NOTE 2 MATERIAL ACCOUNTING POLICY INFORMATION
A. Foreign currency
i. Foreign currency transactions
Transactions in foreign currencies are translated into the functional currency of the Company at the exchange rate
prevailing at the date of the transaction.
Transactions in foreign currencies are recognised at the rate of exchange prevailing on the date of transaction except
where it is impracticable to use such rate, average exchange rate is used Monetary assets and liabilities denominated in
foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary
assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at
the exchange rate when the fair value was determined. Foreign currency differences are generally recognised in the
statement of profit or loss. Non-monetary items that are measured based on historical cost in a foreign currency are
not translated.
Any income or expense on account of exchange difference either on settlement or on translation is recognised in the
Statement of profit and loss in the year in which they arise.
The Company has adopted Appendix B to Ind AS 21, Foreign Currency transactions and advance considerations notified
in the Companies (Indian Accounting Standards) Rules, 2018. Accordingly, the exchange rate for translation of foreign
currency transactions, in cases when Company receives or pays advance consideration is earlier of:-
• the date of initial recognition of non-monetary prepayment asset or deferred income liability or
• the date that the related item is recognised in the Financial Statements.
If the transaction is recognised in stages; then a transaction date will be established for each stage.
B. Revenue Recognition
Revenue Recognition:
The Company recognises revenue when the same can be reliably measured and it is probable that future economic benefits
will flow to the entity.
Revenue from sale of products:
Revenue from sale of products is recognised on satisfaction of performance obligations by the Company on transfer of
control of ownership attached to the goods to customers. The revenue is measured at the amount of transaction price net of
returns, applicable discounts and allowances offered by the Company as a part of the contract and are excluding the amounts
collected on behalf of third parties.
Revenue from contracts with customers:
Revenue from contracts with customers is recognised when the Company satisfies performance obligation by transferring
promised goods and services (assets) to the customers. The Company recognises revenue over the period of time, as
performance obligations are satisfied over time due to continuous transfer of control to the customer. Such contracts are
generally accounted for as a single performance obligation as it involves integration of goods and services. The revenue is
recognised to the extent of transaction price allocated to the performance obligation satisfied. Transaction price is the amount
of consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer
excluding amounts collected on behalf of a third party.
Any amount of income accrued but not billed to customers in respect of any contracts is recorded as a contract asset. Such
contract assets are transferred to trade receivables on actual billing to customers. A contract liability is the obligation to transfer
goods or services to a customer for which the Company has received consideration or an amount of consideration is due from
the customer. Such contract liabilities are recognised as revenue when the Company performs under the contract. Transaction
price is recognised based on the price specified in the contract.
Sales includes transport and other costs recovered separately from the customers.
Processing income:
Revenue from services is recognised as and when the services are rendered on proportionate completion method.
Other Operating Revenue:
Export benefits under Duty Drawback benefits and Remission of Duties and Taxes on Export Products Scheme (RoDTEP) are
accounted as revenue on accrual basis as and when export of goods take place, where there is a reasonable assurance that
the benefits will be received, and the Company will comply with all the attached conditions.
Interest Income
I nterest income is accrued on a time basis, by reference to the principal outstanding and using effective interest rate.
C. Employee benefits
i. Short-term employee benefits
Short-term employee benefits are expensed as the related service is provided.
ii. Post employment benefit plans
The Company has two types of post employment benefit plans i.e. Defined contribution plan and defined benefit plan.
a) Defined contribution plans
Provident Fund Scheme
The Group's state governed provident fund scheme; superannuation scheme are the defined contribution plans. The
contribution paid/payable under the scheme is recognised during the period employee renders the service.
Superannuation Scheme
The Company's contribution paid/payable under the scheme is recognised as expense in the statement of profit and
loss during the period in which the employee renders the related service.
Defined benefit plans
The following post — employment benefit plans are covered under the defined benefit plans:
Gratuity Fund
The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit
credit method. The obligation towards defined benefit plan is measured at present value of estimated future cash
flows using a discount rate based on government bond yield having maturity period similar to weighted average
maturity profile of defined benefit obligation at the end of each balance sheet date.
