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.
Pursuant to the enactment of The
Companies 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 Rs.
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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