2. Material Accounting policies2.1 Basis of preparation
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards
(Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to
time) and presentation requirements of Division II of Schedule III to the Companies Act, 2013 (as amended from
time to time), (Ind AS compliant Schedule III), as applicable to the financial statements.
The preparation of financial statements in conformity with Ind AS, requires management to make estimates,
judgments and assumptions that affects the application of accounting policies and reported amount of assets,
liabilities, income and expenses and the disclosures of the contingent assets and liabilities at the date of financial
statements. Actual results could differ from those estimates. Estimates and underlying assumptions are reviewed
on an ongoing basis. Any revision to estimate is recognized prospectively in current and future periods.
The financial statements have been prepared on a historical cost convention on an accrual basis except for
certain financial instruments, financial assets, and defined employee benefits plan, which have been measured at
fair value or at revalued amount.
The accounting policies and related notes further described the specific measurements applied for each of the
assets and liabilities.
Financial Statements are presented in INR and all values are rounded to nearest Lakhs (INR 00,000) except
when otherwise stated.
The Company has prepared the financial statement on the basis that it will continue to operate as a going
concern.
2.2 Property, plant and equipment
Items of property, plant and equipment except items stated below are stated at cost, net of accumulated
depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing part of the
plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met.
Likewise, when a major inspection is performed, 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 profit or loss as incurred. The present value of the expected cost for the decommissioning of an
asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met.
Capital work in progress is stated at cost, net of accumulated impairment loss, if any. Capital work-in-progress
includes cost of property, plant and equipment under installation / under development as at the balance sheet
date. It is capitalised from the date construction is complete and asset is ready for its intended use.
Land is measured at fair value less accumulated impairment losses recognised at the date of revaluation. Buildings
are measured at fair value less accumulated depreciation on buildings and impairment losses recognised at the
date of revaluation. Valuations are performed with sufficient frequency to ensure that the carrying amount of a
revalued asset does not differ materially from its fair value.
A revaluation surplus is recorded in OCI and credited to the revaluation surplus in equity. However, to the extent
that it reverses a revaluation deficit of the same asset previously recognised in profit or loss, the increase is
recognised in profit or loss. A revaluation deficit is recognised in the P&L, except to the extent that it offsets an
existing surplus on the same asset recognised in the revaluation surplus.
An annual transfer from the revaluation surplus to retained earnings is made for the difference between
depreciation based on the revalued carrying amount of the asset and depreciation based on the asset's original
cost. Additionally, accumulated depreciation as at the revaluation date is eliminated against the gross carrying
amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal, any
revaluation surplus relating to the particular asset being sold is transferred directly to retained earnings.
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 P&L when the asset is derecognised.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at
each financial year end and adjusted prospectively, if appropriate.
Depreciation on property, plant and equipment is calculated on straight line basis over the useful lives of the
assets are as follow:
Electrical fittings and plant & machinery has been depreciated over useful life different from life specified in
Schedule II of Companies Act, 2013 based on the technical estimates made by the management, it believes that
the useful lives as given above represent the period over which the assets are expected to be used.
Assets having value less than Rs. 5,000 are depreciated fully in the year of purchase.
2.3 Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets
acquired in a business combination is their fair value at the date of acquisition. Following initial recognition,
intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses.
Internally generated intangibles, excluding capitalised development costs (refer below policy for R&D costs), are
not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is
incurred.
The useful lives of intangible assets are assessed as either finite or indefinite.
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment
whenever there is an indication that the intangible asset may be impaired. The amortisation period and the
amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each
reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic
benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and
are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is
recognised in the P&L unless such expenditure forms part of carrying value of another asset.
Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either
individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine
whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is
made on a prospective basis.
An intangible asset is derecognised upon disposal (i.e., at the date the recipient obtains control) or when no future
economic benefits are expected from its use or disposal. Any gain or loss arising upon derecognition of the asset
(calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included
in the P&L when the asset is derecognised.
