3 Significant accounting policies
3.1 Revenue recognition
Revenue is recognised upon transfer of control of promised products or services to customers in an amount
that reflects the consideration which the Company expects to receive in exchange for those products or
services.
The Company's revenues are derived from sale of goods and services.
• Revenue from sale of goods is recognized where control is transferred to the Company’s customers at
the time of shipment to customers. There was no change in the point of recognition of revenue upon
adoption of Ind AS 115.
• Service income, is recognized as and when the underlying services are performed. There was no
change in the point of recognition of revenue upon adoption of Ind AS 115. Upfront non-refundable
payments received under these arrangements continue to be deferred and are recognized over the
expected period that related services are to be performed.
• Difference between the sale price and carrying value of investment is recognised as profit or loss on
sale / redemption on investment on trade date of transaction.
• Interest income is accrued on, time basis, by reference to the principal outstanding and at the effective
interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through
the expected life of the financial asset to that asset’s net carrying amount on initial recognition."
3.2 Leases
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 for consideration.
Company as a lessee
The Company accounts for each lease component within the contract as a lease separately from non-lease
components of the contract and allocates the consideration in the contract to each lease component on the
basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the
non-lease components.
The Company recognises right-of-use asset representing its right to use the underlying asset for the lease
term at the lease commencement date. The cost of the right of-use asset measured at inception shall
comprise of the amount of the initial measurement of the lease liability adjusted for any lease payments made
at or before the commencement date less any lease incentives received, plus any initial direct costs incurred
and an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset or
restoring the underlying asset or site on which it is located. The right-of-use assets is subsequently measured
at cost less any accumulated depreciation, accumulated impairment losses, if any and adjusted for any
remeasurement of the lease liability. The right-of-use assets is depreciated using the straight-line method
from the commencement date over the shorter of lease term or useful life of right-of-use asset. The estimated
useful lives of right-of-use assets are determined on the same basis as those of property, plant and
equipment. Right of-use assets are tested for impairment whenever there is any indication that their carrying
amounts may not be recoverable. Impairment loss, if any, is recognised in the statement of profit and loss.
The Company measures the lease liability at the present value of the lease payments that are not paid at the
commencement date of the lease. The lease payments are discounted using the interest rate implicit in the
lease if that rate can be readily determined. If that rate cannot be readily determined, the Company uses
incremental borrowing rate. For leases with reasonably similar characteristics, the Company, on a lease by
lease basis, may adopt either the incremental borrowing rate specific to the lease or the incremental
borrowing rate for the portfolio as a whole. The lease payments shall include fixed payments, variable lease
payments, residual value guarantees, exercise price of a purchase option where the Company is reasonably
certain to exercise that option and payments of penalties for terminating the lease, if the lease term reflects
the lessee exercising an option to terminate the lease. The lease liability is subsequently remeasured by
increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect
the lease payments made and remeasuring the carrying amount to reflect any reassessment or lease
modifications or to reflect revised in-substance fixed lease payments. The Company recognises the amount
of the re-measurement of lease liability due to modification as an adjustment to the right-of-use asset and
statement of profit and loss depending upon the nature of modification. Where the carrying amount of the
right-of-use asset is reduced to zero and there is a further reduction in the measurement of the lease liability,
the Company recognises any remaining amount of the re-measurement in statement of profit and loss.
The Company has elected not to apply the requirements of Ind AS 116 Leases to short term leases of all
assets that have a lease term of 12 months or less and leases for which the underlying asset is of low value.
The lease payments associated with these leases are recognised as an expense on a straight-line basis over
the lease term."
3.3 Foreign currencies
In preparing the financial statements of the Company, transactions in currencies other than the company’s
functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the
transactions. At the end of each reporting period, monetary items denominated in foreign currencies are
retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical
cost in a foreign currency are not retranslated. Exchange differences on monetary items are recognised in
profit or loss in the period in which they arise.
