3. Summary of Significant Accounting Policies
The accounting policies set out below have been applied consistently to all periods presented in the financial
statements unless otherwise stated
i. Current / non-current classification
The Company presents assets and liabilities in the balance sheet based on current and non-current
classification. An asset is treated as current when it is:
a) expected to be realised or intended to be sold or consumed in normal operating cycle;
b) held primarily for the purpose of trading;
c) expected to be realised within twelve months after the reporting period; or
d) cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least
twelve months after the reporting period.
All other assets are classified as non-current.
A liability is treated as current when it is:
a) expected to be settled in normal operating cycle;
b) held primarily for the purpose of trading;
c) due to be settled within twelve months after the reporting period; or
d) there is no unconditional right to defer the settlement of the liability for at least twelve months after
the reporting period.
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets/materials for processing and their realisation
in cash and cash equivalents. As the Company's normal operating cycle is not clearly identifiable, it is
assumed to be twelve months.
ii. 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:
a) Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
b) Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable;
and
c) Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable.
iii. Property, Plant and Equipment (PPE)
Property, plant and equipment are carried at cost less accumulated depreciation and impairment losses, if
any. The cost of Property, plant and equipment comprises its purchase price net of any trade discounts and
rebates, any import duties and other taxes (other than those subsequently recoverable from the tax authorities).
Pre-operative expenditure comprising of revenue expenses incurred in connection with project implementation
during the period upto commencement of commercial production are treated as part of the project costs and
are capitalized. Such expenses are capitalized only if the project to which they relate, involve substantial
expansion of capacity or upgradation.
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits
are expected to arise from its use. Difference between the sales proceeds and the carrying amount of the
asset is recognized in statement of profit and loss.
Freehold land is carried at historical cost and not depreciated.
Depreciation on all fixed assets is provided on Streight line Method as per the useful life prescribed in
Schedule II to the Companies Act, 2013. Depreciation on Property, plant and equipment purchased/acquired
during the year is provided on pro-rata basis according to the period each asset was put to use during the
year. Similarly, depreciation on assets sold/discarded/demolished during the year is provided on pro-rata
basis
The Company assesses at each reporting date using external and internal sources, whether there is an
indication that an asset may be impaired. An impairment occurs where the carrying value exceeds the
present value of future cash flows expected to arise from the continuing use of the asset and its eventual
disposal. The impairment loss to be expensed is determined as the excess of the carrying amount over the
higher of the asset's net sales price or present value as determined above.
iv. Intangible assets
Intangible assets acquired separately are measured, on initial recognition, at cost. Following the initial
recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated
impairment losses.
The amortisation expense on intangible assets is recognised in the statement of profit and loss.
Intangible assets are derecognised either when they have been disposed off or when they are permanently
withdrawn from use and no future economic benefit is expected from their disposal. The difference between
the net disposal proceeds and the carrying amount of the asset is recognised in profit and loss in the period
of derecognition.
The company has elected to measure all its intangible assets and investment property at the previous GAAP
carrying amount as its deemed cost on the date of transition to Ind AS.
v. Impairment of non-financial assets
The Company assesses, at each reporting date, whether there is any 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 or its value in use. 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 groups of assets. When the carrying amount of an 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 no such transactions can be identified, an appropriate valuation model is used. These calculations
are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available
fair value indicators. The Company bases its impairment calculation on detailed budgets and forecast
calculations.
Impairment losses are recognised in the statement of profit and loss.
An assessment is made at each reporting date to determine whether there is an indication that previously
recognised impairment losses on assets no longer exist or have decreased. If such indication exists, the
Company estimates the asset's or CGU's recoverable amount. A previously recognised 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 recognised. 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 recognised for the asset in prior years. Such
reversal is recognised in the statement of profit and loss.
vi. Inventories
Inventories are valued at lower of cost and net realisable value. However, materials and other items held
for use in the production of inventories are not written down below cost if the finished products in which
they will be incorporated are expected to be sold at or above cost. Cost is determined on a First in First
out (FIFO) . Cost includes cost of conversion and other costs incurred in bringing the inventories to their
present location and condition. Obsolete, slow moving and defective inventories are identified and provided
for.
