Material Accounting Policies1.5 Revenue recognition:
Revenue is recognised as and when the entity satisfies a performance obligation by transferring a promised
goods or services (i. e an asset) to a customer. An asset is transferred when (or as) the customer
obtains control of that asset. Revenue is measured at the transaction price which is determined based
on the terms of contract and entity's customary practice. Amounts disclosed as revenue are inclusive of
excise and duties, but exclusive of Goods and Service tax (GST), which the company pays as principal
and net of returns, trade allowances, rebates, and taxes collected on behalf of the government.
1.6 Property, Plant and Equipment:
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at
historical cost less accumulated depreciation and impairment loss, if any. Historical cost includes all
costs directly attributable to bringing the asset to the location and condition necessary for its intended
use and initial estimation of dismantling and site restoration costs. Subsequent costs relating to property,
plant and equipment is capitalized only when it is probable that future economic benefits associated
with these will flow to the company and the cost of the item can be measured reliably. The carrying
amount of any component accounted for as a separate asset is derecognised when replaced.
Expenditure during construction/erection period is included under Capital Work-in-Progress and allocated
to the respective fixed assets on completion of construction/erection.
Property, Plant and Equipment are componentized and are depreciated separately over their estimated
useful lives as prescribed under Part C of Schedule II of the Companies Act, 2013.
Depreciation on buildings and plant and machinery is charged under straight line method and on the
remaining assets under the diminishing balance method. The residual values, useful lives and methods
of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted
prospectively, if appropriate. In case of low value assets of Rs. 10000/- or less, depreciation is charged
at the rate of 100% in the year of purchase itself.
An item of property, plant and equipment and any significant part initially recognised is derecognised
upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or
loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds
and the carrying amount of the asset) is included in the income statement when the asset is derecognised.
1.7 Inventories:
Inventories are valued at the lower of the cost (net of eligible input tax credits) or net realisable value
(except by-products, waste and scrap which are valued at estimated net realisable value).
Costs incurred in bringing each product to its present location and condition, are accounted for as
follows:
• Raw materials: Cost includes cost of purchase and other costs incurred in bringing the inventories to
their present location and condition. Cost is determined on first in, first out basis.
• Finished goods and work in progress: Cost includes cost of direct materials and labour and a
proportion of manufacturing overheads based on the normal operating capacity but excluding borrowing
costs. Cost is determined on monthly weighted average basis.
• Stores and spares: Cost includes cost of purchase and other costs incurred in bringing the inventories
to their present location and condition. Cost is determined on moving weighted average basis.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated
costs of completion and the estimated costs necessary to make the sale.
1.8 Non-Derivative Financial Instruments:
The Company recognizes financial assets and financial liabilities when it becomes a party to the contractual
provisions of the instrument.
1.8.1 Initial Recognition-
All financial assets and liabilities are recognized at fair value on initial recognition, except for trade
receivables which are initially measured at transaction price. Transaction costs that are directly attributable
to the acquisition or issue of financial assets and financial liabilities, which are not at fair value through
profit or loss, are added/ deducted to/from the fair value on initial recognition. Regular way purchase and
sale of financial assets are accounted for at trade date.
1.8.2 Subsequent measurement-
For purposes of subsequent measurement, financial assets are classified in four categories:
• Debt instruments at amortised cost
• Debt instruments at fair value through other comprehensive income (FVTOCI)
• Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVTPL)
• Equity instruments measured at fair value through other comprehensive income (FVTOCI)
(i) Debt instruments at amortised cost
A debt instrument is subsequently measured at amortised cost if it is held within a business model
whose objective is to hold the asset in order to collect contractual cash flows and the contractual
terms of the financial asset give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost
using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account
any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The
amortisation of EIR is included in finance income in the profit or loss. The impairment losses and
gain/loss on derecognition are recognised in the profit or loss.
(ii) Debt instruments at fair value through other comprehensive income
A debt instrument is subsequently measured at fair value through other comprehensive income, if it
is held within a business model whose objective is achieved by both collecting contractual cash
flows and selling financial assets and the contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal and interest on the principal
amount outstanding.
Debt instruments under this category are measured at fair value at each reporting date. Fair value
movements are recognized in the other comprehensive income (OCI). However, the company
recognizes interest income, impairment losses & reversals and foreign exchange gain or loss in the
profit & loss. On derecognition, cumulative gain or loss previously recognised in OCI is reclassified
from the equity to P&L. Interest earned whilst holding FVTOCI debt instrument is reported as interest
income using the EIR method.
