E. Summary of Material Accounting Policy Information
A summary of the material accounting policy information applied in the preparation of the financial
statements are as given below. These accounting policies have been applied consistently to all periods
presented in the financial statements.
1. Current and non-current classification
Based on the time involved between the acquisition of assets for processing and their realization in
cash and cash equivalents, the Company has determined twelve months as its operating cycle for the
purpose of classification of its assets and liabilities as current and non-current in the balance sheet.
Deferred tax assets and liabilities are classified as non-current assets and liabilities
2. Property, plant and equipment
Property, plant and equipment are initially stated at cost.
The cost of property, plant and equipment includes:
(a) its purchase price, net of any trade discount and rebates including non-refundable purchase taxes
and import duty;
(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
The borrowing costs that meet the criteria for capitalization as part of a qualifying asset, then these
costs shall be included in the cost of property, plant, and equipment.
Property, plant and equipment are subsequently measured at cost net of accumulated depreciation
and accumulated impairment losses, if any. Subsequent costs are included in the assets 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 Company and the cost of the item can be
measured reliably.
Depreciation on property, plant and equipment is provided on written down value method over the
estimated useful lives of the assets as specified under part C of schedule II of the Companies Act, 2013
and disclosed in the notes to accounts. The residual values are not more than 5% of the original cost of
assets.
Property, plant and equipment acquired during the period, individually costing up to Rs. 15,000/- are
fully depreciated.
Depreciation methods, useful lives and residual values are reviewed at each financial year end.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These
are included in statement of profit or loss within other gains/(losses).
The Cost of leasehold land is not amortised over the period of lease because it is perpetual in nature.
3. Capital work-in-progress
Capital work-in-progress comprises of property, plant and equipment that are not ready for their
intended use at the end of reporting period and are carried at cost comprising direct costs, related
incidental expenses, other directly attributable costs and borrowing costs.
4. Intangible Assets
Intangible asset comprising of computer software (Payroll Software) are stated at cost of acquisition
less accumulated amortisation and any accumulated impairment losses, if any.
The intangible asset is amortised over a period of 60 months, on a straight-line basis, as per
management estimate of its useful life, over which economic benefits are expected to be realized.
5. Financial Instruments
The Company recognises financial assets and financial liabilities when it becomes a party to the
contractual provisions of the instrument..
i) Financial asset
a) Initial measurement
All financial assets (excluding trade receivables which is measured at transaction price) are
recognised initially at fair value plus transaction costs that are directly attributable to the acquisition of
financial asset. Transaction costs directly attributable to the acquisition of financial assets carried at
fair value through profit or loss are expensed in statement of profit and loss.
b) Subsequent measurement
Subsequent measurement of financial asset depends on the Company business model for managing
the asset and the cash flow characteristics of the asset. The Company classifies its financial asset as:
Financial Assets at amortised cost
After initial measurement, the financial assets that are held for collection of contractual cash flows
where those cash flow represent solely payments of principal and interest (SPPI) on the principal
amount outstanding are measured at amortised cost using the effective interest rate (EIR) method.
Interest income from these financial assets is included in other income.
Financial Assets at fair value through other comprehensive income
Financial instruments included within FVTOCI category are measured initially as well as at each
reporting period at fair value plus transaction costs. Fair value movements are recognised in other
comprehensive income (OCI). However, the Company recognises interest income, impairment losses
& reversals and foreign exchange gain loss in statement of profit and loss. On derecognition of the
asset, cumulative gain or loss previously recognised in OCI is reclassified from equity to profit and loss.
Financial Assets at fair value through profit and loss
Fair value through profit and loss is the residual category. Any financial instrument which does not
meet the criteria for categorization as at amortized cost or fair value through other comprehensive
income is classified at FVTPL.
Financial instruments included within FVTPL category are measured initially as well as at each reporting
period at fair value plus transaction costs. Fair value movements are recorded in statement of profit
and loss.