Re-measurement of the net defined benefit/liability, which comprise actuarial gains and losses, the return on plan
assets (excluding interest) and the effect of the asset ceiling, if any (excluding interest), are recognised immediately
in OCI. Net interest expense and other expenses related to defined benefit plans are recognised in profit or loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to
past service or the gain or loss on curtailment is recognised immediately in statement of profit or loss. The Company
recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.
iii. Other long-term employee benefits
Long-term Compensated Absences are recognised for on the basis of an actuarial valuation, using the Projected Unit
Credit Method, as at the date of the Balance Sheet. Actuarial gains/losses comprising of experience adjustments and the
effects of changes in actuarial assumptions are immediately recognised in the Statement of Profit and Loss.
D. Income Tax
I ncome tax expense comprises of current tax and deferred tax. It is recognised in the statement of profit or loss except when
it relates to an item recognised directly in equity or OCI, in which case, they are recognised in equity or OCI respectively.
i. Current tax
Current tax comprises the expected tax payable on taxable profits calculated using tax rate enacted or substantially
enacted at the reporting date.
ii. Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the
extent that it is probable that future taxable profits will be available against which they can be used.
Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become
probable that future taxable profits will be available against which they can be used.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company
expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
E. Inventories
I nventories and work-in-progress are measured at the lower of cost and net realisable value. Inventory of scrap is valued at
estimated realisable value. The cost of inventories is determined using the weighted average cost method. Cost includes direct
materials, labour, other direct cost and manufacturing overheads. Inventories also includes applicable taxes, other than those
which are subsequently recoverable from tax authorities.
Net realisable value is the estimated selling price in the ordinary course of business less estimated costs of completion and
estimated costs necessary to make the sale.
Raw materials, packing materials, stock-in-trade, work-in-progress, finished goods, project material for long-term contracts, scrap
materials and stores and spares are valued at lower of cost or net realisable value ("NRV") after providing for obsolescence
and other losses, where considered necessary on an item-by-item basis. However, materials and other items held for use
in the production of inventories are not written down below cost if the finished products in which they will be incorporated
are expected to be sold at or above cost. Cost of raw materials, packing materials and stores and spares is determined on a
weighted average basis and includes all applicable costs, including hedging costs, wherever applicable and further includes
inward freight and other costs incurred in bringing goods to their present location and condition. Cost of work-in-progress
and finished goods includes direct materials as aforesaid, direct labour cost and a proportion of manufacturing overheads
based on total manufacturing overheads to raw materials consumed. Cost of stock-in-trade includes cost of purchase and
includes all applicable costs, including inward freight, incurred in bringing the inventories at their location and condition. Cost
is determined on a weighted average basis.
The stocks of scrap materials have been taken at net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and
estimated costs necessary to make the sale.
Carrying value of inventory is adjusted for effective portion of changes in fair value of hedging instrument.
F. Property, plant and equipment
i. Recognition and measurement
I tems of property, plant and equipment except for freehold land are measured at cost less accumulated depreciation and
any accumulated impairment losses, if any. Freehold land which is carried at cost less accumulated impairment losses, if
any Spare parts which are meeting the requirement of property, plant and equipment are capitalised as property, plant
and equipment. All other types of spare parts are charged to the statement of profit and loss.
The cost of an item of property, plant and equipment comprises:
a) its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts
and rebates.
b) any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of
operating in the manner intended by management.
c) t he initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the
obligation for which an entity incurs either when the item is acquired or as a consequence of having used the item during
a particular period for purposes other than to produce inventories during that period.
I ncome and expenses related to the incidental operations, not necessary to bring the item to the location and condition
necessary for it to be capable of operating in the manner intended by management, are recognised in profit or loss.
I f significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for and
depreciated for as separate items (major components) of property, plant and equipment.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected
from its use or disposal. Any gain or loss from the disposal of an item of property, plant and equipment is recognised in
statement of profit and loss when it is derecognised.
The residual value and useful lives of property, plant and equipment are reviewed during each financial year and changes if
any are accounted for as change in account estimate on a prospective basis.
