2 SIGNIFICANT ACCOUNTING POLICIES
a Basis of Preparation
The financial statements of the company have been prepared under historical cost convention on accrual basis of
accounting & in accordance with generally accepted accounting principles in India (Indian GAAP) & the mandatory
accounting standards issued by ICAI. The company has prepared these financial statements to comply in all material
respects with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies
(Accounts) Rules, 2014.
The financial statements are presented in India Rupees ‘INR' which is also the Company's functional currency, and
all values are rounded off to the nearest lakhs except when otherwise indicated. Whenever an amount is presented
as INR ‘0' (zero), it construes amount less than Rs. 50,000/-.
The company has reclassified previous year figures in accordance with the requirements applicable in the current
year.
b Basis of Accounting
All the significant accounting policies adopted in the preparation and presentation of financial statements have
been disclosed, at one place & forms part of the financial statements. The accounting policies, in all material
respects, have been consistently applied by the Company. The change in the accounting policies - if any - which
has a material effect in the current period has been disclosed. In case of a change in accounting policies which has
a material effect in the current period or later period, the amount by which any item in the financial statements is
affected by such change has been ascertained and disclosed in Notes to Financial statements. Where such amount
is not ascertainable, wholly or in part, such fact has been indicated.
The fundamental accounting assumption of' 'going concern', 'consistency', & 'accrual', has been followed.
c Use of Estimates
The preparation of financial statements requires the management of the Company to make an estimate &
assumptions that affect the reported balances of Assets & Liabilities and disclosure relating to Contingent liabilities
as at the date of financial statements & reported amounts of Income & Expenses during the year. Estimates &
assumptions used in the preparation of the financial statements are based upon management's evaluation of the
relevant facts & circumstances as of the date of the financial statements, which may differ from the actual results at
a subsequent date. Difference between the actuals & estimates are recognised in the period in which the results are
known/materialised. Change in estimates is disclosed wherever required.
d Property, Plant and Equipment
For each class of property, plant and equipment, the company has opted for cost model. Property, Plant & Equipment
are stated at cost less depreciation less impairment losses. Cost comprises purchase price, capitalised borrowing
cost and subsequent expenditure if it increases the future benefits from the existing asset. Cost has been adjusted
to the extent of GST credit available and exchange difference arising on translation / settlement of foreign currency
monetary items pertaining to the acquisition of depreciable asset.
In case of derecognition of Property, Plant & Equipment, the difference between the carrying amount and disposal
proceeds is accounted as gain / loss in the Statement of Profit & Loss. Advances paid towards the acquisition of
property, plant & equipment, outstanding at each balance sheet date are shown under capital advances. The cost
of property, plant & equipment nor ready for its intended use on such date, is disclosed under CWIP."
e Intangible assets
Intangible Assets acquired separately & also internally generated are recognised at cost less accumulated
amortisation and impairment. Amortisation is done on straight line basis over estimated useful economic life and the
amortisation period and method are reviewed at the end of each financial year.
In case of derecognition of Intangible Assets, the difference between the carrying amount and disposal proceeds is
accounted as gain / loss in the Statement of Profit & Loss.
f Depreciation and amortization
The carrying amount of Property, Plant & equipment as on 31st March 2014 is depreciated over remaining useful
life of the assets after reassessing the useful life of the asset. The assets acquired on or after 01.04.2014 are
depreciated according to the useful life of such asset as specified in Schedule II of Companies Act, 2013. A residual
value of 5% of the cost of acquisition is considered while calculating the depreciation.
While accounting the Property, Plant & Equipment, the principle of component accounting is followed in case of
significant components of Property, Plant & Equipment and for depreciating the significant components, the useful
life of each significant component is considered separately apart from the remaining parts of the Property, Plant &
Equipment.
g Impairment of assets
The company assesses at each reporting date an indication about impairment of an asset. If any indication exists,
the company estimates the asset's recoverable amount. The recoverable amount is determined for individual asset.
The recoverable amount is higher of the selling price & value in use of the asset. The value in use is estimated on
the basis of estimated future cash flows for next 5 years discounted to the present value by using pre-tax discount
rate that reflects time value of the money and the risk specific to the asset. Where the carrying amount of the asset
exceeds the recoverable amount, the asset is impaired & is written down to its recoverable value.
Impairment losses are recognised in the Statement of Profit & Loss and the depreciation is provided on the revised
carrying amount of the asset after impairment. If the previously recognised impairment losses do not exist or
have decreased, the same are reversed and the reversible is limited so that carrying amount does not exceed the
recoverable amount.
h Leases
"As a Lessee: -
Finance leases, which effectively transfers to the Company substantially all the risks and benefits incidental to
ownership of the leased item, are capitalized at the inception of the lease term at the lower of the fair value of the
leased property and present value of minimum lease payments. Lease payments are apportioned between the
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 recognized as finance costs in the Profit and Loss Account. Lease
management fees, legal charges and other initial direct costs of lease are capitalized."