Research and Development cost
Research costs are expensed as incurred. Development expenditure incurred on an individual project is
recognised as an intangible asset when the Company can demonstrate all the following:
i) The technical feasibility of completing the intangible asset so that it will be available for use or sale;
ii) Its intention to complete and ability and intention to use or sell the asset;
iii) How the asset will generate future economic benefits;
iv) The availability of adequate resources to complete the development and to use or sale the asset; and
v) The ability to measure reliably the expenditure attributable to the intangible asset during development.
Following the initial recognition of the development expenditure as an asset, the cost model is applied requiring the
asset to be carried at cost less any accumulated amortization and accumulated impairment losses. Amortization
of the asset begins when development is complete and the asset is ready for the intended use. It is amortised on
straight line basis over the estimated useful life. Amortisation expense is recognised in the statement of profit and
loss unless such expenditure forms part of carrying value of another asset.
During the period of development, the asset is tested for impairment annually.
2.4 Impairment of non-financial assets
The Company assesses at each reporting date whether there is an indication that an asset may be impaired.
If any indication exists, or when annual impairment testing for an asset is required, the Company estimates
the asset's, recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating
unit's (CGU) fair value less costs of disposal and its value in use. The recoverable amount is determined for an
individual asset, unless the asset does not generate cash inflows that are largely independent of those from other
assets or group of assets. When the carrying amount of asset or CGU exceeds its recoverable amount, the asset
is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre¬
tax discount rate that reflects current market assessments of the time value of money and the risks specific to
the asset. In determining fair value less costs of disposal, recent market transactions are taken into account, if
available. If no such transactions can be identified, an appropriate valuation model is used.
The Company's impairment calculation is based on detailed budgets and forecast calculations which are prepared
separately for each of the Company's cash-generating units to which the individual assets are allocated. These
budgets and forecast calculations generally cover a period of five years. For the remaining economic life of the
asset or cash-generating unit (CGU), a long-term growth rate is calculated and applied to projected future cash
flows after the fifth year.
Impairment losses of continuing operations, including impairment on inventories, are recognised in the statement
of profit and loss, except for properties previously revalued with the revaluation surplus taken to OCI. For such
properties, the impairment is recognised in OCI up to the amount of any previous revaluation surplus.
After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining economic
life.
An assessment is made at each reporting date as to whether there is any indication that previously recognized
impairment losses may no longer exist or may have decreased. If such an indication exists, the Company
estimates the asset's or cash-generating unit's recoverable amount. A previously recognized impairment loss is
reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount
since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset
does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net
of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized
in the statement of profit and loss unless the asset is carried at a revalued amount, in which case the reversal is
treated as a revaluation increase.
2.5 Leases
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Company as a lessee
The Company applies a single recognition and measurement approach for all leases, except for short-term leases
and leases of low-value assets. The Company recognizes lease liabilities to make lease payments and right-of-
use assets representing the right to use the underlying assets.
i) Right-of-use assets
The Company recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying
asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and
impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets
includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or
before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a
straight-line basis over the lease term.
If ownership of the leased asset transfers to the Company at the end of the lease term or the cost reflects the
exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.
The right-of-use assets are also subject to impairment. Refer to the accounting policies in section (Impairment of
non-financial assets).
ii) Lease liabilities
At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value
of lease payments to be made over the lease term. The lease payments include fixed payments (including in
substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an
index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also
include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments
of penalties for terminating the lease, if the lease term reflects the Company exercising the option to terminate.
Variable lease payments that do not depend on an index or a rate are recognized as expenses (unless they are
incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Company uses its weighted average cost of debts as
incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is
not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the
accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities
is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g.,
changes to future payments resulting from a change in an index or rate used to determine such lease payments)
or a change in the assessment of an option to purchase the underlying asset.
Short term leases and leases of low value assets
The Company applies the short-term lease recognition exemption to its short-term leases of machinery and
equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do
not contain a purchase option).
The Company applies the low-value asset recognition exemption on a lease-by-lease basis, if the lease qualifies
as leases of low-value assets, with a value when new of up to INR 3 lacs. In making this assessment, the
Company also factors below key aspects:
• The assessment is conducted on an absolute basis and is independent of the size, nature, or circumstances
of the lessee.
