B. Significant accounting policies
1. Basis of accounting and preparation of financial statements
The financial statements of the Company have been prepared in accordance with the Indian Accounting
Standard (Ind AS), as notified by the Ministry of Corporate Affairs pursuant to Section 133 of the
Companies Act, 2013, Companies (Indian Accounting Standards) Rules, 2015 and other relevant
provisions of the act.
The financial statements have been prepared under the historical cost convention with the exception of
certain assets and liabilities that are required to be carried at fair value by Ind AS. Fair Value is the price
that would be received to sell an asset or paid to transfer of liabilities in an orderly transaction between
market participants at the measurement date.
Accounting policies are consistently applied except where a newly issued accounting standard is initially
adopted or a revision to an existing accounting standard requires a change in accounting policy hitherto
in use.
The Ind AS financial statements are presented in INR which is the Company's functional and presentation
currency and all values are rounded to the nearest lakhs, except when otherwise indicated. Accounting
policies have been consistently applied except where a newly issued accounting standard is initially
adopted or a revision to an existing accounting standard requires a change in the accounting policy
hitherto in use.
2. Use of estimates
The preparation of the Financial Statements in conformity with IND AS requires the management to make
estimates, judgments and assumptions. These estimates, judgments and assumptions affect the
application of accounting policies and the reported amount of Assets and Liabilities and disclosure of
contingent liabilities on the date of the Financial Statements and reported amounts of revenues and
expenses for the year.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimates are revised and future periods are affected.
Key sources of estimation of uncertainty at the date of the financial statements, which may cause a
material adjustment to the carrying amounts of assets and liabilities within the next financial year, is in
respect of impairment of investments, useful lives of property, plant and equipment, valuation of deferred
tax assets, provisions and contingent liabilities and fair value measurement of financial instruments have
been discussed below. Key source of estimation of uncertainty in respect of revenue recognition and
employee benefits have been discussed in their respective policies.
Useful lives of property, plant and equipment
The Company reviews the useful life of property, plant and equipment at the end of each reporting period.
This reassessment may result in change in depreciation expense in future periods.
Valuation of deferred tax assets
The Company reviews the carrying amount of deferred tax assets at the end of each year.
3. Current and Non-current Classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current
classification. An asset is treated as current when it is:
- Expected to be realised or intended to be sold or consumed in normal operating cycle
- Held primarily for the purpose of trading
- Expected to be realised within twelve months after the reporting period, or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least
twelve months after the reporting period
All other assets are classified as non-current.
A liability is current when:
- It is expected to be settled in normal operating cycle
- It is held primarily for the purpose of trading
- It is due to be settled within twelve months after the reporting period, or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the
reporting period
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realisation in
cash and cash equivalents. The Company has identified twelve months as its operating cycle.
4. Property, Plant and Equipment (PPE)
Property, plant and equipment are carried at the cost of acquisition or construction less accumulated
depreciation. Costs directly attributable to acquisition are capitalized until the property, plant and
equipment are ready for use, as intended by management.
Freehold land is carried at its historical cost. Historical cost includes expenditure that is directly
attributable to the acquisition of items.
Any subsequent costs are included in the assets carrying amount or recognized as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to
the company and the cost of the item can be measured reliably. All other repairs and maintenance are
recognized in profit or loss as incurred.
The cost of property, plant and equipment comprises its purchase price net of any trade discounts and
rebates, any import duties and other taxes (other than those subsequently recoverable from the tax
authorities), any directly attributable expenditure on making the assets ready for its intended use, other
incidental expenses and interest on borrowings attributable to acquisition of qualifying fixed assets up to
the date the assets is ready for its intended use.
5. Depreciation
Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its
estimated residual value. Depreciation on tangible assets has been provided on the straight-line method
as per the useful life prescribed in Schedule II to the Companies Act, 2013. The assets residual values,
useful life and method of depreciation are reviewed and adjusted if appropriate, at the end of each
reporting period.