Impairment of financial assets
The Company applies the expected credit loss (ECL) model for recognising impairment loss on
financial assets measured at amortised cost, trade receivables, and other contractual rights to receive
cash or other financial asset.
For trade receivables and contract assets, the Company follows ’simplified approach’ and measures
the loss allowance at an amount equal to lifetime expected credit losses.
For recognition of impairment loss on other financial assets and risk exposure, the Company
determines that whether there has been a significant increase in the credit risk since initial recognition.
If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss.
ECL impairment loss allowance (or reversal) recognised during the period is recognised as expense/
income in the statement of profit and loss.
ECL is presented as an allowance, i.e., as an integral part of the measurement of those assets in the
balance sheet. The allowance reduces the net carrying amount. Until the asset meets write-off criteria,
the company does not reduce impairment allowance from the gross carrying amount.
ii) Financial liability
a) Initial measurement
All financial liabilities are recognised initially at fair value net of directly attributable transaction costs.
The Company’s financial liabilities include loans and borrowings, trade and other payables and other
financial liabilities etc.
b) Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at amortised cost
After initial recognition, trade payables are measured at transaction price whereas the borrowings and
other financial liabilities are subsequently measured at amortised cost using the EIR (Effective Interest
Rate) method. 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.
6. Fair value measurement of financial instruments
The company measures financial instruments at fair value at each reporting period.
All assets and liabilities for which fair value is measured, are disclosed in the financial statements are
categorised within the level 1 (quoted price unadjusted in active market), level 2 (Valuation techniques
for which the lowest level input that is significant to the fair value measurement is directly or indirectly
observable) and level 3 (Valuation techniques for which the lowest level input that is significant to the
fair value measurement is unobservable) of fair value hierarchy.
The fair value of an asset or a liability is measured using the assumptions that market participants
would use when pricing the asset or liability, assuming that market participants act in their economic
best interest.
7. Inventories
Inventories are valued at lower of cost and net realizable value.
Inventories includes raw material, work-in-progress, finished goods, store & spare, packing material.
Raw material and components: cost includes cost of purchase and other costs incurred in bringing the
inventories to their present location and condition. Cost is determined using first in first out (FIFO) basis.
Finished goods and work in progress: cost includes cost of direct materials and labour and a proportion
of manufacturing overheads based on the normal operating capacity but excluding borrowing costs.
Cost is determined on weighted average basis.
Store, spare parts, packing material etc.: Cost is determined on FIFO basis.
Inter branch transfers are valued at works/factory costs of the transferor unit/ branch.
8. Employee Benefits
a. Short term employee benefits: Employee benefits such as salaries falling due wholly within twelve
months of rendering the service are classified as short-term employee benefits and undiscounted
amount of such benefits are expensed in the statement of profit and loss in the period in which the
employee renders the related services.
b. Post-employment benefits
Defined contribution plan: A defined contribution plan is a plan under which the Company pays fixed
contributions into a separate entity and will have no legal or constructive obligation to pay further
amounts. Obligations for contributions to defined contribution plans are recognized as an employee
benefits expense in the statement of profit and loss during the period in which the employee renders
the related services.
Contribution to Defined Contribution Plans such as Provident Fund and Employees' State Insurance
Corporation are charged to the Statement of Profit and Loss as incurred.
Defined Benefit Plan: A defined benefit plan is a post-employment benefit plan other than a defined
contribution plan. Under such plans, the obligation for any benefits remains with the Company. The
company's liability towards gratuity is in the nature of defined benefit plans.
Remeasurement of net defined benefit liability, which comprises actuarial gains and losses and the
return on plan assets (excluding interest) and the effect of the asset ceiling (if any excluding interest),
are recognized immediately in other comprehensive income.
9. Foreign Exchange Transactions
Foreign currency transactions are recorded at exchange rates prevailing on the date of the
transaction. Foreign currency monetary items are retranslated at each reporting date. The exchange
gains and losses arising on settlement and restatement are recognised in the statement of profit and
loss. Non-monetary items which are measured in terms of historical cost denominated in foreign
currencies are translated using the exchange rates at the dates of the initial transactions.
