1.6 Summary of Material accounting policies:
a) Property, Plant & Equipment:
i) Measurement at recognition:
An item of property, plant and equipment
that qualifies as an asset is measured
on initial recognition at cost. Following
initial recognition, items of property,
plant and equipment are carried at its
cost less accumulated depreciation and
accumulated impairment losses.
The cost of an item of property, plant
and equipment comprises of its purchase
price, including import duties, borrowing
cost, changes on foreign exchange
contracts and adjustments arising from
exchange rate variations attributable
to the assets, other non-refundable
purchase taxes or levies and any cost
directly attributable to bringing the assets
to its working condition for its intended
use.
Subsequent costs are included in the
asset's carrying amount or recognised
as a separate asset, as appropriate, only
when it is probable that future economic
benefits associated with the item will
flow to the entity and the cost can be
measured reliably.
ii) Depreciation:
Depreciation on each part of an item
of property, plant and equipment is
provided using the Straight-Line Method
(SLM) Method based on the useful life
of the asset as prescribed in Schedule
II to the Companies Act, 2013 except in
respect of some Plant & Machinery and
Factory Building, in whose case the life of
the assets has been assessed as 30 years
and 45 years respectively of Idar, Radhu,
Ceramic and Vitrified Division based on
technical advice, taking into account the
nature of the asset, the estimated usage
of the asset, the operating conditions of
the asset etc.
The following items of Property, Plant
and Equipment where Company has
estimated different useful life:
Land is not depreciated.
The useful lives, residual values of each
part of an item of property, plant and
equipment and the depreciation methods
are reviewed at the end of each financial
year. If any of these expectations differ
from previous estimates, such change
is accounted for as a change in an
accounting estimate.
iii) Derecognition:
The carrying amount of an item of
property, plant and equipment is
derecognized on disposal or when no
future economic benefits are expected
from its use or disposal. The gain or loss
arising from the Derecognition of an
item of property, plant and equipment is
measured as the difference between the
net disposal proceeds and the carrying
amount of the item and is recognized in
the Statement of Profit and Loss when the
item is derecognized.
iv) Capital Work in progress:
Cost of assets not ready for intended use,
as on the Balance Sheet date, is shown as
capital work in progress.
b) Investment Property:
Investment Property is measured initially at
cost including related transaction costs.
The cost comprises the purchase price,
borrowing cost if capitalization criteria are
met and directly attributable cost of bringing
the asset to its working condition for its
intended use.
Subsequent expenditures 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. All day-to-day repair
and maintenance expenditure are charged to
the statement of profit and loss for the period
during which such expenses are incurred.
Gains or losses arising from derecognition
of investment property are measured as the
difference between the net disposal proceeds
and the carrying amount of the asset at the
time of disposal and are recognized in the
statement of profit and loss when the asset is
derecognized.
c) Borrowing Costs:
Borrowing cost includes interest, amortization
of ancillary costs incurred in connection with
the arrangement of borrowings and exchange
differences arising from foreign currency
borrowings to the extent they are regarded as
an adjustment to the interest cost.
Borrowing costs, if any, directly attributable
to the acquisition, construction or production
of an asset that necessarily takes a substantial
period of time to get ready for its intended
use or sale are capitalized, if any. All other
borrowing costs are expensed in the period
in which they occur.
d) Impairment of non-financial assets:
The Company assesses at each reporting
date as to whether there is any indication
that any property, plant and equipment and
intangible assets or group of assets, called
cash generating units (CGU) may be impaired.
If any such indication exists the recoverable
amount of an asset or CGU is estimated
to determine the extent of impairment, if
any. When it is not possible to estimate the
recoverable amount of an individual asset,
the Group estimates the recoverable amount
of the CGU to which the asset belongs.
An impairment loss is recognised in
the Statement of Profit and Loss to the
extent, asset's carrying amount exceeds
its recoverable amount. The recoverable
amount is higher of an asset's fair value less
cost of disposal and value in use. Value in use
is based on the estimated future cash flows,
discounted to their present value using pre¬
tax discount rate that reflects current market
assessments of the time value of money and
risk specific to the assets.
The impairment loss recognised in prior
accounting period is reversed if there has
been a change in the estimate of recoverable
amount.
e) Investment in Subsidiary, Joint Venture &
Associate:
The Company has elected to recognize its
investments in subsidiaries, joint venture and
an associate company at cost in accordance
with the option available in Ind AS 27, 'Separate
Financial Statements'. The details of such
investments are given in Note 5. Impairment
policy applicable on such investments is
explained in note (d) above.
f) Inventory:
Raw materials, finished goods, packing materials,
stores, spares, consumables and stock-in-trade
are carried at the lower of cost and net realizable
value. However, materials and other items held
for use in production of inventories are not
written down below cost if the finished goods
in which they will be incorporated are expected
to be sold at or above cost. The comparison
of cost and net realizable value is made on an
item-by item basis.
