Note No. 4: Material Accounting Policies
The financial Statement have been prepared inconformity with generally accepted accounting principle to comply in all material respect with the notified accounting standards as prescribed u/s 133 of the Companies Act, 2013 ('the Act') read with relevant rules issued there under.
4.1 Operating Cycle
All assets and liabilities have been classified as Current or Non-Current as per the Company's normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013 and Ind AS 1 - Presentation of Financial Statements based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
4.2 Property, Plant and Equipment - Tangible Assets
Property, plant and equipment are stated at cost less accumulated depreciation and impairment, if any. Costs directly attributable to acquisition are capitalized until the property, plant and equipment are ready for use, as intended by the management. The company depreciates
property; plant and equipment over their estimated useful lives using the written down value method and the estimated useful lives of assets are as follows:
Management believes that the useful lives as given above best represent the period over which the assets are expected to be used. Subsequent expenditures relating to property, plant and equipment are 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 cost and related accumulated depreciation are eliminated from the financial statements upon sale or retirement of the asset and the resultant gains or losses are recognized in the Statement of Profit and Loss.
4.3 Impairment of Assets
Property, plant and equipment are evaluated for recover ability whenever events or changes in circumstances indicate that their carrying amounts may not beer coverable. For the purpose of impairment testing, there cover able amount (i.e. the higher of the fair value less cost to sell and the value in use) is determined on an individual asset base is unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the CGU (Cash Generating Unit) to which the asset belongs.
4.4 Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization. All other borrowing costs are recognized in profit or loss in the period in which they are incurred.
4.5 Leases
Leases are classified as finance leases whenever the terms of the lease, transfers substantially all the risks and rewards of the ownership to the lessee. All other leases are classified as operating leases.
Company as a lessee
Operating lease payments are recognized as an expense in the statement of profit or loss account on straight line basis over the lease term.
Company as a lessor
Rental income from operating lease is recognized on straight line basis over the term of the relevant lease. Initial direct costs having substantial amount incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as revenue in the period in which they are earned.
Since company has not entered into any financial lease during the periods mentioned in financial statement, therefore no related policy provided here.
4.6 Accounting of Inventories
Inventories are stated at cost. The cost is calculated on FIFO weighted average method. Cost comprises expenditure incurred in the normal course of business in bringing such inventories to its present location and condition and includes, where applicable, appropriate overheads based on normal level of activity. Obsolete, slow moving and defective inventories are identified from time to time and, where necessary; a provision is made for such inventories.
There is no closing stock of inventories on 31.03.2024.
4.7 Investment in Properties
Property that is held for long- term rental yields or for capital appreciation or both, and that is not occupied by the Company, is classified as investment property. Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment property is measured at cost and accumulated impairment losses, if any. Subsequent costs are added to the carrying amount only when it is probable that it will increase its useful life. All other repairs and maintenance are charged to the Statement of Profit and Loss during the period in which they are incurred.
4.8 Investment in Subsidiaries and Associates
Investment in subsidiaries, associates and joint ventures are carried at cost less accumulated impairment, if any. In case of any LLP Associate/ Subsidiaries -Accumulated profit also included in investment and fund received from LLP Associate/ Subsidiaries has deducted.
4.9 Financial instruments, financial assets, financial liabilities and Equity Instruments
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the relevant instrument and are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities measured at fair value through profit or loss) are added to or deducted from the fair value on initial recognition of financial assets or financial liabilities. Purchase or sale of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the date when the Company commits to purchase or sell the asset.
4.9.1 Financial Assets Recognition:
Financial assets include Investments, Trade Receivables, Advances, Security Deposits, Cash and Cash equivalents. Such assets are initially recognized at transaction price when the Company becomes party to contractual obligations. The transaction price includes transaction costs unless the asset is being fair valued through the Statement of Profit and Loss.
Classification:
Management determines the classification of an asset at initial recognition depending on the purpose for which the assets were acquired. The subsequent measurement of financial assets depends on such classification.
Financial assets are classified as those measured at:
(a) Amortized cost, where the financial assets are held solely for collection of cash flows arising from payments of principal and/ or interest.
(b) Fair value through other comprehensive income (FVTOCI), where the financial assets are held not only for collection of cash flows arising from payments of principal and interest but also from the sale of such assets. Such assets are subsequently measured at fair value, with
unrealized gains and losses arising from changes in the fair value being recognized in other comprehensive income.