10. Borrowing Costs
Borrowing costs consist of interest and other costs that the Company incurs in connection with the
borrowing of funds and are charged to the statement of profit and loss in the period in which they are
incurred except when it meets the criteria for capitalization as part of qualifying assets.
11. Impairment of non-financial assets
At each reporting date, the Company reviews the carrying amounts of its non-financial assets to
determine whether there is any indication of impairment. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
If such assets are considered to be impaired, the impairment to be recognised in the Statement of
Profit and Loss is measured by the amount by which the carrying value of the assets exceeds the
estimated recoverable amount of the asset.
12. Revenue Recognition
Sale of products
Revenue from sale of goods is recognised when control of the products being sold is transferred to the
customer and when there are no longer any unfulfilled obligations. The Performance Obligations in our
contracts are fulfilled at the time of dispatch, delivery or upon formal customer acceptance depending
on terms with customers. Revenue is measured on the basis of transaction price, which is the
consideration, adjusted for volume discounts, rebates, schemes allowances, price concessions,
incentives and returns, if any, as specified in the contracts with the customers. Accumulated
experience is used to estimate the provision for such discounts and rebates. Revenue is only
recognised to the extent that it is highly probable a significant reversal will not occur.
Sales return - Our customers have the contractual right to return goods only when authorised by the
Company. An estimate is made of goods that will be returned and a liability is recognised for this
amount using a best estimate based on accumulated experience. The Company deals in various
products and operates in various distribution channels. Accordingly, the estimate of sales returns is
determined primarily by the Company's historical experience in the markets in which the Company
operates by considering actual sales returns, estimated shelf life and other factors.
13. Other Income
Income from services rendered including commission income
• Income from services rendered including the commission income is recognised based on
agreements/arrangements as the service is performed and there are no unfulfilled obligations.
• Interest income is recognised using Effective Interest rate method.
• Dividend income on investments is recognised when the right to receive dividend is established
• All other income is accounted on accrual basis when no significant uncertainty exists regarding the
amount that will be received.
14. Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes
unrestricted cash and short-term deposits with original maturities of three months and less that are
readily convertible to known amounts of cash and which are subject to an insignificant risk of change
in value.
15. Taxes
Tax expense comprises current tax and deferred income tax. Current and deferred tax are recognised
in the statement of profit & loss except when they relate to items that are recognised in other
comprehensive income or directly in equity, in which case, the current and deferred tax are also
recognised in other comprehensive income or directly in equity, respectively.
Current income Tax
Current tax is determined as the tax payable in respect of taxable income for the period and is
computed in accordance with relevant tax regulations.
Current income tax is recognised in statement of profit and loss. Management periodically evaluates
positions taken in the tax returns with respect to situations in which applicable tax regulations are
subject to interpretation and establishes provisions where appropriate.
Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset
and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Deferred Tax
Deferred tax is provided for temporary taxable/deductible difference arising on the difference of tax
base and accounting base of assets/liabilities using the liability method and are measured at the
enacted tax rates or substantively enacted tax rates at reporting date.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the
extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the
deferred tax asset to be utilised. Any such reduction shall be reversed to the extent that it becomes
probable that sufficient taxable profit will be available. Unrecognised deferred tax assets are
re-assessed at each reporting date and are recognised to the extent that it has become probable that
future taxable profit will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets and liabilities and when the deferred tax balances relate to the same taxation authority.
16. Earnings per share
In determining basic earnings per share, the company considers the net profit attributable to equity
shareholders. The number of shares used in computing basic earnings per share is the weighted
average number of shares outstanding during the period.
In determining diluted earnings per share, the net profit attributable to equity shareholders and
weighted average number of shares outstanding during the period are adjusted for the effect of all
dilutive potential equity shares.
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