• The assessment is based on the value of the asset when new, regardless of the asset's age at the time of the
lease.
• The lessee can benefit from the use of the underlying asset either independently or in combination with other
readily available resources, and the asset is not highly dependent on or interrelated with other assets.
• If the asset is subleased or expected to be subleased, the head lease does not qualify as a lease of a low-
value asset.
Based on the above criteria, the Company has classified leases of water coolers as leases of low value assets.
Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight¬
line basis over the lease term.
Company as a lessor
Leases in which the Company does not transfer substantially all the risks and rewards of ownership of an asset
are classified as operating leases. Rental income from operating lease is recognized as per the terms of lease
agreement. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying
amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent
rents are recognized as revenue in the period in which they are earned.
Leases are classified as finance leases when substantially all of the risks and rewards of ownership transfer from
the Company to the lessee. Amounts due from lessees under finance leases are recorded as receivables at the
Company's net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect
a constant periodic rate of return on the net investment outstanding in respect of the lease.
2.6 Foreign Currencies
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 Company's financial statements are presented in
Indian rupee (Rs.) which is also the Company's functional and presentation currency.
Foreign currency transactions are recorded on initial recognition in the functional currency, using the exchange
rate prevailing at the date of transaction.
Measurement of foreign currency items at the balance sheet date
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot
rates of exchange at the reporting date.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the date when the fair value is determined.
Exchange differences
Exchange differences arising on settlement or translation of monetary items are recognized as income or expense
in the period in which they arise with the exception of exchange differences arising on reporting of long term
foreign currency monetary items at rates different from those at which they were initially recorded in so far as
they relate to the acquisition of depreciable capital assets are shown by addition to/deduction from the cost of the
assets as per exemption provided under IND AS 21 read along with Ind AS 101 appendix 'D' clause-D13AA.
2.7 Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily
takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the
respective asset. All other borrowing costs are recognized as expense in the period in which they occur.
Borrowing cost includes interest and other costs incurred in connection with the borrowing of funds and charged
to Statement of Profit & Loss on the basis of effective interest rate.
2.8 Inventories
a. Basis of valuation:
Inventories are valued at the lower of cost and net realisable value after providing cost of obsolescence, if
any.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
i) Raw materials: cost includes cost of purchase and other costs incurred in bringing the inventories to
their present location and condition. Cost is determined on first in, first out basis.
ii) 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 first in, first out basis.
iii) Traded goods: cost includes cost of purchase and other costs incurred in bringing the inventories to
their present location and condition. Cost is determined on weighted average basis.
Initial cost of inventories includes the transfer of gains and losses on qualifying cash flow hedges, recognised in
OCI, in respect of the purchases of raw materials.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of
completion and the estimated costs necessary to make the sale.
2.9 Cash and cash Equivalents
Cash and cash equivalents in the balance sheet comprise cash at banks and on hand and short-term deposits
with an original maturity of three months or less, that are readily convertible to a known amount of cash and
subject to insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash at banks and on hand
and short-term deposits, as defined above net of outstanding bank overdrafts as they are considered an integral
part of the Company's cash management.
2.10 Employees Benefits
i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly
within twelve months after the end of the period in which the employees render the related service are
recognized in respect of employee service upto the end of the reporting period and are measured at the
amount expected to be paid when the liabilities are settled. The liabilities are presented as current employee
benefit obligations in the balance sheet.
ii) Other long-term employee benefit obligations
a) Gratuity
The Employee's Gratuity Fund Scheme, which is defined benefit plan, is maintained with Life insurance
Corporation. The liabilities with respect to Gratuity Plan are determined by actuarial valuation on projected
unit credit method on the balance sheet date, based upon which the Company contributes to the Company
Gratuity Scheme. The difference, if any, between the actuarial valuation of the gratuity of employees at
the year end and the balance of funds is provided for as assets/ (liability) in the books. Net interest is
calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognizes
the following changes in the net defined benefit obligation under Employee benefit expense in statement of
profit or loss:
1. Service costs comprising current service costs, past-service costs, gains and losses on curtailments and
non-routine settlements.