(iii) Debt instruments, derivatives and equity instruments at fair value through profit or loss
Any debt instrument, which does not meet the criteria for categorization as at amortized cost or as
FVTOCI, is classified as at FVTPL (residual category).
In addition, the company may elect to designate a debt instrument, which otherwise meets amortized
cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or
eliminates a measurement or recognition inconsistency (referred to as 'accounting mismatch'). The
company has not designated any debt instrument as at FVTPL.
All equity instruments in scope of Ind AS 109 are measured at fair value by the Company. Equity
investments which are held for trading are classified as at FVTPL. For all other equity instruments,
the Company decides to classify the same either as at FVTOCI or FVTPL. The classification is
made on initial recognition and is irrecoverable.
Financial instruments included within the FVTPL category are measured at fair value with all changes
recognized in the P&L.
(iv) Equity instruments measured at fair value through other comprehensive income
The Company has made an irrevocable election to present the subsequent fair value changes in
'other comprehensive income' for its investments in equity instruments that are not held for trading.
Fair value changes on the instrument, impairment losses & reversals and foreign exchange gain or
loss are recognized in the OCI. Dividends are recognised in the Profit &Loss. There is no recycling
of the amounts from OCI to Profit & Loss, even on sale of investment. However, the company may
transfer the cumulative gain or loss within equity.
Financial liabilities are classified in two measurement categories:
• Financial liability measured at amortised cost
• Financial liability measured at fair value through profit or loss
(i) Financial liabilities measured at fair value through profit or loss include financial liabilities
held for trading and financial liabilities designated upon initial recognition as at fair value through
profit or loss. The company has not designated any financial liability as at fair value through profit
and loss.
(ii) Financial liability measured at amortised cost
All other financial liabilities are subsequently carried at amortized cost using effective interest rate
(EIR) method, thereby resulting in amortisation of transaction costs and interest expenses through
Profit & Loss over the life of the instrument. The EIR amortisation is included as finance costs in the
statement of profit and loss.
1.8.3 Reclassification of financial assets-
The company reclassifies its financial assets only when there is a change in entity's business model for
managing its financial assets.
1.8.4 Derecognition of financial instruments-
The company derecognizes a financial asset when the contractual rights to the cash flows from the
financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition under
Ind. AS 109. A financial liability (or a part of a financial liability) is derecognized when the obligation
specified in the contract is discharged or cancelled or expires.
1.8.5 Impairment of financial assets-
The Company applies expected credit losses (ECL) model for measurement and recognition of loss
allowance on the following:
a. Trade receivables
b. Financial assets measured at amortized cost (other than trade receivables)
c. Financial assets measured at fair value through other comprehensive income.
In case of trade receivables, the Company follows a simplified approach wherein an amount equal to
lifetime ECL is measured and recognized as loss allowance.
In case of other assets, the Company determines if there has been a significant increase in credit risk of
the financial asset since initial recognition. If the credit risk of such assets has not increased significantly,
an amount equal to 12-month ECL is measured and recognized as loss allowance. However, if credit risk
has increased significantly, an amount equal to lifetime ECL is measured and recognized as loss allowance.
ECL is the difference between all contractual cash flows that are due to the Company in accordance with
the contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted
at the original effective interest rate.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/
expense in the Statement of Profit and Loss under the head "Other expenses".
1.8.6 Offsetting of financial instruments-
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if
there is a currently enforceable legal right to offset the recognised amounts and there is an intention
either to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.
1.8.7 Fair Value of Financial instruments-
In determining the fair value of its financial instruments, the Company uses a variety of methods and
assumptions that are based on market conditions and risks existing at each reporting date. The methods
used to determine fair value include discounted cash flow analysis, available quoted market prices and
dealer quotes. All methods of assessing fair value result in general approximation of value, and such
value may never actually be realized. For trade and other receivables maturing within one year from the
Balance Sheet date, the carrying amounts approximate fair value due to the short maturity of these
instruments.
1.9 Employee Benefits include:
(i) Short term employee benefits-
Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly
within 12 months after the end of the period in which the employees render the related service are
recognised in respect of employees' services up to the end of the reporting period and are measured at
the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current
employee benefit obligations in the balance sheet.
