Note 2 SIGNIFICANT ACCOUNTING POLICIES
2.1 Statement of compliance
Financial Statements have been prepared in accordance with the accounting principles generally accepted in India
including Indian Accounting Standards (Ind AS) prescribed under the Section 133 of the Companies Act, 2013 read
with rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 as amended and relevant provisions of the
Companies Act, 2013.
2.2 Basis of preparation of financial statements
The financial statements are prepared under the historical cost convention on an accrual basis of accounting except
following assets and liabilities which have been measured at fair value amount:
i) Certain financial assets and liabilities, and
ii) Defined benefit plans - plan assets
The Ind AS are prescribed under Section 133 of the Act read with Rule 3 of the Companies (Indian Accounting
Standards) Rules, 2015 and relevant amendment rules issued thereafter.
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.
2.3 Use of estimates
The preparation of financial statement requires management of the company to make estimates and assumptions that
affect the reported balances of assets and liabilities and disclosure of contingent liabilities as at the date of financial
statements and reported.
2.4 Property, Plant and Equipment
Property, Plant and Equipment are stated at cost, less accumulated depreciation and impairment, if any. It includes
the direct costs attributable to bringing the assets to its working condition for its intended use.
Capital work-in-progress comprises of the cost of the assets that are not yet ready for their intended use at the
reporting date.
The depreciation during the year has been provided on straight line basis as per Schedule II of the Companies act 2013
since the acquisition of respective fixed assets. The depreciation on fixed assets is provided on the straight line method
considering the useful life and residual value of respective fixed asset.
Based on an independent technical evaluation carried out by external valuer, the management believes that the useful
life of Plant and machinery estimated best represent the period over which the management expects to use these
assets. However, the useful lives for these assets is different from that prescribed in schedule II of the Act.
2.5 Intangible Assets and amortisation
Intangible Assets are recognized only if it is probable that the future economic benefits that are attributable to the
assets will flow to the enterprise and the cost of the assets can be measured reliably. The intangible assets are
recorded at cost and are carried at cost less accumulated amortization and accumulated impairment losses, if any.
Intangible assets are amortized over the estimated period of benefit, not exceeding ten years.
Goodwill arising on acquisition is carried at cost as established at the date of acquisition of the business less
accumulated impairment losses, if any. For the purpose of impairment testing, goodwill is allocated to each of the cash¬
generating units expected to benefit from the synergies of the combination.
Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently
when there is an indication that the unit may be impaired. If the recoverable amount of the cash generating unit is less
than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any
goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of
each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.
2.6 Revenue recognition
a) Revenue from sale of goods is recognised when significant risks and rewards of ownership have been passed to the
buyer and when the effective control of the seller as the owner is lost. Revenues are recorded at invoice value, net of
goods & service tax.
b) Interest income is recognized on time proportion basis.
c) Dividend income is recognised when the right to receive payment is established.
d) Job work income is recognised on completion of job.
e) Commission Income is recognised only when the relevant service has been rendered or the goods have been
delivered that is when the risk has passed to the customer.
2.7 Foreign Currency Transactions & Forward Contracts
Exchange differences
Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of the transaction. Foreign
currency monetary assets and liabilities are translated at year end exchange rates.
a) Exchange differences arising on settlement of transactions and translation of monetary items other than those
covered by (b) below are recognized as income or expense in the year in which they arise. Exchange differences
considered as borrowing cost are capitalized to the extent these relate to the acquisition / construction of qualifying
assets and the balance amount is recognized in the Profit and Loss Statement.
b) Non-monetary items that are measured in terms of historical cost in a foreign currency are recorded using the
exchange rates at the date of transaction. The gain or loss arising on translation of non-monetary items measured at
fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item. (i.e. translation
difference on items whose fair value gain or loss is recognised in OCI or Statement of Profit and Loss are also
recognised in OCI or Statement of Profit and Loss, respectively).