A leased asset is depreciated on a straight-line basis over the useful life of the asset assessed by the management.
However, if there is no reasonable certainty that the Company will obtain the ownership by the end of the lease term,
the capitalized asset is depreciated on a straight-line basis over the shorter of the estimated useful life of the asset.
Leases, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item,
are classified as operating leases. Operating lease payments are recognized as an expense in the Profit and Loss
Account on a straight-line basis over the lease term.
"As a Lessor: -
Leases in which the Company transfers substantially all the risks and benefits of ownership of the asset are classified
as finance leases. Assets given under finance lease are recognized as a receivable at an amount equal to the
net investment in the lease. After initial recognition, the Company apportions lease rentals between the principal
repayment and interest income so as to achieve a constant periodic rate of return on the net investment outstanding
in respect of the finance lease. The interest income is recognized in the Profit and Loss Account. Initial direct costs
such as legal costs, brokerage costs, etc. are recognized immediately in the Profit and Loss Account. "
Leases in which the Company does not transfer substantially all the risks and benefits of ownership of the asset
are classified as operating leases. Assets subject to operating leases are included in property, plant and equipment
assets. Lease income on an operating lease is recognized in the Profit and Loss Account on a straight-line basis over
the lease term. Costs, including depreciation, are recognized as an expense in the Profit and Loss Account. Initial
direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the Profit and Loss Account.
i Investment
Investments which are readily realisable and intended to be held for not more than 1 year from the date on which
such investments are made are classified as current investments. All other investments are classified as Long-term
Investments.
On initial recognition, all investments are measured at cost. The cost comprises Purchase price and directly
attributable acquisition charges such as brokerage, fees and duties.
"Current investments are carried in the financial statements at lower of cost or fair value determined
on an individual investment basis. Long term investments are carried at cost. However, provision for
diminution in value is made to recognise a decline other than temporary in the value of investments.
On disposal of investment, the difference between its carrying amount and net disposal proceeds is charged or
credited to the Statement of Profit and Loss. TDS on income from Investment is included in Advance taxes paid. "
j Inventories
Raw materials and Stores & Spares valued at lower of cost or net realizable value. However, these items are
considered to be realisable at replacement cost if the finished goods, in which they will be used, are expected to be
sold below cost.
"Cost of Inventories is computed on a Weighted Average basis. Cost includes purchase price, (excluding
those subsequently recoverable by the enterprise from the concerned revenue authorities), freight inwards
and other expenditure incurred in bringing such inventories to their present location and condition.
Work in progress and manufactured finished goods are valued at the lower of cost and net realisable value. Cost
of work in progress and manufactured finished goods is determined on the weighted average basis and comprises
direct material, Cost of conversion and other costs incurred in bringing these inventories to their present location
and condition. Cost of traded goods is determined on a weighted average basis."
Provision of obsolescence on inventories is considered on the basis of management's estimate based on demand
and market of the inventories. Net realizable value is the estimated selling price in the ordinary course of business,
less the estimated cost of completion and the estimated costs necessary to make the sale. The comparison of cost
and net realizable value is made on item-by-item basis."
k Cash and cash equivalents
The Cash Flow Statement discloses the cash flows during the period classified by operating, investing and financing
activities in a manner which is most appropriate to the business of the company for each period for which financial
statements are presented. Reporting of cash flows from operating activities has been made by indirect method.
Extraordinary items: The cash flows associated with extraordinary items have been appropriately classified as
arising from operating, investing, or financing activities and separately disclosed. Interests and Dividends: Separate
disclosure of cash flows from interest and dividends received and paid has been made. Taxes on income: Cash flows
arising from taxes on income are separately disclosed & classified as cash flows from operating activities unless they
can be specifically identified with financing and investing activities."
The enterprise has disclosed the components of cash and cash equivalents together with a commentary by
management, the amount of significant cash and cash equivalent balances held by the enterprise that are not
available for use by it.
l Current assets, loans & advances
Current Assets, Loans and Advances are approximately of the value stated, if realized in the ordinary course of
business.
m Investment Property
Investment in Land or Building which is not intended to be occupied substantially for use in the operations of the
company is classified as Investment Property. Investment properties are stated at cost less accumulated depreciation
and impairment losses. Depreciation and impairment loss policy as stated above is followed for calculation. On
disposal of the Investment Property, the difference between its carrying amount and the net disposal proceeds is
charged / credited to Statement of Profit and Loss.
n Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the company and the
revenue can be reliably measured.
Sale of goods and services are recognized net of duties, taxes & Sales Returns. Expenditure & income are accounted
on accrual basis including provisions/adjustments for committed obligations & amounts determined payable or
receivable during the year.
Sales of goods are recognised when property in goods has been transferred to the buyer for a price or all significant
risks and rewards of ownership have been transferred to the buyer and the seller retains no effective control of the
goods transferred to a degree usually associated with ownership.