The cost of the property, plant and equipment at April 1, 2015, the Company's date of transition to Ind AS, was determined
with reference to its carrying value at that date.
ii. Depreciation
Depreciation is provided, pro rata to the period of use, based on useful lives specified in Schedule II to the Companies
Act, 2013 after taking into account estimated residual value except in the case where the estimated useful life based on
management experience and technical evaluation differs.
Depreciation is charged on the Straight-Line method (SLM) or the Written Down Value method (WDV) based on the method
consistently followed by the respective divisions in the Company. The depreciation method followed by each division is
as below:
G. Intangible Assets
Intangible assets having finite useful lives are measured at cost less accumulated amortisation and any accumulated impairment
losses. Intangible assets having indefinite useful life are measured at cost.
All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss
as incurred.
Amortisation
I ntangible asset having finite useful life is amortised on a straight-line basis over their useful life. Intangible assets having
indefinite useful life is not amortised but tested for impairment.
Enterprise Resource Planning Software cost: Cost of implementation of ERP Software including all related direct expenditure
is amortised over a period of 5 years on successful implementation.
The cost of the intangible assets at April 1, 2015, the Company's date of transition to Ind AS, was determined with reference
to its carrying value at that date.
Capital work-in-progress/Intangible assets under development
Expenditure, including eligible borrowing cost, net of income earned, during the construction/development period of
Property, Plant and Equipment, and Intangible Assets, is included under capital work-in-progress or intangible assets under
development, as the case be, and the same is attributed to the respective assets when they are ready for intended use.
H. Borrowing costs
Borrowing costs that are directly attributable to the acquisition or construction of an asset that necessarily takes a substantial
period of time to get ready for its intended use are capitalised as part of the cost of that asset till the date it is ready for its
intended use or sale. Other borrowing costs are recognised as an expense in the period in which they are incurred.
I. Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument
of another entity. Financial instruments also include derivative contracts such as Foreign Exchange Forward Contracts,
Commodity Future Contracts.
i. Financial assets
Classification
The financial assets are classified as subsequently measured at amortised cost, fair value through other comprehensive
income ("FVTOCI") or fair value through profit or loss ("FVTPL") on the basis of its business model for management of
the financial assets and the contractual cash flow characteristics of the financial asset.
• Equity instruments and mutual funds, the Group elects, on an instrument by instrument basis, to classify the it either
as at FVOCI or FVTPL. Such election is made on initial recognition and is irrevocable.
• Derivative financial instruments which are designated as effective hedging instruments are accounted as per hedge
accounting requirement, as described below.
• Financial assets other than those described above are measured at amortised cost.
Initial recognition and measurement
All financial assets are recognised initially at fair value plus, In case of financial assets measured at fair value through
profit or loss, transaction costs are recognised in the statement of profit and loss. In case financial assets are not
measured at fair value through profit or loss transaction costs are added to the fair value.
Trade receivables that do not contain a significant financing component are measured at transaction price.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or
convention in the marketplace (regular way trades) are recognised on the trade date, i.e., the date that the Company
commits to purchase or sell the asset.
Subsequent recognition and measurement
Financial instruments which are measured at amortised cost are recognised using effective interest method ("EIR").
EIR is a rate that discounts future cash flows including discounts or premium on acquisition, fees or costs incurred on
acquisition) to a net carrying amount of financial instrument, on initial recognition. Interest income on EIR amortisation
and impairment losses, if any, are recognised in the statement of profit and loss.
Financial assets which are measured at FVTOCI, gains and losses arising from changes in fair value, including impairment
loss if any are recognised in the other comprehensive income and accumulated in other equity.
Financial assets which are measured at FVTPL, gains and losses arising from changes in fair value including impairment
loss if any are recognised in the statement of profit and loss.
Derecognition
• A financial asset (or, where applicable, a part of a financial asset) is primarily derecognised (i.e. removed from the
Company's balance sheet) when:
• The rights to receive cash flows from the asset have expired, or
• The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay
the received cash flows in full without material delay to a third party under a 'pass-through' arrangement; and either
(a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither
transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
• When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through
arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither
transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset,
the Company continues to recognise the transferred asset to the extent of the Company's continuing involvement. In
that case, the Company also recognises an associated liability. The transferred asset and the associated liability are
measured on a basis that reflects the rights and obligations that the Company has retained.
• Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the
original carrying amount of the asset and the maximum amount of consideration that the Company could be required
to repay.
Impairment of financial assets
The Company uses expected credit loss model with respect to impairment loss on financial assets.
• Impairment loss on trade receivables is recognised using life time expected credit loss model. This model
involves use of a provision matrix which is based on historical credit loss experience and is adjusted for forward¬
looking information.
• Impairment loss on equity instrument is recognised when carrying amount exceeds its recoverable amount.
• Impairment loss on financial instrument measured at amortised cost are deducted from equity and are recognised
in the statement of profit and loss. Financial instruments measured at FVTPL, impairment loss is recognised in
statement of profit and loss. Financial instruments measured at FVTOCI, impairment loss is recognised in other
comprehensive income.
• Gross carrying amount of financial instrument is written off to the extent there is no prospect of recovery. Such
financial instruments could still be subject to enforcement activities under the Group's recovery procedure, taking
into account legal advice as appropriate. Any recovery made subsequent to write off is recognised in the statement
of profit and loss under other income.
ii. Financial liabilities
Classification
The Company classifies all financial liabilities as subsequently measured at amortised cost, except for financial liabilities
measured at fair value through profit or loss.
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and
borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of
directly attributable and incremental transaction cost.
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 EIR amortisation is included as finance costs in the statement of profit and loss.
The Company's financial liabilities include trade and other payables, loans and borrowings including bank overdrafts,
financial guarantee contracts and derivative financial instruments.
Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse
the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the
terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for
transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at
the higher of the amount of loss allowance determined as per impairment requirements of Ind-AS 109 and the amount
recognised less cumulative amortisation.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When
an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of
an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the
original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in
the statement of profit or loss.
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 to settle on a net basis, to realise the
assets and settle the liabilities simultaneously.
iii. Derivative financial instruments and hedge accounting
The Company holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures.
Derivatives are initially measured at fair value. Subsequent to initial recognition, derivatives are measured at fair value,
and changes therein are generally recognised in profit or loss.
The Company designates certain derivatives as hedging instruments to hedge the variability in cash flows associated with
highly probable forecast transactions arising from changes in foreign exchange rates and interest rates.
At inception of designated hedging relationships, the Company documents the risk management objective and strategy
for undertaking the hedge. The Company also documents the economic relationship between the hedged item and
the hedging instrument, including whether the changes in cash flows of the hedged item and hedging instrument are
expected to offset each other.
Cash Flow Hedges
When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value
of the derivative is recognised in OCI and accumulated in the other equity under the "effective portion of cash flow
hedges". The effective portion of changes in the fair value of the derivative that is recognised in OCI is limited to the
cumulative change in fair value of the hedged item, determined on the present value basis, from the inception of the
hedge. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit and loss.
When the hedged forecast transaction subsequently results in the recognition of a non-financial item such as inventory,
the amount accumulated in the other equity is included directly in the initial cost of the non-financial item when it is
recognised. For all other hedged forecast transactions, the amount accumulated in other equity is reclassified to profit
and loss in the same period or periods during which the hedged expected future cash flows affect profit and loss.
I f a hedge no longer meets the criteria for hedge accounting or the hedging instrument is sold, expires, is terminated
or is exercised, then hedge accounting is discontinued prospectively. When hedge accounting for cash flow hedges
is discontinued, the amount that has been accumulated in other equity remains there until, for a hedge of a transaction
resulting in the recognition of a non-financial item, it is included in the non-financial items cost of initial recognition or for
other cash flow hedges, it is reclassified to profit and loss in the same period as the hedged future cash flows affect the
profit and loss.
I f the hedged cash flows are no longer expected to occur, then the amounts that have been accumulated in the other
equity are immediately reclassified to profit and loss.
The Company formally designates foreign currency denominated financial liabilities relating to imported raw materials,
in one of the division, in a cash flow hedge relationship for hedging of foreign exchange risk associated with highly
probable future sales transactions. The Effective portion of gains or losses arising on restatement of the foreign currency
denominated financial liabilities is initially recognised in other comprehensive income and is reclassified to profit or loss
in the period of settlement when the sales are affected. Ineffective portions, if any, is be charged to profit or loss.
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