3. MATERIAL ACCOUNTING POLICIES
3.1 Presentation and disclosure of financial statements
All assets and liabilities have been classified as current and non-current as per Company's normal
operating cycle and other criteria set out in the division II of Schedule III of the Companies Act,
2013, for a Company whose financial statements are made in compliance with the Companies
(India Accounting Standards) Rules, 2015. Deferred tax liabilities are classified as non-current
liabilities.
Based on the nature of business and their realization in cash and cash equivalents, 12 months has
been considered by the Company for the purpose of current/non-current classification of assets
and liabilities.
3.2 Property, plant and equipment
i) Under the previous GAAP, property, plant and equipment were carried at historical cost less
depreciation and impairment losses, if any. On transition to Ind AS, the Company has availed
the optional exemption under Ind AS 101 and accordingly it has used the carrying value as at
the date of transition i.e. 1st April 2016 as the deemed cost of the property, plant & equipment
under Ind AS.
ii) Subsequent to transition date, property, plant and equipment are stated at cost of acquisition
less accumulated depreciation and accumulated impairment losses, if any. Cost of property,
plant and equipment includes non-refundable taxes and duties, borrowing cost directly
attributable to the qualifying asset and any directly attributable costs of bringing the asset to
its working condition for its intended use.
iii) Capital work-in-progress comprises of cost incurred on property, plant and equipment not yet
ready for their intended use at the Balance Sheet date. Advances paid towards the acquisition
of property, plant and equipment outstanding at each balance sheet date is classified as
capital advances under other non-current assets and the cost of assets not put to use before
such date are disclosed under 'Capital work-in-progress'.
3.3 Depreciation on property, plant and equipment
a) Depreciation on property, plant and equipment (other than freehold land and capital work in
progress) is provided on SLM over the useful life of the relevant assets net of residual value
whose life is in consonance with the life mentioned in Schedule II of the Companies Act, 2013.
b) In the case of assets purchased, sold or discarded during the year, depreciation on such
assets is calculated on pro-rata basis from the date of such addition or as the case may be,
upto the date on which such asset has been sold or discarded.
c) Depreciation on addition has been provided from the date of putting the assets into use.
3.4 Investment properties
Investment properties are measured at cost, including transaction costs.
3.5 Intangible assets
i) Under the previous GAAP, intangible Assets acquired separately are measured on initial
recognition at cost. Following initial recognition intangible assets are carried at cost less any
accumulated amortization. On transition to Ind AS, the Company has availed the optional
exemption under Ind AS 101 and accordingly it has used carrying value as at the date of
transition i.e. 1st April 2016 as the deemed cost of intangible assets under Ind AS.
ii) Subsequent to transition date, Intangible Assets acquired separately are measured on initial
recognition at cost. Following initial recognition intangible assets are carried at cost less any
accumulated amortization. Intangible assets are recognised only if it is probable that the
future economic benefits attributable to the asset will flow to the enterprise and the cost of
asset can be measured reliably.
3.6 Inventories
Inventories are measured at the lower of cost and net realisable value.
Costs incurred in bringing each product to it's present location and condition are accounted for as
follows:
i) Raw Materials, Packing Materials & Stores & Spares: Costs include cost of purchase and
other costs incurred in bringing the inventories to their present location and condition. Costs
is determined based on FIFO Basis.
ii) Finished Goods and Work in Progress: Costs include cost of purchase and other costs
incurred in bringing the inventories to their present location and condition. Costs is determined
based on FIFO basis.
Disclosure regarding change on cost formula:
During the year, the Company changed its method of inventory valuation from the Weighted
Average Method (WAM) to the First-In-First-Out (FIFO) method. The management believes
that the FIFO method results in more relevant and reliable presentation of the cost of inventories
and better reflects the current economic conditions affecting inventory turnover.
The change in accounting policy has been applied prospectively from April 1, 2024, as it was
impracticable to determine the retrospective impact on prior periods due to the unavailability of
detailed historical inventory records required to recalculate cost using the FIFO method.
Consequently, the carrying amounts of inventories in the comparative period have not been
restated. The impact of the change on the current year's financial statements has been appropriately
recognized. The management is further of view that impact of such change in earlier inventory
valuation is not material.