In determining the cost of raw materials,
packing materials, stock-in-trade, stores,
spares, components and consumables, first
in first out (FIFO) method is used. Cost of
inventory comprises all costs of purchase,
duties, taxes (other than those subsequently
recoverable from tax authorities) and all other
costs incurred in bringing the inventory to
their present location and condition.
Cost of finished goods and work-in-progress
includes the cost of raw materials, packing
materials, an appropriate share of fixed and
variable production overheads as applicable
and other costs incurred in bringing the
inventories to their present location and
condition. Fixed production overheads are
allocated on the basis of normal capacity of
production facilities.
g) Financial Instrument:
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 Assets:
Initial recognition and measurement:
The Company recognizes a financial asset in
its Balance Sheet when it becomes party to
the contractual provisions of the instrument.
All financial assets are recognized initially at
fair value, plus in the case of financial assets
not recorded at fair value through profit or loss
(FVTPL), transaction costs that are attributable
to the acquisition of the financial asset.
Where the fair value of a financial asset at initial
recognition is different from its transaction
price, the difference between the fair value
and the transaction price is recognized as
a gain or loss in the Statement of Profit and
Loss at initial recognition if the fair value is
determined through a quoted market price
in an active market for an identical asset (i.e.
level 1 input) or through a valuation technique
that uses data from observable markets (i.e.
level 2 input).
In case the fair value is not determined using
a level 1 or level 2 input as mentioned above,
the difference between the fair value and
transaction price is deferred appropriately and
recognized as a gain or loss in the Statement
of Profit and Loss only to the extent that such
gain or loss arises due to a change in factor
that market participants take into account
when pricing the financial asset.
However, trade receivables that do not
contain a significant financing component
are measured at transaction price.
Subsequent measurement:
For subsequent measurement, the Company
classifies a financial asset in accordance with
the below criteria:
i. The Company's business model for managing
the financial asset and
ii. The contractual cash flow characteristics of
the financial asset.
Based on the above criteria, the Company
classifies its financial assets into the following
categories:
i. Financial assets measured at amortized cost
ii. Financial assets measured at fair value through
other comprehensive income (FVTOCI)
iii. Financial assets measured at fair value through
profit or loss (FVTPL)
i. Financial assets measured at amortized cost:
A financial asset is measured at the
amortized cost if both the following
conditions are met:
a. The Company's business model objective
for managing the financial asset is to
hold financial assets in order to collect
contractual cash flows, and
b. 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.
This category applies to cash and bank
balances, trade receivables, loans and
other financial assets of the Company.
Such financial assets are subsequently
measured at amortized cost using the
effective interest method.
Under the effective interest method, the
future cash receipts are exactly discounted
to the initial recognition value using the
effective interest rate. The cumulative
amortization using the effective interest
method of the difference between the
initial recognition amount and the maturity
amount is added to the initial recognition
value (net of principal repayments, if any)
of the financial asset over the relevant
period of the financial asset to arrive at the
amortized cost at each reporting date. The
corresponding effect of the amortization
under effective interest method is
recognized as interest income over the
relevant period of the financial asset. The
same is included under other income in
the Statement of Profit and Loss.
The amortized cost of a financial asset is
also adjusted for loss allowance, if any.
ii. Financial assets measured at FVTOCI:
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).
iii. Financial assets measured at FVTPL:
A financial asset is measured at FVTPL
unless it is measured at amortized cost
or at FVTOCI as explained above. This is
a residual category applied to all other
investments of the Company excluding
investments in subsidiary and associate
companies. Such financial assets are
subsequently measured at fair value at
each reporting date. Fair value changes
are recognized in the Statement of Profit
and Loss.
Derecognition:
A financial asset (or, where applicable, a
part of a financial asset or part of a group
of similar financial assets) is derecognized
(i.e. removed from the Company's Balance
Sheet) when any of the following occurs:
i. The contractual rights to cash flows from
the financial asset expires;
ii. The Company transfers its contractual
rights to receive cash flows of the financial
asset and has substantially transferred all
the risks and rewards of ownership of the
financial asset;
iii. The Company retains the contractual
rights to receive cash flows but assumes
a contractual obligation to pay the cash
flows without material delay to one or
more recipients under a 'pass-through'
arrangement (thereby substantially
transferring all the risks and rewards of
ownership of the financial asset);
iv. The Company neither transfers nor
retains substantially all risk and rewards of
ownership and does not retain control over
the financial asset.