2. Net interest expense or income.
Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts
included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts
included in net interest on the net defined benefit liability), are recognized immediately in the Balance Sheet
with a corresponding debit or credit to retained earnings through OCI in the period in which they occur.
Remeasurements are not reclassified to profit or loss in subsequent periods.
b) Provident fund
Retirement benefits in the form of Provident fund / Pension Schemes are defined contribution schemes
and the contributions are charged to the statement of profit and loss of the year when the contributions to
the respective funds become due. The Company has no obligation other than contribution payable to these
funds.
c) Compensated Absences
Accumulated leaves which are expected to be utilized within next 12 months are treated as short term
employee benefit. The Company measures the expected cost of such absences as the additional amount
that it expects to pay as a result of the unused entitlement and is discharged by the year end. The Company
recognizes expected cost of short-term employee benefit as an expense, when an employee renders the
related service.
The Company treats accumulated leaves to be carried forward beyond 12 months as long-term employee
benefits for measurement purpose, such long term compensated absence are provided for based on
actuarial valuation which is done as per projected unit credit method at year end. Actuarial gains/losses are
immediately taken to the statement of profit and loss and are not deferred. The obligations are presented as
current liabilities in the balance sheet if the entity does not have an unconditional right to defer the settlement
for at least twelve months after the reporting date.
2.11 Fair Value Measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The fair value measurement is based on the presumption
that the transaction to sell the asset or transfer the liability takes place either:
a) In the principal market for the asset or liability, or
b) In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company. 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.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate
economic benefits by using the asset in its highest and best use or by selling it to another market participant that
would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data
are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised
within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair
value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is
directly or indirectly observable.
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is
unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company
determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation
(based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each
reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets & liabilities on the
basis of the nature, characteristics and the risks of the asset or liability and the level of the fair value hierarchy as
explained above.
2.12 Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or
equity instrument of another entity.
i) Financial assets
The Company classified its financial assets in the following measurement categories:
• Those to be measured subsequently at fair value (either through OCI or through profit & loss).
• Those measured at amortized cost.
Initial recognition and measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value
through other comprehensive income (OCI), and fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset's contractual cash
flow characteristics and the Company's business model for managing them. With the exception of trade
receivables that do not contain a significant financing component or for which the Company has applied
the practical expedient, the Company initially measures a financial asset at its fair value plus, in the case
of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not
contain a significant financing component or for which the Company has applied the practical expedient are
measured at the transaction price determined under Ind AS 115. Refer to the accounting policies in 2.13
“Revenue from contracts with customers”.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it
needs to give rise to cash flows that are 'solely payments of principal and interest (SPPI)' on the principal
amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.
Financial assets with cash flows that are not SPPI are classified and measured at fair value through profit or
loss, irrespective of the business model.
The Company's business model for managing financial assets refers to how it manages its financial assets in
order to generate cash flows. The business model determines whether cash flows will result from collecting
contractual cash flows, selling the financial assets, or both. Financial assets classified and measured at
amortised cost are held within a business model with the objective to hold financial assets in order to collect
contractual cash flows while financial assets classified and measured at fair value through OCI are held
within a business model with the objective of both holding to collect contractual cash flows and selling.
Purchases or sales of financial assets that require delivery of assets within a time frame established by
regulation or convention in the marketplace (regular way trades) are recognised on the trade date, i.e., the
date that the Company commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
• Financial assets at amortised cost (debt instruments)
• Financial assets at fair value through other comprehensive income (FVTOCI) with recycling of cumulative
gains and losses (debt instruments)
• Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses
upon derecognition (equity instruments)
• Financial assets at fair value through profit or loss
The Company's financial assets are only classified as debt instruments at amortised cost.