3.7 Cash and cash equivalents
Cash and cash equivalents include cash in hand, demand deposits with bank and other short¬
term (three months or less from the date of acquisition), highly liquid investments that are readily
convertible into cash and which are subject to an insignificant risk of changes in value.
3.8 Statement of cash flows
Cash flows are reported using the indirect method, whereby profit for the period is adjusted for the
effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating
cash receipts or payments and items of income or expenses associated with investing or financing
cash flows. The cash generated from/(used) in operating, investing and financing activities of the
Company are segregated.
3.9 Trade receivables
Trade receivables are carried at their transaction price, as they do not contain a significant financing
component and are repayable within a short credit period, generally not exceeding 90 days.
The Company has assessed that the time value of money impact is immaterial and accordingly
has not applied the effective interest rate method. Trade receivables are classified and measured
at amortized cost in accordance with Ind AS 109 - Financial Instruments. The Company uses the
simplified approach for impairment assessment, as permitted under Ind AS 109, whereby lifetime
expected credit losses are recognized based on historical loss experience and forward-looking
information.
3.10 Trade and other payables
These amounts represent liabilities for goods and services provided to the Company prior to the
end of the financial year which are unpaid. Trade and other payables are presented as current
liabilities unless payment is not due within 12 months from the reporting date. These are initially
recognized at transaction value and are measured subsequently at amortized cost. However, as the
time between recognition and settlement is short and the impact of discounting is immaterial, the
Company has not applied the effective interest rate method.
3.11 Investments and other financial assets
Classification and measurement:
The Company classifies its financial assets in the following measurement categories:
i) Those to be measured subsequently at fair value (either through other comprehensive
income or through profit or loss).
ii) Those measured at amortised cost.
iii) Those measured at carrying cost for equity instruments of subsidiary companies and joint
venture company. The classification depends on the business model of the Company for
managing financial assets and the contractual terms of the cash flows.
(i) Financial assets at amortised cost
A financial asset shall be measured at amortised cost 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 (SPPI) on the principal amount outstanding.
They are presented as current assets, except for those maturing later than 12 months after the
reporting date which are presented as non-current assets. Financial assets are measured initially
at fair value plus transaction costs and subsequently carried at amortized cost using the effective
interest method, less any impairment loss.
Trade receivables, security deposits, cash and cash equivalents, Loans given, employee and other
advances and eligible current and non-current assets are measured at Amortized Cost.
(ii) Equity instruments at FVTOCI
All equity instruments are measured at fair value. The Company subsequently measures all
investments in equity instruments other than subsidiary, joint venture and associate companies/
entities and joint operation at fair value. The Company has elected to present fair value gains and
losses on such equity investments in other comprehensive income and there is no subsequent
reclassification of these fair value gains and losses to the Standalone Statement of Profit and Loss.
Investments in subsidiary companies, associate companies and joint venture company are carried
at cost less accumulated impairment losses, if any. Where an indication of impairment exists, the
carrying amount of the investment is assessed and written down immediately to its recoverable
amount. On disposal of investments in subsidiary companies, associate companies and joint
venture company, the difference between net disposal proceeds and the carrying amounts are
recognised in the Standalone Statement of Profit and Loss.
3.12 Borrowings
Borrowings are initially recognized at fair value, net of transaction costs, and are subsequently
measured at amortized cost using the effective interest rate method.
3.13 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 and rendering of services
Revenue from the sale of products is recognised at the point in time when control is transferred
to the customer. Revenue is measured based on the transaction price, which is the consideration,
net of customer incentives, discounts, variable considerations, payments made to customers, other
similar charges, as specified in the contract with the customer. Additionally, revenue excludes taxes
collected from customers, which are subsequently remitted to governmental authorities.
Service income is recognised on rendering of services based on the agreements/arrangements
with the concerned parties.
The Company has determined that the revenues as disclosed in Note 28 are disaggregated into
categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows
are affected by economic factors.
Eligible export incentives are recognised in the year in which the conditions precedent are met and
there is no significant uncertainty about the collectability.
Other Income
Interest income in respect to all the Debt Instruments and deposits which are measured at cost or at
fair value through other comprehensive income, is recorded using effective interest rate (EIR). EIR
is the rate that exactly discounts the estimated future cash payments or receipts over the expected
life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount
of the financial asset or to the amortized cost of a financial liability. Interest Income is included in
Other Income in the statement of profit and loss.
