2 MATERIAL ACCOUNTING POLICIES
a Current versus 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.
Based on the nature of products and the time between acquisition of assets for processing and their realisation
in cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the
purpose of current or noncurrent classification of assets and liabilities.
b i. Property, plant and equipment
The Company has elected to regard previous GAAP carrying values of Property, plant and equipment as
deemed cost at the date of transition to Ind AS.
An item of property, plant and equipment is recognised as an asset if it is probable that the future economic
benefits associated with the item will flow to the Company and its cost can be measured reliably.
The initial cost of property, plant and equipment comprises its purchase price, non-refundable purchase taxes,
and any directly attributable costs of bringing an asset to working condition and location for its intended use.
All other expenses on existing property, plant and equipment, including day-to-day repair and maintenance
expenditure and cost of replacing parts, are charged to the statement of profit and loss for the period during
which such expenses are incurred.
Where, during any financial year, any addition has been made to any asset, or where any asset has been
sold, discarded, demolished or destroyed, or significant components replaced; depreciation on such assets is
calculated on a pro rata basis as individual assets with specific useful life from the month of such addition or,
as the case may be, up to the month on which such asset has been sold, discarded, demolished or destroyed
or replaced.
The Company reviews the residual value and useful life of an asset at least at each financial year-end and, if
expectations differ from previous estimates, the change is accounted for as a change in accounting estimate.
Depreciation on property, plant and equipment is provided on the straight-line method prescribed under
Schedule II of the Act, computed on the basis of useful lives prescribed under Schedule II of the Act. Leasehold
improvements are amortised over the period of lease or estimated useful life, whichever is lower. For the
following assets useful life is taken bases on technical evaluation of the property, plant and equipment by the
management which are mentioned below:
EPOS Devices are depreciated over a useful life of 5 years based on management's assessment of project life,
expected usage and economic benefits derived from the assets, which is different from the indicative useful
life prescribed under Schedule II to the Companies Act, 2013
ii. Capital Work in Progress
“Directly and indirectly attributable Expenditure, including borrowing costs for long-term
construction projects, related to and incurred during implementation (net of incidental income
from selling power generated while bringing the asset to that location and condition) of capital
projects to get the assets ready for intended use and for a qualifying asset is included under “Capital
Work in Progress ” if the recognition criteria are met. The same is allocated to the respective items of property,
plant and equipment on completion of construction (development of project) / erection of the capital project
/ property, plant and equipment. Capital work in progress is stated at cost, net of accumulated impairment
loss, if any.”
c Other Intangible assets
Recognition and initial measurement
The Company has elected to regard previous GAAP carrying values of Intangible assets as deemed cost at the
date of transition to Ind AS.
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition,
intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses,
if any.
Subsequent measurement (amortisation and useful lives)
All intangible assets are accounted for using the cost model whereby capitalised costs are amortised on a
straight-line basis over the period five years on the basis of their estimated useful lives.
De-recognition
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the
net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or
loss when the asset is derecognised.
d Inventories
Inventories are stated at lower of cost or net realisable value. Cost is determined on a First in First out basis
Net realisable value is the price at which the inventories can be realised in the normal course of business
after allowing for the cost of conversion from their existing state to a finished condition and for the cost of
marketing, selling and distribution.
e Foreign Currency Translation
Functional and Presentation Currency
The financial statements are presented in Indian Rupees and are rounded to two decimal places of Lakhs
which is also the Company's functional currency.
Transactions in foreign currencies are initially recorded by the Company at its functional currency spot rates
at the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency
spot rates of exchange at the reporting date.
Exchange differences arising on settlement or translation of monetary items as at reporting date are recognised
in statement of profit and loss.
f Revenue recognition from sale of products and services
i. Revenue from contracts with customers is recognised when control of the goods or services are transferred
to the customer at an amount that reflects the consideration to which the Company expects to be entitled
in exchange for those goods or services. Revenue towards satisfaction of a performance obligation is
measured at the amount of transaction price (net of variable consideration) allocated to that performance
obligation. The transaction price of goods sold and services rendered is net of variable consideration on
account of various discounts and schemes offered by the Company as part of the contract. This variable
consideration is estimated based on the expected value of outflow. Revenue (net of variable consideration)
is recognized only to the extent that it is highly probable that the amount will not be subject to significant
reversal when uncertainty relating to its recognition is resolved. The performance obligation in case of sale
of goods is satisfied at a point in time i.e., when the material is shipped to the customer or on delivery to
the customer, as may be specified in the contract.
