1. SUMMARY OF MATERIAL ACCOUNTING
POLICIES
The Standalone financial statements have been prepared
using the accounting policies and measurement basis
summarized below.
1.1 Historical cost convention
The financial statements have been prepared on a
historical cost basis, except for the following assets
and liabilities which have been measured at fair value
or revalued amount:
• Certain financial assets and liabilities, measured
at fair value (refer accounting policy regarding
financial instruments),
• Defined benefit plans, plan assets measured at fair
value
1.2 Property, plant and equipment
Items of Property, plant and equipment are valued at
cost of acquisition inclusive of any other cost attributable
to bringing the same to their working condition. Property,
plant and equipment manufactured /constructed in
house are valued at actual cost of raw materials,
conversion cost and other related costs.
Expenditure incurred during construction of capital
projects including related pre-production expenses is
treated as Capital Work-in- Progress and in case of
transfer of the project to another body, the accounting is
done on the basis of terms of transfer.
Machine Spares whose use is irregular is classified as
Capital Spares. Such capital spares are capitalised as
per Property, plant & equipment.
Gains or losses arising on the disposal of property,
plant and equipment are determined as the difference
between the disposal proceeds and the carrying amount
of the assets and are recognized in profit or loss within
'other income' or 'other expenses' respectively.
Depreciation on Plant & Machinery other than continuous
process plant is provided on pro-rata basis following
straight line method considering estimated useful life
at 25 years, based on technical review by a Chartered
Engineer. Depreciation on continuous process plant is
as per Schedule II of the Companies Act, 2013.
Depreciation on certain Property, plant & equipment,
which have been refurbished/ upgraded and put to
further use are being depreciated on a pro rata basis
considering their reassessed residual useful life which
is not more than the life specified in Schedule II of the
Companies Act, 2013.
Depreciation on tangible assets other than Plant &
Machinery is provided on pro-rata basis following
straight line method over the estimated useful lives of
the asset or over the lives of the assets prescribed under
Schedule II of the Companies Act, 2013, whichever is
lower. Based on internal review, the lower estimated
useful lives of the following assets are found justifiable
compared to the lives mentioned in Schedule II of the
Companies Act 2013:
1.3 Investment property
Property that is held for long-term rental yields or for
capital appreciation or both, and that is not occupied
by the Company, is classified as investment property.
Investment property is measured initially at its
cost, including related transaction costs and where
applicable, borrowing costs. Subsequent expenditure is
capitalised to the asset's carrying amount only when it is
probable that future economic benefits associated with
the expenditure will flow to the Company and the cost of
the item can be measured reliably. All other repairs and
maintenance costs are expensed when incurred.
When part of an investment property is replaced, the
carrying amount of the replaced part is derecognised.
Additionally, when a property given on rent is vacated
and the managements intention is to use the vacated
portion for the purpose of its own business needs,
Investment Properties are reclassified as Buildings.
Investment properties are depreciated using the straight¬
line method over their estimated useful lives which is
consistent with the useful lives followed for depreciating
Property, Plant and Equipment.
1.4 Financial Instruments
Recognition, initial measurement and derecognition
Financial assets and financial liabilities are recognised
when the Company becomes a party to the contractual
provisions of the financial instrument and are measured
initially at fair value adjusted by transaction costs,
except for those carried at fair value through profit
or loss (FVTPL) which are measured initially at fair
value. However, trade receivables that do not contain
a significant financing component are measured at
transaction price. Subsequent measurement of financial
assets and financial liabilities is described below.
Financial assets are derecognized when the contractual
rights to the cash flows from the financial asset expire,
or when the financial asset and all substantial risks
and rewards are transferred. A financial liability is
derecognized when it is extinguished, discharged,
cancelled or expires.
Classification and subsequent measurement of financial
assets
For the purpose of subsequent measurement, financial
assets are classified into the following categories upon
initial recognition:
• Amortised cost
• financial assets at FVTPL
All financial assets except for those at FVTPL are
subject to review for impairment.
Amortised cost
A financial asset shall be measured at amortised cost
using effective interest rates if both of the following
conditions are met:
a) The financial asset is held within a business model
whose objective 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.
The Company's cash and cash equivalents, trade and
most other receivables fall into this category of financial
instruments.
A loss allowance for expected credit losses is
recognised on financial assets carried at amortised cost.
Expected loss on individually significant receivables
are considered for impairment when they are past
due and based on Company's historical counterparty
default rates and forecast of macro-economic factors.
Receivables that are not considered to be individually
significant are segmented by reference to the industry
and region of the counterparty and other shared credit
risk characteristics to evaluate the expected credit
loss. The expected credit loss estimate is then based
on recent historical counterparty default rates for each
identified segment. The Company has a diversified
portfolio of trade receivables from its different segments.
Every business segment of the Company has calculated
provision using a single loss rate for its receivables
using its own historical trends and the nature of its
receivables. There are no universal expected loss
percentages for the Company as a whole. The Company
generally considers its receivables as impaired when
they are 3 years past due. Considering the historical
trends and market information, the Company estimates
that the provision computed on its trade receivables is
not materially different from the amount computed using
expected credit loss method prescribed under Ind AS
109. Since the amount of provision is not material for the
Company as a whole, no disclosures have been given in
respect of expected credit losses.
Derivative financial instruments are carried at FVTPL.
Investment in subsidiaries, joint ventures and associates
and other investment
Investments in Equity Shares of Subsidiaries, Joint
Ventures and Associates are accounted for at cost in
the financial statements and the same are tested for
impairment in case of any indication of impairment.
The Company has made an irrevocable election for
its other investments, which are classified as equity
instruments, to present the subsequent changes in fair
value in other comprehensive income on its business
model.
1.5 Inventories
Inventories are valued at lower of cost or net realisable
value. For this purpose, the basis of ascertainment of
cost of the different types of inventories is as under -
a) Raw materials & trading goods, stores & spare
parts and materials for turnkey projects on the basis
of weighted average cost.
b) Work-in-progress on the basis of weighted average
cost of raw materials and conversion cost upto the
relative stage of completion where it can be reliably
estimated.
c) Finished goods on the basis of weighted average
cost of raw materials, conversion cost and other
related costs.
d) Loose Tools are written-off over the economic
life except items costing upto ?10,000 which are
charged off in the year of issue.
1.6 Government grants
a) Grants from the government are recognised at their
fair value where there is a reasonable assurance
that the grant will be received and the Company will
comply with all attached conditions.
b) Government grants relating to income are deferred
and recognised in the profit or loss over the period
necessary to match them with the costs that they
are intended to compensate and presented within
other income.
c) Government grants relating to the purchase of
property, plant and equipment are included in
non-current liabilities as deferred income and are
credited to profit or loss on a straight-line basis
over the expected lives of the related assets and
presented within other income.
1.7 Foreign currency translation
a) Functional and presentation currency
Items included in the financial statements are
measured using the currency of the primary
economic environment in which the entity operates
('the functional currency'). The applicable functional
and presentation currency is INR.
b) Transactions and balances
Foreign currency transactions are translated into
the functional currency using the exchange rates
at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement
of such transactions and from the translation of
monetary assets and liabilities denominated in
foreign currencies at year end exchange rates are
generally recognised in profit or loss.
1.8 Segment reporting
Operating segments are reported in a manner consistent
with the internal reporting provided to the chief operating
decision maker.
The board of directors assesses the financial
performance and position of the Company, and makes
strategic decisions and have identified business
segment as its primary segment.
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