2.9 Cash and Cash Equivalents (for purpose of Cash Flow Statement)
The cash flow statement is prepared by the “Indirect Method” as set out in Ind AS 7 “Cash Flow Statement” and
presents the cash flow by Operating, Investing & Financing activities of the company.
Cash and Cash Equivalents for the purpose of Cash Flow Statement comprise cash at bank and in hand and short term
Investment with the Original Maturity of 3 months or less.
2.10 Employee Benefits
a) The Company’s contribution in respect of provident fund is charged to Profit and Loss Account each year.
b) The Company pays gratuity to the employees whoever has completed five years of service with the Company at the
time of resignation. The gratuity is paid @ 15 days salary for every completed year of service as per the payment of
Gratuity Act 1972.
The gratuity liability amount is contributed to the Life Insurance Corporation of India (LIC) under LIC’s Group Gratuity
policy. The liability in respect of gratuity is calculated using the Projected Unit Credit Method and spread over the
period during which the benefit is expected to be derived from employees’ services.
Re-measurement of defined benefit plans in respect post-employment are charged to the Other Comprehensive
Income.
2.11 Borrowing Costs
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset should
be capitalised as part of the cost of that asset. The amount of borrowing costs eligible for capitalisation should be
determined in accordance with this Standard. Other borrowing costs should be recognised as an expense in the period
in which they are incurred.
To the extent that funds are borrowed specifically for the purpose of obtaining a qualifying asset, the amount of
borrowing costs eligible for capitalisation on that asset should be determined as the actual borrowing costs incurred
on that Borrowing during the period less any income on the temporary investment of those borrowings.
2.12 Segment disclosures
The company operates in a single business segment, i.e. of manufacturing of compounds, blends & alloys of
Engineering Polymers; and also no geographical segments as company operates only in India. Accordingly, no
separate disclosures required by Ind AS-108 for primary business segment and geographical segment.
2.13 Lease
Finance Leases
Assets acquired under lease where the company has substantially all the risk and rewards of ownership are classified
as finance lease. Such leases are capitalised at the inception of lease at lower of the fair value and present value of
minimum lease payments. Each lease rental paid is allocated between the liability and the interest cost, so as to obtain
a constant periodic rate of interest on the outstanding liability for each period.
Operating Leases
Assets acquired as leases where a significant portion of risks and rewards of ownership are retained by the lessor are
classified as operating lease. Operating lease charges are recognised in the Profit and Loss account on a straight line
basis over the lease term.
2.14 Earnings Per Share
The Company reports basic and diluted earnings per share in accordance with the IND AS -33 ‘ Earning per Share’
prescribed by the Companies (Accounting Standard) Rules 2006. Basic Earning per Share is computed by dividing the
net profit or loss for the year by the weighted average number of Equity Share outstanding during the year. Diluted
earnings per share is computed by dividing the net profit or loss for the year by the weighted number of equity shares
outstanding during the year as adjusted for the effects of all dilutive potential equity share.
2.15 Taxes on Income
The tax expense for the period comprises current and deferred tax. Tax is recognised in Statement of Profit and Loss,
except to the extent that it relates to items recognised in the comprehensive income or in equity. In which case, the tax
is also recognised in other comprehensive income or equity.
- Current Tax
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation
authorities, based on the tax rates and laws that are enacted or substantively enacted at the Balance sheet date.
- Deferred tax
Deferred tax is recognised on temporary difference between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the
liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively
enacted by the end of the reporting period. The carrying amount of deferred tax liabilities and assets are reviewed at
the end of each reporting period.
2.16 Impairment of Assets
The Company tests for impairments at the close of the accounting period if and only if there are indications that
suggest a possible reduction in the recoverable value of an asset. If the recoverable value amount of an Asset, i.e. the
net realisable value or the economic value in use of a cash generating unit, is lower than the carrying amount of the
Asset the difference is provided for as impairment. However, if subsequently the position reverses and the recoverable
amount become higher than the then carrying value the provision to the extent of the then difference is reversed, but
not higher than the amount provided for.
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