3.14 Foreign currency transactions
Transactions denominated in foreign currencies are recorded at the exchange rates prevailing on
the date of the transaction. As at the Balance Sheet date, foreign currency monetary assets and
liabilities are translated at closing exchange rate. The gains or losses resulting from such translations
are included in net profit in the Statement of Profit and Loss.
Non-monetary assets and non-monetary liabilities denominated in a foreign currency and
measured at fair value are translated at the exchange rate prevalent at the date when the fair value
was determined. Non-monetary assets and non-monetary liabilities denominated in a foreign
currency and measured at historical cost are translated at the exchange rate prevalent at the date
of the transaction.
Transaction gains or losses realized upon settlement of foreign currency transactions are included
in determining net profit for the period in which the transaction is settled. Revenue, expense
and cash flow items denominated in foreign currencies are translated into the relevant functional
currencies using the exchange rate in effect on the date of the transaction.
3.15 Employee Benefits
(i) Short-term employee benefits
Short Term employee benefits payable within 12 months of service such as salaries, wages, bonus,
ex-gratia, medical benefits, etc, are recognised in the year in which the employees render the
related service and are presented as current employee benefit obligations. Termination benefits are
recognised as an expense as and when incurred.
(ii) Post-employment obligations
(a) Defined benefit plan
(A) Gratuity
Gratuity liability is a defined benefit obligation and is computed on the basis of an actuarial valuation
by an actuary appointed for the purpose as per projected unit credit method at the end of each
financial year. The liability recognised in the Standalone Balance Sheet in respect of defined benefit
gratuity plans is the present value of the defined benefit obligation at the end of the reporting
period. There is no plan assets created by the company against this defined benefit obligation.
The present value of the defined benefit obligation is determined by discounting the estimated
future cash outflows with reference to market yields at the end of the reporting period on
government bonds that have terms approximating to the terms of the related obligation
The interest cost is calculated by applying the discount rate at the beginning of the period to the
balance of the defined benefit obligation. This cost is included in employee benefit expense in the
Standalone Statement of Profit and Loss.
Reasurement gains and losses arising from experience adjustments and changes in actuarial
assumptions are recognised in the period in which they occur directly in other comprehensive
income. They are included in retained earnings in the Statement of changes in equity and in the
Standalone Balance Sheet.
The defined benefit obligation was not recognized until current year. Hence, obligation pertaining
to preceding year has been recognized in Retained earnings as Prior Period item in Statement of
Changes in Equity.
(b) Defined Contribution plan
The contributions to defined contribution schemes such as contribution to provident fund and
employees state insurance scheme are charged as an expense to the Standalone Statement of
Profit and Loss based on the amount of contribution required to be made as and when services
are rendered by the employees. The above benefits are classified as defined contribution schemes
as the Company has no further defined obligations beyond the monthly contributions.
3.16 Borrowing Cost
Borrowing Costs that are attributable to the acquisition, construction or production of qualifying
assets are capitalized as part of Cost of such assets. A qualifying asset is one that necessarily takes
a substantial period of time to get ready for its intended use. All other borrowing costs are charged
the Statement of Profit & Loss.
3.17 Taxes on income
Tax expenses for the year comprises of current tax, deferred tax charge or credit and adjustments
of taxes for earlier years. In respect of amounts adjusted outside profit or loss (i.e. in other
comprehensive income or equity), the corresponding tax effect, if any, is also adjusted outside
profit or loss.
Provision for current tax is made as per the provisions of Income Tax Act, 1961.
Deferred tax is provided using the liability method on temporary differences between the tax bases
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, and deferred tax assets
are recognised for all deductible temporary differences, carry forward tax losses and allowances
to the extent that it is probable that future taxable profits will be available against which those
deductible temporary differences, carry forward tax losses and allowances can be utilised. Deferred
tax assets and liabilities are measured at the tax rates that are expected to apply in the year when
the asset is realized 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 assets and deferred tax
liabilities are offset, if a legally enforceable right exists to set off current tax assets against current
tax liabilities and the deferred taxes relate to the same taxation authority.
3.18 Goods & Services Tax (GST)
GST credit received on purchases is reduced from respective item of purchases. GST on Sales is
credited to Payable account and differential amount, if any, is paid. Thus, the company has followed
exclusive method of accounting whereby purchases, sales and stock is shown exclusive of GST and
accounted for in separate Account.
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