Financial Assets at amortized cost (Debt instruments)
A ’’financial asset” is measured at the amortized cost if both the following conditions are met:
1) Business model test: The asset is held within a business model whose objective is to hold assets for
collecting contractual cash flows (rather than to sell the instrument prior to its contractual maturity to
release its fair value change), and
2) Cash flow characteristics test: Contractual terms of the asset give rise on specified dates to cash flows
that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortized cost using the
effective interest rate (EIR) method. Amortized 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. EIR is the rate that exactly
discount the estimated future cash receipts over the expected life of the financial instrument or a shorter
period, where appropriate to the gross carrying amount of financial assets. When calculating the effective
interest rate the company estimate the expected cash flow by considering all contractual terms of the financial
instruments. The EIR amortization is included in finance income in the profit or loss. The losses arising from
impairment are recognized in the profit or loss. This category generally applies to trade and other receivables.
Financial assets at FVTPL
Financial assets at fair value through profit or loss are carried in the balance sheet at fair value with net
changes in fair value recognised in the statement of profit and loss.
FVTPL is a residual category for financial instruments. Any financial instrument, which does not meet the
criteria for amortized cost or FVTOCI, is classified as at FVTPL. A gain or loss on a Debt instrument that is
subsequently measured at FVTPL and is not a part of a hedging relationship is recognized in statement of
profit or loss and presented net in the statement of profit and loss within other gains or losses in the period in
which it arises. Interest income from these Debt instruments is included in other income.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a Company of similar financial
assets) is primarily derecognized (i.e., removed from the Company's statement of financial position) when:
• the rights to receive cash flows from the asset have expired, or
• the Company has transferred its rights to receive cash flows from the asset or has assumed an obligation
to pay the received cash flows in full without material delay to a third party under a "pass through"
arrangement and either;
(a) the Company has transferred substantially all the risks and rewards of the asset, or
(b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset but
has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass¬
through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership.
When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor
transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the
Company's continuing involvement. In that case, the Company also recognises an associated liability. The
transferred assets and the associated liability are measured on a basis that reflects the rights and obligations
that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower
of the original carrying amount of the asset and the maximum amount of consideration that the Company
could be required to repay.
Impairment of financial assets
In accordance with IND AS 109, the Company applies expected credit losses (ECL) model for measurement
and recognition of impairment loss on the following financial asset and credit risk exposure.
- Financial assets measured at amortised cost, e.g., Loans, Security deposits, trade receivable, bank
balance, other financial assets etc.
The Company follows “simplified approach” for recognition of impairment loss allowance on trade receivables.
Under the simplified approach, the Company does not track changes in credit risk. Rather, it recognizes
impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure, ECLs are recognised in
two stages. For credit exposures for which there has not been a significant increase in credit risk since
initial recognition, ECLs are provided for credit losses that result from default events that are possible within
the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant
increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the
remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
There is no significant credit risk in relation to financial assets including trade receivables.
The Company considers a financial asset in default when contractual payments are 90 days past due.
However, in certain cases, the Company may also consider a financial asset to be in default when internal or
external information indicates that the Company is unlikely to receive the outstanding contractual amounts in
full before taking into account any credit enhancements held by the Company. A financial asset is written off
when there is no reasonable expectation of recovering the contractual cash flows.
Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial
recognition, no reclassification is made for financial assets which are equity instruments and financial
liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change
in the business model for managing those assets. Changes to the business model are expected to be
infrequent. The Company's senior management determines change in the business model as a result of
external or internal changes which are significant to the Company's operations. Such changes are evident
to external parties. A change in the business model occurs when the Company either begins or ceases to
perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies
the reclassification prospectively from the reclassification date which is the first day of the immediately next
reporting period following the change in business model. The Company does not restate any previously
recognized gains, losses (including impairment gains or losses) or interest.
ii) Financial liabilities
Initial recognition and measurement
Financial liabilities are classified at initial recognition as financial liabilities at fair value through profit or loss,
loans and borrowings, and payables, net of directly attributable transaction costs. The Company financial
liabilities include loans and borrowings including bank overdraft, trade payable, trade deposits, retention
money and other payables.
