2.2 MATERIAL ACCOUNTING POLICIES
A) Revenue Recognition
The Company derives revenues primarily from
sale of manufactured goods, traded goods and
related services.
Revenue is recognized on satisfaction of
performance obligation upon transfer of control
of promised products or services to customers
in an amount that reflects the consideration
the company expects to receive in exchange for
those products or services.
The Performance Obligations in our contracts
are fulfilled at the time of dispatch, delivery or
upon formal customer acceptance depending
on customer terms.
Revenue from the sale of goods is measured
on the basis of contracted price net of returns,
Liquidation damage, trade discount & volume
rebates and any taxes or duties collected on
behalf of the Government such as goods and
services tax, etc.
Revenue is recognised to the extent that it is
probable that the economic benefits will flow to
the Company and the revenue can be reliably
measured, regardless of when the payment is
being made.
Revenue is measured at the fair value of the
consideration received or receivable, taking into
account contractually defined terms of payment.
Revenue from a contract to provide services
is recognised based on terms of agreements/
arrangements with the customers as the service
is performed and there are no unfulfilled
performance obligations.
Sale of goods, Rendering of Services , Interest
Income and Dividends
i) Sale of goods
Revenue from sale of goods is measured at
the fair market value of the consideration
received or receivable, taking into account
contractually defined terms of payment
and excluding taxes or duties collected on
behalf of the government. Sales are net
of rebates and price concessions. Sales
in the domestic market are recognized at
the time of dispatch of materials to the
buyers including the cases where delivery
documents are endorsed in favour of the
buyers.
ii) Rendering of Services
Revenue from sale of services is recognised
upon the rendering of services and is
recognised net of GST.
B) Other Income
i) Interest income
Interest income is included in other income
in the statement of profit and loss. Interest
income is recognised on a time proportion
basis taking into account the amount
outstanding and the applicable interest
rate when there is a reasonable certainty
as to realisation.
ii) Dividends
Dividends are recognised in profit or
loss when the right to receive payment
is established, it is probable that the
economic benefits associated with the
dividend will flow to the Company, and the
amount of the dividend can be measured
reliably. This applies even if they are paid
out of pre-acquisition profits, unless the
dividend clearly represents a recovery of
part of the cost of the investment.
C) Property, plant and equipment
The initial cost of property, plant and equipment
comprises its purchase price, including import
duties and non refundable purchase taxes,
attributable borrowing cost and any other directly
attributable costs of bringing an asset to working
condition and location for its intended use.
Expenditure incurred after the property, plant
and equipment have been put into operation,
such as repairs and maintenance, are normally
charged to the statements of profit and loss in
the period in which the costs are incurred.
Major inspection and overhaul expenditure is
capitalized if the recognition criteria are met.
When significant parts of plant and equipment
are required to be replaced at intervals, the
Company depreciates them separately based
on their specific useful lives. Likewise, when a
major inspection is performed and overhaul
cost is incurred, its cost is recognised in the
carrying amount of the plant and equipment
as a replacement if the recognition criteria are
satisfied. All other repair and maintenance costs
are recognised in the statement of profit and
loss as incurred.
An item of property, plant and equipment
and any significant part initially recognised
is derecognised upon disposal or when no
future economic benefits are expected from
its use or disposal. Any gain or loss arising on
derecognition of the asset (calculated as the
difference between the net disposal proceeds
and the carrying amount of the asset) is included
in the statement of profit and loss, when the
asset is derecognised.
The residual values, useful life and methods of
depreciation of property, plant and equipment
are reviewed at each financial year end and
adjusted prospectively, if appropriate.
The company has elected to continue with
the carrying amount of its Property, plant
and Equipment as recognised in the financial
statements on transition to Ind AS, measured
as per the previous GAAP and use that as its
deemed cost as at the date of transition.
i) Capital work in progress
Assets in the course of construction are
capitalized in capital work in progress
account. At the point when an asset
is capable of operating in the manner
intended by management, the cost
of construction is transferred to the
appropriate category of property, plant
and equipment. Costs associated with the
commissioning of an asset are capitalised
when the asset is available for use but
incapable of operating at normal levels
until the period of commissioning has
been completed. Revenue generated
from production during the trial period is
credited to capital work in progress.
ii) Depreciation
Assets in the course of development
or construction and freehold land are
not depreciated. Other property, plant
and equipment are stated at cost less
accumulated depreciation and any
provision for impairment. Depreciation
commences when the assets are ready for
their intended use.
Depreciation is calculated on the
depreciable amount, which is the cost of an
asset less its residual value.
Pursuantto theenactment oftheCompanies
Act,2013("the Act") and its applicability for
accounting periods commencing from April
1,2014 the company has, wherever required
reassessed the useful life of its fixed assets
and has computed depreciation with
reference to the useful life of the assets as
recommended in schedule II of the Act.
Depreciation on tangible fixed assets has
been provided on the straight-line method
as per the useful life prescribed in Schedule
II to the Companies Act,2013, except for
Tangible Assets for which certificate of the
useful life is taken from the competent
person in that field
Individual items of assets costing upto '
5,000 are fully depreciated in the year of
acquisition except certain class of assets.
Leasehold improvements are depreciated
over the unexpired period of respective
leases or useful life whichever is shorter.
The company acquired three Industrial
Plots as part of Leasehold Land from the UP
State Industrial Development Corporation,
with upfront fees paid. These plots have
been capitalized at their acquisition cost
and are being amortized using the straight¬
line method.
The management believes that these
estimated useful lives are realistic and
reflect fair approximation of the period
over which the assets are likely to be used.
Major inspection and overhaul costs are
depreciated over the estimated life of the
economic benefit derived from such cost.
The carrying amount of the remaining
previous overhaul cost is charged to the
statement of profit and loss if the next
overhaul is undertaken earlier than the
previously estimated life of the economic
benefit.
When significant spare parts of an item
of property, plant and equipment have
different useful lives, they are accounted
for as separate items (major components)
of property, plant and equipment.
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