6. Impairment of Non-Financial Assets
The management periodically assesses using external and internal sources, whether there is an indication
that both tangible and intangible asset may be impaired. An impairment loss is recognized wherever the
carrying value of an asset exceeds its recoverable amount. An impairment loss for an asset is reversed if,
and only if, the reversal can be related objectively to an event occurring after the impairment loss was
recognized.
7. Investment in subsidiaries, associates and joint ventures
Investments in subsidiaries are accounted at cost in the financial statements.
8. Cash and Bank Balances
Cash and bank balances consist of:
(i) Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprises of cash in hand and at bank, bank
deposits and also short-term deposits with an original maturity of three months or less, which is
subject to an insignificant risk of change in value. These balances with banks are unrestricted for
withdrawal and usage.
(ii) Other bank balances
These include balances and deposits with banks that are restricted for withdrawal and usage.
9. Inventories
Inventories are valued at cost or net realizable value, whichever is lower. Cost of inventories includes all
the cost that are incurred in bringing the inventories to their present condition and location. Net
realizable value is the estimated selling price in the ordinary course of business less the estimated costs
of completion and the estimated cost necessary to make the sale.
10. Financial Instruments
Financial Asset Initial Recognition
Financial assets and financial liabilities are recognized in the company's statement of financial position
when the company becomes a party to the contractual provisions of the instrument. The company
determines the classification of its financial assets and liabilities at initial recognition.
Subsequent Measurement
The Subsequent measurement of financial assets depends on their classification which is as follows:
Financial Asset at Fair value through Profit or Loss
Financial assets at fair value through profit and loss include financial assets held for sale in the near term
and those designated upon initial recognition at fair value through profit or loss.
Financial Asset measured at Amortized Cost
Loans, receivables and cash are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market. Trade receivables do not carry any interest and are stated at their
nominal value as reduced by appropriate allowance for estimated irrecoverable amounts based on the
ageing of the receivables balance and historical experience. Individual trade receivables are written off
when management deems them not to be collectible.
Financial Asset at Fair value through OCI
All equity investments, except investments in subsidiaries falling within the scope of Ind AS 109, are
measured at fair value through Other Comprehensive Income (OCI). If the company decides to designate
an equity instrument at fair value through OCI, then all fair value changes on the instrument, excluding
dividends, are recognized in the OCI.
Financial Asset Derecognition
The company derecognizes a financial asset when the contractual rights to the cash flows from the assets
expire or it transfers the financial asset and substantially all the risks and rewards of ownership of the
asset. Upon derecognition of equity instruments designated at fair value through OCI, the associated fair
value changes of that equity instrument are transferred from OCI to Retained Earnings.
Financial Liabilities - Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at amortized cost, loans and
borrowings, or as payables, as appropriate.
Subsequent Measurement
The Subsequent measurement of financial liabilities depends on their classification which is as follows:
Interest bearing borrowings, trade payables and other payables issued by the company are subsequently
measured at amortized cost.
Measurement of Fair Values
Certain accounting policies and disclosures of the Company require the measurement of fair values, for
both financial and non-financial assets and liabilities. The Company has an established control framework
with respect to the measurement of fair values.
Trade Payables
These amounts represent liabilities for goods and services provided to the company prior to the end of
financial year which are unpaid. These amounts are secured and unsecured. Trade and other payables are
presented as current liabilities unless payment is not due within 12 months after the reporting period. Also,
the segregation has been made for the micro, small and medium enterprises creditors.
11. Fair Value Measurement
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 under current market conditions.
Fair Values are categorized into different levels in a fair value hierarchy based on the inputs used in the
valuation techniques as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable
inputs).
When measuring the fair value of an asset or liability, the company uses observable market data as far as
possible. If the inputs used to measure the fair value of an asset or a liability fall into a different level of the
fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the
fair value hierarchy as the lowest level input that is significant to the entire measurement.
12. Borrowings
Borrowings are recognized at fair value. They are classified as current liabilities unless the company has
the right to defer the settlement of the liability for at least 12 months after the reporting period.
Borrowings are removed from the balance sheet when the obligations are discharged, cancelled or
expired.
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