3.4 Borrowing costs
Specific borrowing costs that are attributable to the acquisition, construction or production of a qualifying
asset are capitalized as part of the cost of such asset till such time the asset is ready for its intended use and
borrowing costs are being incurred. A qualifying asset is an asset that necessarily takes a substantial period
of time to get ready for its intended use. All other borrowing costs are recognised as an expense in the period
in which they are incurred.
Borrowing cost includes interest expense, amortization of discounts including cash discounts allowed to
customers, 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.
3.5 Taxation
Income tax expense consists of current and deferred tax. Income tax expense is recognized in the income
statement except to the extent that it relates to items recognized directly in equity, in which case it is
recognized in equity.
Current tax
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax
Deferred tax is recognized using the balance sheet method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation
purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of
assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor
taxable profit; differences relating to investments in subsidiaries and jointly controlled entities to the extent
that it is probable that they will not reverse in the foreseeable future; and taxable temporary differences
arising upon the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to
be applied to the temporary differences when they reverse, based on the laws that have been enacted or
substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally
enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same
tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax
liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available
against which the temporary difference can be utilized. 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 realized.
3.6 Earnings per share
The Company presents basic and diluted earnings per share (“EPS”) data for its ordinary shares. The basic
earnings per share is computed by dividing the net profit attributable to equity shareholders for the year by the
weighted average number of equity shares outstanding during the year.
Diluted earnings per share is computed by dividing the net profit attributable to equity shareholders for the
year 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 the conversion of all dilutive potential equity shares. Potential equity shares are
deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share.
3.7 Property, plant and equipment (PPE)
The initial cost of PPE comprises its purchase price, including import duties and non-refundable purchase
taxes, and any directly attributable costs of bringing an asset to working condition and location for its intended
use, including relevant borrowing costs and any expected costs of decommissioning, less accumulated
depreciation and accumulated impairment losses, if any. Expenditure incurred after the PPE have been put
into operation, such as repairs and maintenance, are charged to the Statement of Profit and Loss in the
period in which the costs are incurred.
If significant parts of an item of PPE have different useful lives, then they are accounted for as separate items
(major components) of PPE.
Material items such as spare parts, stand-by equipment and service equipment are classified as PPE when
they meet the definition of PPE as specified in Ind AS 16 - Property, Plant and Equipment.
3.8 Expenditure during construction period
Expenditure during construction period (including financing cost related to borrowed funds for construction or
acquisition of qualifying PPE) is included under Capital Work-in-Progress, and the same is allocated to the
respective PPE on the completion of their construction. Advances given towards acquisition or construction
of PPE outstanding at each reporting date are disclosed as Capital Advances under “Other non-current
Assets”.
3.9 Depreciation
Depreciation is the systematic allocation of the depreciable amount of PPE over its useful life and is provided
on a witten down value basis over the useful lives as prescribed in Schedule II to the Act or as per technical
assessment.
Depreciable amount for PPE is the cost of PPE less its estimated residual value. The useful life of PPE is the
period over which PPE is expected to be available for use by the Company, or the number of production or
similar units expected to be obtained from the asset by the Company.
The Company has componentised its PPE and has separately assessed the life of major components. In
case of certain classes of PPE, the Company uses different useful lives than those prescribed in Schedule II
to the Act. The useful lives have been assessed based on technical advice, taking into account the nature of
the PPE and the estimated usage of the asset on the basis of management’s best estimation of obtaining
economic benefits from those classes of assets.
Such classes of assets and their estimated useful lives are as under:
Depreciation on additions is provided on a pro-rata basis from the date of installation or acquisition and in case
of Projects from the date of commencement of commercial production. Depreciation on deductions/disposals
is provided on a pro-rata basis up to the date of deduction/disposal.
3.10 Intangible assets and amortisation
Intangible assets are stated at cost less accumulated amortization and impairment. Intangible assets are
amortized over their respective estimated useful lives on a straight-line basis, from the date that they are
available for use.
Amortization
The estimated useful life of an identifiable intangible asset is based on a number of factors including the effects
of obsolescence, demand, competition and other economic factors (such as the stability of the industry and
known technological advances) and the level of maintenance expenditures required to obtain the expected
future cash flows from the asset.”