(c) Fair value through profit or loss (FVTPL), where the assets are managed in accordance with an approved investment strategy that triggers purchase and sale decisions based on the fair value of such assets. Such assets are subsequently measured at fair value, with unrealized gains and losses arising from changes in the fair value being recognized in the Statement of Profit and Loss in the period in which they arise.
Trade Receivables, Advances, Security Deposits, Cash and Cash equivalents etc. are classified for measurement at amortized cost while investments may fall under any of the aforesaid classes. However, in respect of particular investments in equity instruments that would otherwise be measured at fair value through profit or loss, an irrevocable election at initial recognition may be made to present subsequent changes in fair value through other comprehensive income.
4.9.2 Debt Instruments:
a) Measured at amortized cost: Financial assets that are held within a business model whose objective is to hold financial assets in order to collect contractual cash flows that are solely payments of principal and interest, are subsequently measured at amortized cost using the effective interest rate ('EIR') method less impairment, if
any. The amortization of EIR and loss arising from impairment, if any is recognized in the Statement of Profit and Loss.
b) Measured at fair value through other comprehensive income: Financial assets that are held within a business model whose objective is achieved by both, selling financial assets and collecting contractual cash flows that are solely payments of principal and interest, are subsequently measured at fair value through other comprehensive income. Fair value movements are recognized in the other comprehensive income (OCI). Interest income measured using the EIR method and impairment losses, if any are recognized in the Statement of Profit and Loss. On derecognition, cumulative gain or loss previously recognized in OCI is reclassified from the equity to 'other income' in the Statement of Profit and Loss.
c) Measured at fair value through profit or loss: A financial asset not classified as either amortized cost or FVOCI, is classified as FVTPL. Such financial assets are measured at fair value with all changes in fair value, including interest income and dividend income if any, recognized as 'other income' in the Statement of Profit and Loss.
4.9.3 Equity Instruments:
All investments in equity instruments classified under financial assets are initially measured at fair value; the Company may, on initial recognition, irrevocably elect to measure the same either at FVOCI or FVTPL.
The Company makes such election on an instrument-by-instrument basis. Fair value changes on an equity instrument are recognized as other income in the Statement of Profit and Loss unless the Company has elected to measure such instrument at FVOCI. Fair value changes excluding dividends, on an equity instrument measured at FVOCI are recognized in OCI. Amounts recognized in OCI are not subsequently reclassified to the Statement of Profit and Loss. Dividend income on the investments in equity instruments are recognized as 'other income' in the Statement of Profit and Loss.
De-recognition:
Financial assets are de-recognized when the right to receive cash flows from the assets has expired, or has been transferred, and the Company has transferred substantially all of the risks and rewards of ownership. if the asset is one that is measured at:
(a) amortized cost, the gain or loss is recognized in the Statement of Profit and Loss;
(b) fair value through other comprehensive income, the cumulative fair value adjustments previously taken to reserves are reclassified to the Statement of Profit and Loss unless the asset represents an equity investment in which case the cumulative fair value adjustments previously taken to reserves is reclassified within equity.
4.10Fair Value Measurement
The company measures financial instruments (investment in mutual funds and listed shares) at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
(i) In the principal market for asset or liability, or
(ii) in the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the company.
The company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
4.11 Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand and demand deposits with banks which are Short-Term, highly liquid investments that are readily convertible into cash and which are subject to an insignificant risk of changes in value.
Statement of Cash Flows and Cash and Cash Equivalents
Statement of cash flows is prepared in accordance with the indirect method prescribed in the relevant Ind AS. For the purpose of presentation in the Statement of cash flows, Cash and cash equivalents comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less.
In the balance sheet, bank overdrafts are shown within borrowings in current liabilities (if any).
4.12 Revenue Recognition
a) Interest Income
In respect of loan, the income is accrued by applying the interest rate in the transaction on declining balance on the amount financed for the period of the agreement i.e. interest income recognized on day basis.
b) Dividend income on investments is a counted for as and when the dividend is received.
c) Revenue is measured at the fair value of the consideration received or receivable for goods supplied and services rendered, net of returns and discounts to customers. Revenue from the sale of goods is recognized when significant risks and rewards of ownership have been transferred to the customer, which is mainly upon delivery, the amount of revenue can be measured reliably and recovery of the consideration is probable.
d) Profit/Loss on sale of mutual fund and Listed shares are accounted for in profit and loss account when the company redeem/sale the mutual fund and shares respectively. Notional profit on investment in mutual fund is shown through OCI.
4.13 Employee Benefits
The company has liability only on account of short-term employee benefits to employees like Salary, wages which is accounted as expenses in the year of payment. As per Management, there is no liability of the company on account of Gratuity.
|