In cases where Company has neither
transferred nor retained substantially all of
the risks and rewards of the financial asset,
but retains control of the financial asset,
the Company continues to recognize
such financial asset to the extent of its
continuing involvement in the financial
asset. In that case, the Company also
recognizes an associated liability. The
financial asset and the associated liability
are measured on a basis that reflects the
rights and obligations that the Company
has retained.
On Derecognition of a financial asset,
(except as mentioned in ii above for financial
assets measured at FVTOCI), the difference
between the carrying amount and the
consideration received is recognized in the
Statement of Profit and Loss.
Impairment of financial assets:
The Company applies expected credit
losses (ECL) model for measurement
and recognition of loss allowance on the
following:
i. Trade receivables:
Trade receivables are initially recognised
at fair value. Subsequently, these assets
are held at amortised cost less provision
for impairment based on expected
credit loss.
For trade and lease receivable only,
the Company applies the simplified
approach permitted by Ind AS 109
Financial Instruments, which requires
expected lifetime losses to be
recognised from initial recognition of
such receivables.
ii. Financial assets measured at
amortized cost (other than
trade receivables)
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 (listed as ii above),
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.
Subsequently, if the credit quality of
the financial asset improves such that
there is no longer a significant increase
in credit risk since initial recognition,
the Company reverts to recognizing
impairment loss allowance based on
12-month ECL.
Lifetime ECL are the expected credit
losses resulting from all possible default
events over the expected life of a financial
asset. 12-month ECL are a portion of the
lifetime ECL which result from default
events that are possible within 12 months
from the reporting date.
ECL are measured in a manner that
they reflect unbiased and probability
weighted amounts determined by a
range of outcomes, taking into account
the time value of money and other
reasonable information available as a
result of past events, current conditions
and forecasts of future economic
conditions.
Financial Liabilities
Initial recognition and measurement:
The Company recognizes a financial liability
in its Balance Sheet when it becomes party to
the contractual provisions of the instrument.
All financial liabilities are recognized initially
at fair value minus, in the case of financial
liabilities not recorded at fair value through
profit or loss (FVTPL), transaction costs that
are attributable to the acquisition of the
financial liability.
Where the fair value of a financial liability
at initial recognition is different from its
transaction price, the difference between
the fair value and the transaction price is
recognized as a gain or loss in the Statement
of Profit and Loss at initial recognition if the
fair value is determined through a quoted
market price in an active market for an
identical asset (i.e. level 1 input) or through
a valuation technique that uses data from
observable markets (i.e. level 2 input).
In case the fair value is not determined using
a level 1 or level 2 input as mentioned above,
the difference between the fair value and
transaction price is deferred appropriately and
recognized as a gain or loss in the Statement
of Profit and Loss only to the extent that such
gain or loss arises due to a change in factor
that market participants take into account
when pricing the financial liability.
Subsequent measurement:
All financial liabilities of the Company are
subsequently measured at amortized cost
using the effective interest method.
Under the effective interest method, the future
cash payments are exactly discounted to the
initial recognition value using the effective
interest rate. The cumulative amortization
using the effective interest method of the
difference between the initial recognition
amount and the maturity amount is added to
the initial recognition value (net of principal
repayments, if any) of the financial liability
over the relevant period of the financial
liability to arrive at the amortized cost at each
reporting date. The corresponding effect
of the amortization under effective interest
method is recognized as interest expense
over the relevant period of the financial
liability. The same is included under finance
cost in the Statement of Profit and Loss.
Derecognition:
A financial liability is derecognized 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 between the carrying amount
of the financial liability derecognized and
the consideration paid is recognized in the
Statement of Profit and Loss.
Offsetting of Financial Instruments:
Financial assets and financial liabilities are
offset, and the net amount is reported in
financial statements 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.
h) Fair Value:
The Company measures financial
instruments at fair value in accordance with
the accounting policies mentioned above.
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:
• In the principal market for the asset
or liability, or
• In the absence of a principal market, in
the most advantageous market for the
asset or liability
All assets and liabilities for which fair value
is measured or disclosed in the financial
statements are categorized within the fair
value hierarchy that categorizes into three
levels, described as follows, the inputs to
valuation techniques used to measure value.
The fair value hierarchy gives the highest
priority to quoted prices in active markets for
identical assets or liabilities (Level 1 inputs)
and the lowest priority to unobservable inputs
(Level 3 inputs).
Level 1 — quoted (unadjusted) market prices
in active markets for identical assets or
liabilities
Level 2 — inputs other than quoted prices
included within Level 1 that are observable for
the asset or liability, either directly or indirectly
Level 3 — inputs that are unobservable for the
asset or liability
For assets and liabilities that are recognized
in the financial statements at fair value on a
recurring basis, the Company determines
whether transfers have occurred between
levels in the hierarchy by re-assessing
categorization at the end of each reporting
period and discloses the same.
i) Revenue Recognition:
The Company has applied Ind AS 115 - Revenue
from Contracts with Customers which
establishes a comprehensive framework for
determining whether, how much and when
revenue is to be recognised.