3.11 Cash and cash equivalents
Cash and cash equivalents in the Balance Sheet comprise cash at bank and in hand and short-term deposits
with banks that are readily convertible into cash which are subject to insignificant risk of changes in value and
are held for the purpose of meeting short-term cash commitments.
3.12 Cash flow statement
Cash flows are reported using the indirect method, whereby net profit before tax is adjusted for the effects of
transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments.
The cash flows from operating, investing and financing activities of the Company are segregated. Bank
overdrafts are classified as part of cash and cash equivalent, as they form an integral part of an entity’s cash
management.
3.13 Government grants
Government grants are recognised where there is reasonable assurance that the grant will be received and all
attached conditions will be complied with.
Where the Company receives non-monetary grants, the asset and the grant are accounted at fair value and
recognised in the statement of profit and loss over the expected useful life of the asset.
3.14 Impairment of non financial assets
The carrying amounts of the Company’s non-financial assets, inventories and deferred tax assets are
reviewed at each reporting date to determine whether there is any indication of impairment. If any such
indication exists, then the asset’s recoverable amount is estimated.
The recoverable amount of an asset or cash-generating unit (as defined below) is the greater of its value in use
and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset or the cash-generating unit. For the purpose of impairment testing,
assets are grouped together into the smallest group of assets that generates cash inflows from continuing use
that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating
unit”).
An impairment loss is recognized in the income statement if the estimated recoverable amount of an asset or
its cash-generating unit is lower than its carrying amount. Impairment losses recognized in prior periods are
assessed at each reporting date for any indications that the loss has decreased or no longer exists. An
impairment loss is reversed if there has been a change in the estimates used to determine the recoverable
amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed
the carrying amount that would have been determined, net of depreciation or amortization, if no impairment
loss had been recognized. Goodwill that forms part of the carrying amount of an investment in an associate is
not recognized separately, and therefore is not tested for impairment separately. Instead, the entire amount of
the investment in an associate is tested for impairment as a single asset when there is objective evidence that
the investment in an associate may be impaired.
An impairment loss in respect of equity accounted investee is measured by comparing the recoverable
amount of investment with its carrying amount. An impairment loss is recognized in the income statement, and
reversed if there has been a favourable change in the estimates used to determine the recoverable amount.
3.15 Employee benefits
Short-term employee benefits:
Short-term employee benefits are expensed as the related service is provided. A liability is recognized 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 contribution plans
The Company’s contributions to defined contribution plans are charged to the income statement as and when
the services are received from the employees.
Defined benefit plans
The liability in respect of defined benefit plans and other post-employment benefits is calculated using the
projected unit credit method consistent with the advice of qualified actuaries. The present value of the defined
benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-
quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have
terms to maturity approximating to the terms of the related defined benefit obligation. In countries where there
is no deep market in such bonds, the market rates on government bonds are used. The current service cost of
the defined benefit plan, recognized in the income statement in employee benefit expense, reflects the
increase in the defined benefit obligation resulting from employee service in the current year, benefit changes,
curtailments and settlements. Past service costs are recognized immediately in income. The net interest cost
is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value
of plan assets. This cost is included in employee benefit expense in the income statement. Actuarial gains and
losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to
equity in other comprehensive income in the period in which they arise.
Termination benefits
Termination benefits are recognized as an expense when the Company is demonstrably committed, without
realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal
retirement date, or to provide terminal benefits as a result of an offer made to encourage voluntary
redundancy. Termination benefits for voluntary redundancies are recognized as an expense if the Company
has made an offer encouraging voluntary redundancy, it is probable that the offer will be accepted, and the
number of acceptances can be estimated reliably.
Other long-term employee benefits
The Company’s net obligation in respect of other long term employee benefits is the amount of future benefit
that employees have earned in return for their service in the current and previous periods. That benefit is
discounted to determine its present value. Re-measurements are recognized in the statement of profit and
loss in the period in which they arise.
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