The measurement of financial liabilities depends on their classification, as described below:
Trade Payables
These amounts represent liabilities for goods and services provided to the Company prior to the end
of financial year which are unpaid. The amounts are unsecured and are usually paid within 90 days of
recognition. Trade and other payables are presented as current liabilities unless payment is not due within
12 months after the reporting period. They are recognised initially at fair value and subsequently measured
at amortised cost using EIR method.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial
liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are
classified as held for trading if they are incurred for the purpose of repurchasing in the near term. Gains or
losses on liabilities held for trading are recognised in the statement of profit and loss. Financial liabilities
designated upon initial recognition at fair value through profit or loss are designated as such at the initial date
of recognition, and only if the criteria in IND AS 109 are satisfied. For liabilities designated as FVTPL, fair
value gains/ losses attributable to changes in own credit risk are recognised in OCI. These gains/ losses are
not subsequently transferred to profit and loss. However, the Company may transfer the cumulative gain or
loss within equity. All other changes in fair value of such liability are recognised in the statement of profit or
loss. The Company has not designated any financial liability as at fair value through profit and loss.
Financial liabilities at amortized cost
Borrowings are initially recognised at fair value, net of transaction cost incurred. After initial recognition,
interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method.
Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the
EIR amortization process. 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 amortization is included as finance
costs in the statement of profit and loss.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different
terms, or the terms of an existing liability are substantially modified, such an exchange or modification is
treated as the derecognition of the original liability and the recognition of a new liability. The difference in the
respective carrying amounts is recognised in the statement of profit and loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset, and the net amount is reported in the balance sheet if there
is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a
net basis, to realize the assets and settle the liabilities simultaneously.
2.13 Revenue from contract with customer
Revenue from contracts with customers is recognised when control of the goods or services are transferred
to the customer at an amount that reflects the consideration to which the Company expects to be entitled in
exchange for those goods or services. The Company has generally concluded that it is the principal in its revenue
arrangements because it typically controls the goods or services before transferring them to the customer.
Sale of goods
Revenue from sale of goods is recognised at the point in time when control of the assets is transferred to the
customer, generally on delivery of the goods. The normal credit term is 30 to 60 days upon delivery.
The Company also considers whether there are other promises in the contract that are separate performance
obligations to which a portion of the transaction price needs to be allocated. In determining the transaction price
for the sale of goods, the Company considers the effects of variable consideration, the existence of significant
financing components, non-cash consideration, and consideration payable to the customer (if any).
i) Variable Consideration
If the consideration in a contract includes a variable amount, the Company estimates the amount of
consideration to which it will be entitled in exchange for transferring the goods to the customer. The variable
consideration is estimated at contract inception and constrained until it is highly probable that a significant
revenue reversal in the amount of cumulative revenue recognised will not occur when the associated
uncertainty with the variable consideration is subsequently resolved. The contracts for the sale of goods
provide price revision receivable from/payable to customers on account of change of commodity prices/
purchase price and these prices escalations and relaxations give rise to variable consideration. Contract
revenue includes price revision received/receivable from customers and similarly, price revision for material
purchased or payable to vendors has also been included in purchases.
ii) Significant financing component
Generally, the Company receives short-term advances from its customers. Using the practical expedient in
Ind AS 115, the Company does not adjust the promised amount of consideration for the effects of a significant
financing component if it expects, at contract inception, that the period between the transfer of the promised
good or service to the customer and when the customer pays for that good or service will be one year or less.
Contract balancesContract Assets
A contract asset is a right to consideration in exchange for goods or services transferred to the customers. If the
Company performs by transferring goods or services to a customer before the customer pays consideration or
before payment is due, a contract asset is recognized for the earned consideration that is conditional.
Trade receivables
A receivable represents the Company's right to an amount of consideration that is unconditional (i.e., only the
passage of time is required before payment of the consideration is due). Refer to accounting policies of financial
assets for further reference.
Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Company has
received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration
before the Company transfers goods or services to the customer, a contract liability is recognised when the
payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when
the Company performs under the contract.