The revenue from service is recognised as and when the services are rendered, based on the agreements/
arrangements with the concerned parties net of duties, taxes. Unearned revenue' included in other current liabilities
represent billing in excess of revenue recognized. Rental Income is recognized on time proportionate basis over the
period of the rent.
Interest is recognized on a time proportion basis considering the amount outstanding and the applicable
interest rate. Dividend is recognised when the Company's right to receive dividend is established.
In case of any pending resolution of significant uncertainties, the revenue recognition is postponed & is disclosed
separately in the notes. "
o Employee Benefits
Employee benefits include provident fund, employee state insurance, gratuity and leave encashment & bonus.
The Company provides for retirement benefits in the form of gratuity as per Payment of Gratuity Act, 1972. Benefits
payable to eligible employees with respect to gratuity, a defined benefit plan, is accounted for on the basis of
an actuarial valuation as at the Balance Sheet date. Leave encashment due is provided on the basis of actuarial
valuation.
Contributions made to approved scheme of provident fund is a defined contribution plan and is charged to Statement
of Profit and Loss on accrual basis. Bonus is provided in the books of accounts as per the provisions of Payment of
Bonus Act, 1965 (as amended).
p Borrowing Cost
Borrowing cost includes interest, amortisation of ancillary costs incurred in connection with the arrangement of
borrowing & exchange differences arriving from foreign currency borrowing to the extent they are regarded as an
adjustment to the interest cost.
Borrowing costs that are directly attributable to the acquisition, construction or production of an asset that takes a
substantial period of time to get ready for its intended use are capitalised. All other borrowing costs are recognised
as expenditure in the period in which they are incurred.
q Related Party Transactions
"All related party transactions are reported irrespective of the fact whether such transactions have adversely affected
financial position and operating results of the company. The related parties are reported even when there are no
transactions with such parties.
Related parties include -
• Enterprises that are under common control - Directly or indirectly.
• Associates and JVs.
• Individuals having interest in voting power of the enterprise that gives them control and significant influence
over the enterprise and relatives of such individuals.
• Key management personnel (KMP) and their relatives having significant influence over the enterprise."
The transactions include -
• Sale and purchase of goods and fixed assets and services
• Agency arrangements
• Leased and hire purchase transactions.
• Transfer of R & D
• License agreements
• Financial transactions - Loans, equity, guarantee, collaterals
• Management contracts including deputation of employees.
The disclosures are given as per AS 18."
r Foreign currency transactions
Foreign Currency transactions are recorded in reporting currency at the exchange rate prevailing on the date of
transaction.
On the reporting date monetary items are retranslated by using the exchange rate prevailing on the reporting date.
Foreign exchange difference related to acquisition of Fixed Assets and loans related to it is adjusted in the carrying
amount of Fixed Asset and the loan amount.
Income or expenditure arising out of exchange fluctuation other than Fixed Assets and loans on such assets is
accounted for in the Statement of Profit and Loss.
s Taxes on Income
Provision for current Income Tax is determined in accordance with the provisions of Income Tax Act 1961. Minimum
Alternate Tax (MAT) is not applicable since Company has opted Section 115BAA of Income tax Act 1961. Deferred
Tax - subject to materiality - is recognized on timing differences, being the difference between the taxable income
& the accounting income that originate in one period & are capable of reversal in one or more subsequent periods.
Deferred tax asset is recognized & carried forward only to the extent that there is a virtual certainty that the asset
will be realized in future.
Indirect Taxes
The amounts of output liability & amounts claimed by the company as eligible input tax credit under the CGST
Act, SGST Act, IGST Act, as per the books of account of the company is subject to reconciliation & correction -
if any - which will be done while filing of the GST Annual return in Form GSTR 9 - to be filed before due date.
Provisions in respect of present obligations arising out of past events are made in accounts when reliable estimates
can be made of the amounts of obligations. Provisions are not discounted to their present value and reviewed at
each reporting date. Contingent liabilities & commitments are not accounted but disclosed separately. Contingent
assets are neither accounted nor disclosed in the financial statements.
t Segment reporting
The segment reporting is done assuming two segments - Business segment as primary segment & geographical
segment as secondary segment. The segment reporting includes segment wise revenue, expenses, assets &
liabilities & accounting policies. Unallocated items include general corporate income and expense items, which are
not allocated to any business segment. The disclosures are given as per AS 17."
u Government Grants & Subsidies
Grants and subsidies from the Government are recognised only when there is reasonable assurance that it will be
received. When the grant or subsidy relates to the revenue, it is recognised as income in the Statement of Profit
and Loss and where the Grant relates to an asset, the same is reduced from the cost of the asset before charging
depreciation & when the subsidy is of capital nature but not attributable to any particular asset or group of assets,
the same is recognised as Capital reserve.
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