equipment
which necessarily take a substantial period of time to get ready for their intended use are capitalised.
Expenditure incurred on acquisition/ construction of Property, Plant and Equipment which are not ready for
their intended use at each balance sheet date are disclosed under capital work in progress.
Depreciation on Fixed Assets is provided to the extent of depreciable amount on the Written Down Value
(WDV) Method. Depreciation is provided based on useful life of the assets as prescribed in Schedule II to
the Companies Act, 2013. Depreciation on Property, Plant and Equipment acquired / discarded during the
year is provided on a pro-rata basis from / upto the date of addition / deletion.
Intangible assets
Intangible assets are amortised in statement of profit and loss over their estimated useful lives, from the date
that they are available for use based on the expected pattern of consumption of economic benefits of the
asset. Accordingly, at present, these are being amortised on Written Down Value (WDV) basis. In accordance
with the applicable Accounting Standard, the Company follows a rebuttable presumption that the useful life
of an intangible asset will not exceed ten years from the date when the asset is available for use. However,
if there is persuasive evidence that the useful life of an intangible asset is longer than ten years, it is
amortised over the best estimate of its useful life. Such intangible assets and intangible assets that are not
yet available for use are tested periodically for impairment.
vi Impairment of Assets:
The carrying amount of tangible or intangible assets are reviewed at each Balance Sheet date if there is any
indication of impairment based on internal / external factors. An impairment loss is recognized in profit and
loss account wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable
amount is greater of the asset’s net selling price and value in use. In assessing value in use, the estimated
future cash flows are discounted to the present value by using weighted average cost of capital. A previously
recognized impairment loss is further provided or reversed depending on changes in circumstances.
vii Accounting for Taxes on Income
Income-tax expense comprises current tax (i.e. amount of tax for the period determined in accordance with
the income-tax law) and deferred tax charge or credit (reflecting the tax effects of timing differences between
accounting income and taxable income for the period). Income-tax expense is recognised in profit or loss
except that tax expense related to items recognised directly in reserves is also recognised in those reserves.
Current tax is measured at the amount expected to be paid to (recovered from) the taxation authorities, using
the applicable tax rates and tax laws. Deferred tax is recognised in respect of timing differences between
taxable income and accounting income i.e. differences that originate in one period and are capable of reversal
in one or more subsequent periods. The deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognised using the tax rates and tax laws that have been enacted or substantively
enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable
certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carried
forward loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty
supported by convincing evidence that sufficient future taxable income will be available against which such
deferred tax assets can be realised. Deferred tax assets are reviewed as at each balance sheet date and
written down or written-up to reflect the amount that is reasonably/virtually certain (as the case may be) to
be realised.
Minimum Alternative Tax (‘MAT’) under the provisions of the Income-tax Act, 1961 is recognised as current
tax in the Statement of Profit and Loss. The credit available under the Act in respect of MAT paid is
recognised as an asset only when and to the extent there is convincing evidence that the company will pay
normal income tax during the period for which the MAT credit can be carried forward for set-off against the
normal tax liability. MAT credit recognised as an asset is reviewed at each balance sheet date and written
down to the extent the aforesaid convincing evidence no longer exists.
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