Other revenue streams:
i) Interest Income
Interest income is recognised on a time proportion basis taking into account the amount outstanding and the
applicable interest rate. Interest income is included under the head “other income” in the statement of profit
and loss.
ii) Lease income
Rental income arising from operating leases on property let out by the Company is accounted for on a
straight-line basis over the lease terms and is included in other income in statement of profit and loss.
iii) Rendering of services
Revenue from service-related activities is recognised as and when services are rendered and on the basis
of contractual terms with the parties and is included in revenue in the statement of profit and loss under the
head other income.
2.14 TaxesCurrent income tax
Tax expense comprises current tax expense and deferred tax.
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to
the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or
substantively enacted, at the reporting date in the countries where the Company operates and generates taxable
income.
Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss (either
in other comprehensive income or in equity). Current tax items are recognised in correlation to the underlying
transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns
with respect to situations in which applicable tax regulations are subject to interpretation and considers whether
it is probable that a taxation authority will accept an uncertain tax treatment. The Company reflects the effect
of uncertainty for each uncertain tax treatment by using either most likely method or expected value method,
depending on which method predicts better resolution of the treatment.
Deferred Tax
Deferred tax is provided using the balance sheet approach on temporary differences between the tax base of
assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
- When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction
that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor
taxable profit or loss and does not give rise to equal taxable and deductible temporary differences;
- In respect of taxable temporary differences associated with investments in subsidiaries, associates and
interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and
it is probable that the temporary differences will not reverse in the foreseeable future
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax
credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable
profit will be available against which the deductible temporary differences, and the carry forward of unused tax
credits and unused tax losses can be utilised, except:
- When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition
of an asset or liability in a transaction that is not a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss and does not give rise to equal taxable and
deductible temporary differences;
- In respect of deductible temporary differences associated with investments in subsidiaries, associates and
interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the
temporary differences will reverse in the foreseeable future and taxable profit will be available against which
the temporary differences can be utilized.
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. 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 profits will allow the deferred tax asset to be recovered.
In assessing the recoverability of deferred tax assets, the Company relies on the same forecast assumptions
used elsewhere in the financial statements and in other management reports.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when
the asset is realised, or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other
comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction
either in OCI or directly in equity.
The Company offsets deferred tax assets and deferred tax liabilities if and only if it has a legally enforceable
right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities
relate to income taxes levied by the same taxation authority on either the same taxable entity which intends
either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities
simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected
to be settled or recovered.
Goods and Services Tax (GST) / value added taxes paid on acquisition of assets or on incurring expenses
Expenses and assets are recognised net of the amount of GST paid, except:
- When the tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in
which case, the tax paid is recognised as part of the cost of acquisition of the asset or as part of the expense
item, as applicable;
- When receivables and payables are stated with the amount of tax included
The net amount of tax recoverable from, or payable to, the taxation authority is included as part of other current
assets/ liabilities in the balance sheet.
2.15 Earnings Per Share
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity
shareholders by the weighted average number of equity shares outstanding during the period. The weighted
average number of equity shares outstanding during the period is adjusted for events such as bonus issue, bonus
element in a rights issue, share split, and reverse share split (consolidation of shares) that have changed the
number of equity shares outstanding, without a corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity
shareholders and the weighted average number of shares outstanding during the period are adjusted for the
effect of all potentially dilutive equity shares.
2.16 Events after the reporting period
If the Company receives information after the reporting period, but prior to the date of approval of financial
statements, about conditions that existed at the end of the reporting period, it will assess whether the information
affects the amounts that it recognises in its separate financial statements. The Company will adjust the amounts
recognised in its financial statements to reflect any adjusting events after the reporting period and update the
disclosures that relate to those conditions in light of the new information. For non-adjusting events after the
reporting period, the Company will not change the amounts recognised in its separate financial statements but
will disclose the nature of the non-adjusting event and an estimate of its financial effect, or a statement that such
an estimate cannot be made, if applicable.
|