ii. Revenue from Engineering, procurement and construction services (net of reversals/credits) is recognised
on completion of performance obligation under the contract with the customer as per terms of contract/
agreement.
iii. The Company provides preventive maintenance services and on-site maintenance on its certain products
at the time of sale. These maintenance services are sold together with the sale of product. Contracts
for such sales of product and preventive maintenance services comprise two performance obligations
because the promises to transfer the product and to provide the preventive maintenance services are
capable of being distinct. Accordingly, a portion of the transaction price is allocated to the preventive
maintenance services and recognised as a contract liability. Revenue is recognised over the period in
which the preventive maintenance services are provided based on the time elapsed.
The performance obligation in case of service is satisfied over a period of time. Income in respect of service
contracts, which are generally in the nature of providing maintenance and support services, are recognised
in statement of profit and loss on straight line basis over the period of the performance obligation.
g Other Income
Interest income
Interest income on financial assets is calculated using the effective interest method is recognised in the
statement of profit and loss as part of other income.
Dividend Income
Dividend income from investment is accounted for when the right to receive is established, which is generally
when shareholders approve the dividend.
h 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.
Initial Recognition
The Company recognizes financial assets and financial liabilities when it becomes a party to the contractual
provisions of the instrument. All financial assets and liabilities are recognized at fair value on initial recognition.
Trade Receivables are initially recognised at transaction price where that do not contain any significant
portion of financing component. Transaction costs that are directly attributable to the acquisition or release of
financial assets and financial liabilities respectively, which are not at fair value through profit or loss, are added
to the fair value of underlying financial assets and liabilities on initial recognition. Trade receivables and trade
payables that do not contain a significant financing component are initially measured at their transaction
price.
FINANCIAL ASSETS
Subsequent Measurement
For purposes of subsequent measurement, financial assets are classified in two categories:
> Financial assets at amortised cost at effective interest rate.
> Financial assets at fair value through profit or loss
> Financial assets at amortised cost
A financial asset is subsequently measured at amortised cost which is held with objective 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.
> Financial assets at fair value through profit or loss:
Financial assets at fair value through profit or loss are carried in the balance sheet at fair value with net
changes in fair value recognised in the statement of profit and loss.
This category includes interest free security deposit given valued at present value.
De-recognition of financial assets
A financial asset is primarily de-recognised 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.
FINANCIAL LIABILITIES
Subsequent Measurement
Financial liabilities are subsequently carried at amortized cost using the effective interest method.
De-recognition of financial liabilities
A financial liability is de-recognised 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 de-recognition 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 realize the assets and settle the liabilities simultaneously.
i Impairment of financial assets
The Company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets
which are not fair valued through profit or loss. For impairment purposes significant financial assets are tested
on an individual basis, other financial assets are assessed collectively in groups that share similar credit risk
characteristics.
j Right-of-use assets and lease liabilities
As a lessee
Classification of lease:
The Company's leased asset consist of leases for building and vehicle only. The Company assesses whether a
contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset for a period of time in exchange for consideration. To
assess whether a contract conveys the right to control the use of an identified asset, the Company assesses
whether:
(i) the contract involves the use of an identified asset
(ii) the Company has substantially all of the economic benefits from use of the asset through the period of
the lease and
(iii) the Company has the right to direct the use of the asset.
Recognition and initial measurement of right-of use assets:
At the date of commencement of the lease, the Company recognises a right-of-use asset (“ROU”) and a
corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of
twelve months or less (short-term leases) and low value leases. For these short-term and low value leases, the
Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the
lease.
Subsequent measurement of right-of-use asset:
The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability
adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial
direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation
and impairment losses if any. Right-of-use assets are depreciated from the commencement date on a straight¬
line basis over the shorter of the lease term and useful life of the underlying asset.
Lease liabilities:
The lease liability is initially measured at amortized cost at the present value of the future lease payments.
The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable,
using the incremental borrowing rates in the country of domicile of these leases. Lease payments included in
the measurement of the lease liability are made up of fixed payments (including in substance fixed payments)
and variable payments based on an index or rate. Subsequent to initial measurement, the liability will be
reduced for payments made and increased for interest. Lease liabilities are remeasured with a corresponding
adjustment to the related right of use asset if the Company changes its assessment of whether it will exercise
an extension or a termination option.
Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases (i.e., those leases
that have a lease term of 12 months or less from the commencement date and do not contain a purchase
option). Lease payments on short-term leases and leases of low-value assets are recognised as expense on a
straight-line basis over the lease term.
Sale and Lease Back
In case of sale and leaseback transactions, the Company first considers whether the initial transfer of the
underlying asset to the buyer lessor is a sale by applying the requirements of Ind AS 115. If the transfer
qualifies as a sale and the transaction is at market terms, the Company effectively derecognises the asset,
recognises a ROU asset (and lease liability) and recognises in Statement of Profit and Loss, the gain or loss
relating to the buyer-lessor's rights in the underlying asset.
k Cash and bank balances
Cash and bank balances consist of:
• Cash and cash equivalents - which includes cash in hand, deposits held at call with banks and other short
term deposits which are readily convertible into known amounts of cash, are subject to an insignificant
risk of change in value and have maturities of less than three months from the date of such deposits.
These balances with banks are unrestricted for withdrawal and usage.
• Other bank balances - which includes balances and deposits with banks that are restricted for withdrawal
and usage.
l Cash Flow Statement
Statement of Cash Flows is prepared segregating the cash flows into operating, investing and financing
activities. Cash flow from operating activities is reported using indirect method adjusting the net profit for the
effects of:
(i) changes during the period in inventories and operating receivables and payables, transactions of a non¬
cash nature;
(ii) non-cash items such as depreciation, provisions, and unrealised foreign currency gains and losses etc.; and
(iii) all other items for which the cash effects are investing or financing cash flows
m Employee Benefits
(i) Short Term Employee Benefits:
All employee benefits payable wholly within twelve months of rendering the service are classified as short
term employee benefits. Benefits such as salaries, wages, short term compensated absences etc., and the
expected cost of bonus, ex-gratia are recognised in the period in which the employee renders the related
service.
(ii) Post-Employment Benefits:
1. Defined Contribution Plans:
State governed Provident Fund Scheme and Employees State Insurance Scheme are defined contribution
plans.
The contribution paid / payable under the schemes is recognised during the period in which the employees
render the related services.
2. Defined Benefit Plans:
The Employee's Gratuity Fund Scheme and compensated absences is Company's defined benefit plans. The
present value of the obligation under such defined benefit plan is determined based on actuarial valuation
using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional
unit of employee benefits entitlement and measures each unit separately to build up the final obligation. The
obligation is measured at the present value of the estimated future cash flows. The discount rates used for
determining the present value of the obligation under defined benefit plans, is based on the market yields on
Government Securities as at the Balance Sheet date, having maturity periods approximating to the terms of
related obligations.
For defined benefit plans, the amount recognised as Employee benefit expenses' in the Statement of Profit
and Loss is the cost of accruing employee benefits promised to employees over the year and the costs of
individual events such as past/future service benefit changes and settlements (such events are recognised
immediately in rate to the net defined benefit liability or asset is charged or credited to Finance costs' in
the Statement of Profit and Loss. Any differences between the interest income on plan assets and the return
actually achieved and any changes in the liabilities over the year due to changes in actuarial assumptions or
experience adjustments within the plans, are recognised immediately in Other comprehensive income' and
subsequently not reclassified to the Statement of Profit and Loss.
All defined benefit plans obligations are determined based on valuations, as at the Balance Sheet date, made
by independent actuary using the projected unit credit method. The classification of the Company's net
obligation into current and non-current is as per the actuarial valuation report.
In case of funded plans, the fair value of the plan assets is reduced from the gross obligations under the
defined benefit plans, to recognise the obligation on net basis.
Gains or losses on the curtailment or settlement of any defined benefits plans are recognised when the
curtailment or settlement occurs. Past service cost is recognised as expense on a straight-line basis over the
average period until the benefits become vested.
3. Long Term Employee Benefits:
The employees' long term compensated absences are Company's defined benefit plans. The present value of
the obligation is determined based on the actuarial valuation using the projected unit credit method as at
the date of the balance sheet. In case of funded plans, the full value of plan assets is reduced from the gross
obligation to recognise the obligation on the net basis.
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