Revenue from sale of goods is recognised
when control of the products being sold
is transferred to customer and when there
are no longer any unfulfilled obligations.
The Performance Obligations in contracts
are fulfilled at the time of dispatch, delivery
or upon formal customer acceptance
depending on contract terms.
Revenue is measured at fair value of the
consideration received or receivable, after
deduction of any trade discounts, volume
rebates and any taxes or duties collected on
behalf of the government such as goods and
services tax, etc.
Revenue is only recognised to the extent that
it is highly probable a significant reversal will
not occur. Customers have the contractual
right to return goods only when authorised
by the Company.
Interest and dividends:
Interest income is recognized using
effective interest method. Dividend income
is recognized when the right to receive
payment is established.
Export benefits:
The Company recognises income from duty
drawback and export benefit on accrual basis.
j) Income Taxes:
Tax expense is the aggregate amount
included in the determination of profit or loss
for the period in respect of current tax and
deferred tax.
Current tax:
Current tax is the amount of income taxes
payable in respect of taxable profit for a period.
Taxable profit differs from 'profit before tax' as
reported in the Statement of Profit and Loss
because of items of income or expense that
are taxable or deductible in other years and
items that are never taxable or deductible
under the Income Tax Act, 1961. Current tax
is measured using tax rates that have been
enacted by the end of reporting period for
the amounts expected to be recovered from
or paid to the taxation authorities.
Deferred tax:
Deferred tax is recognized on temporary
differences between the carrying amounts of
assets and liabilities in the financial statements
and the corresponding tax bases used in the
computation of taxable profit under Income
Tax Act, 1961.
Deferred tax liabilities are generally recognized
for all taxable temporary differences.
However, in case of temporary differences
that arise from initial recognition of assets or
liabilities in a transaction (other than business
combination) that affect neither the taxable
profit nor the accounting profit, deferred
tax liabilities are not recognized. Also, for
temporary differences if any that may arise
from initial recognition of goodwill, deferred
tax liabilities are not recognized.
Deferred tax assets are generally recognized
for all deductible temporary differences to the
extent it is probable that taxable profits will
be available against which those deductible
temporary difference can be utilized. In case
of temporary differences that arise from
initial recognition of assets or liabilities in a
transaction (other than business combination)
that affect neither the taxable profit nor the
accounting profit, deferred tax assets are not
recognized.
The carrying amount of deferred tax assets is
reviewed at the end of each reporting period
and reduced to the extent that it is no longer
probable that sufficient taxable profits will be
available to allow the benefits of part or all
such deferred tax assets to be utilized.
Deferred tax assets and liabilities are measured
at the tax rates that have been enacted or
substantively enacted by the Balance Sheet
date and are expected to apply to taxable
income in the years in which those temporary
differences are expected to be recovered or
settled.
Presentation of current and deferred tax:
Current and deferred tax are recognized
as income or an expense in the Statement
of Profit and Loss, except when they relate
to items that are recognized in Other
Comprehensive Income, in which case, the
current and deferred tax income/ expense are
recognized in Other Comprehensive Income.
The Company offsets current tax assets and
current tax liabilities, where it has a legally
enforceable right to set off the recognized
amounts and where it intends either to settle
on a net basis, or to realize the asset and settle
the liability simultaneously. In case of deferred
tax assets and deferred tax liabilities, the
same are offset if the Company has a legally
enforceable right to set off corresponding
current tax assets against current tax liabilities
and the deferred tax assets and deferred tax
liabilities relate to income taxes levied by the
same tax authority on the Company.
k) Foreign Currency Transaction & Translation:
Initial Recognition:
On initial recognition, transactions in foreign
currencies entered into by the Company are
recorded in the functional currency (i.e. Indian
Rupees), by applying to the foreign currency
amount, the spot exchange rate between the
functional currency and the foreign currency at
the date of the transaction. Exchange differences
arising on foreign exchange transactions settled
during the year are recognized in the Statement
of Profit and Loss.
Measurement of foreign currency items
at reporting date:
Foreign currency monetary items of the
Company are translated at the dosing exchange
rates. Non-monetary items that are measured
at historical cost in a foreign currency, are
translated using the exchange rate at the date
of the transaction. Non-monetary items that are
measured at fair value in a foreign currency, are
translated using the exchange rates at the date
when the fair value is measured.
Exchange differences arising out of these
translations are recognized in the Statement
of Profit and Loss.
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