The company recognises a liability and an expense for bonus only when it has a present legal or
constructive obligation to make such payments as a result of past events and a reliable estimate of
obligation can be made.
(ii) Long term employee benefits -
Liabilities for earned leave and sick leave are not expected to be settled wholly within 12 months after the
end of the period in which the employees render the related service. They are therefore measured at the
present value of expected future payments to be made in respect of services provided by employees up
to the end of the reporting period using the projected unit credit method. The benefits are discounted
using the market yields at the end of the reporting period that have terms approximating to the terms of
the related obligation. Re-measurements as a result of experience adjustments and changes in actuarial
assumptions are recognised in profit or loss.
The obligations are presented as current liabilities in the balance sheet if the entity does not have an
unconditional right to defer settlement for at least twelve months after the reporting period, regardless of
when the actual settlement is expected to occur.
(iii) Post employment benefits-
The company operates the following post-employment schemes:
(a) Defined benefit plans such as gratuity: and
(b) Defined contribution plans such as provident and pension funds.
Defined Benefit Plans - The liability or asset recognised in the balance sheet in respect of defined
benefit gratuity plan is the present value of the defined benefit obligation at the end of the reporting period
less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using
the projected unit credit method. Re-measurement gains and losses arising from experience adjustments
and changes in actuarial assumptions are recognised in the period in which they occur, directly in other
comprehensive income.
Defined Contribution Plans - The Company pays provident fund contributions to publicly administered
provident funds as per local regulations. It has no further payment obligations once the contributions
have been paid. The contributions are accounted for as defined contribution plans and the contributions
are recognised as employee benefit expense when they are due. Prepaid contributions are recognised
as an asset to the extent that a cash refund or a reduction in the future payments is available.
1.10 Leases
The company has applied Ind AS 116 using the modified retrospective approach and therefore the
comparative information has not been restated and continues to be reported under Ind AS 17.
As a lessee
The company recognizes a right-of-use asset and a lease liability at the lease commencement date.
The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease
liability adjusted for any lease payments made at or before the commencement date, plus any initial
direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to
restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement
date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The
estimated useful lives of right-of-use assets are determined on the same basis as those of property and
equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and
adjusted for certain re-measurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be
readily determined, company's incremental borrowing rate. Generally, the company uses its incremental
borrowing rate as the discount rate.
Lease payments included in the measurement of the lease liability comprise the following:
• Fixed payments, including in-substance fixed payments.
• Variable lease payments that depend on an index or a rate, initially measured using the index or rate
as at the commencement date.
• Amounts expected to be payable under a residual value guarantee; and
• The exercise price under a purchase option that the company is reasonably certain to exercise,
lease payments in an optional renewal period if the company is reasonably certain to exercise an
extension option, and penalties for early termination of a lease unless the company is reasonably
certain not to terminate early.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when
there is a change in future lease payments arising from a change in an index or rate, if there is a change in the
company's estimate of the amount expected to be payable under a residual value guarantee, or if company
changes its assessment of whether it will exercise a purchase, extension or termination option. When the
lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the
right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been
reduced to zero.
Short-term leases and leases of low-value assets
The company has elected not to recognise right-of-use assets and lease liabilities for short term leases of real
estate properties that have a lease term of 12 months. The company recognises the lease payments associated
with these leases as an expense on a straight-line basis over the lease term.
Under Ind AS 17
In the comparative period, leases are classified as finance leases 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. Payments made under operating leases were recognised in profit or loss on a straight-line basis over
the term of the lease unless the payments are structured to increase in line with the expected general inflation
to compensate for the lessors expected inflationary cost increases.
1.11 Foreign Currency Transactions:
The functional currency of the company is the Indian rupee and the financial statements are presented
in Indian rupee rounded off to the nearest lakhs except where otherwise indicated.
Transactions in foreign currency are initially accounted at the exchange rate prevailing on the date of the
transaction, and adjusted appropriately, with the difference in the rate of exchange arising on actual
receipt/payment during the year.
At each Balance Sheet date
i. Foreign currency denominated monetary items are translated into the relevant functional currency at
exchange rate at the balance sheet date. The gains and losses resulting from such translations are
included in net profit in the statement of profit and loss.
ii. Foreign currency denominated non-monetary items are reported using the exchange rate at which they
were initially recognized.
T ransaction gains or losses realized upon settlement of foreign currency transactions are included in
statement of profit and loss.
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