Net Realizable value is the estimated selling price in the ordinary course of business, less estimated cost
of completion and estimated costs necessary to make sale.
vii. Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at banks and on hand and term deposits
with an original maturity of three months or less, which are subject to an insignificant risk of changes in
value.
viii. Finance Cost
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 capitalised as part of the
cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs
consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
ix. Revenue Recognition
Revenue is recognised to the extent it is probable that the economic benefits will flow to the Company and
the revenue can be reliably measured,regardlessofwhenthepayment is being made. Revenue is measured
at the fair 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. The Company has
concluded that it is the principal in all of its revenue arrangements since it is the primary obligor in all the
revenue arrangements as it has pricing latitude and is also exposed to inventory and credit risks.
Based on Ind AS 18 issued by the ICAI, the Company has assumed that recovery of excise duty flows to
the Company on its own account. This is for the reason that it is a liability of the manufacturer which forms
part of the cost of production, irrespective of whether the goods are sold or not. Since the recovery of excise
duty flows to the Company on its own account, revenue includes excise duty.
However, sales tax/ value added tax (VAT)/Goods and Service Tax (GST) is not received by the Company
on its own account. Rather, it is tax collected on value added to the commodity by the seller on behalf of
the government. Accordingly, it is excluded from revenue.
The specific recognition criteria described below must also be met before revenue is recognised.
Sale of products
Revenue from the sale of products is recognised when the significant risks and rewards of ownership of the
products have passed to the buyer, usually on delivery of the products. Revenue from the sale of products
is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade
discounts and volume rebates.
Interest Income
For all financial assets measured either at amortised cost or at fair value through other comprehensive
income, interest income is recorded using the 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 amortised
cost of a financial liability. When calculating the effective interest rate, the Company estimates the expected
cash flows by considering all the contractual terms of the financial instrument but does not consider the
expected credit losses.
x. Employee Benefit Expenses
Short Term Employee Benefits
The undiscounted amount of short term employee benefits expected to be paid in exchange for the services
rendered by employees are recognised as an expense during the period when the employees render the
services.
Post- Employment Benefits
Defined Contribution Plans
The Company recognizes contribution payable to the provident fund scheme as an expense, when an
employee renders the related services.
The gratuity liability is paid in terms of insurance premium and the company does not have any liability once
the contribution in tems of premium is paid.
xi. Foreign currencies
The Company's standalone financial statements are prepared in Indian Rupee which is also Company's
functional currency.
Transactions and balances
Transactions denominated in foreign currencies are recorded at the exchange rate prevailing at the time of
the transaction, i.e. spot rate.
Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate at
the reporting date.
Exchange differences arising on settlement or translation of monetary items are recognised in the statement
of profit and loss.
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.
xii. Taxes on Income
Tax on Income comprises current and deferred tax. It is recognised in statement of profit and loss except
to the extent that it relates to a business combination, or items recognised directly in equity or in other
comprehensive income.
Current tax
Tax on income for the current period is determined on the basis on estimated taxable income and tax credits
computed in accordance with the provisions of the relevant tax laws and based on the expected outcome
of assessments / appeals. 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. Management periodically
evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations
are subject to interpretation and establishes provisions where appropriate.
Deferred tax
Deferred tax is recognized for the future tax consequences of deductible temporary differences between the
carrying values of assets and liabilities and their respective tax bases at the reporting date, using the tax
rates and laws that are enacted or substantively enacted as on reporting date. Deferred tax liability are
generally recorded for all temporary timing differences. Deferred tax assets are recognized to the extent that
it is probable that future taxable income will be available against which the deductible temporary differences
can be utilised. Deferred tax relating to items recognized outside the statement of profit and loss is
recognized outside the statement of profit and loss, either in other comprehensive income or directly in
equity. The carrying amount of deferred tax assets is reviewed at each reporting date.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period
in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been
enacted or substantively enacted by the end of the reporting period.
The Company recognizes tax credits in the nature of MAT credit as an asset only to the extent that there
is convincing evidence that the Company will pay normal income tax during the specified period, i.e., the
period for which tax credit is allowed to be carried forward. In the year in which the Company recognizes
tax credits as an asset, the said asset is created by way of tax credit to the Statement of profit and loss.
The Company reviews such tax credit asset at each reporting date and writes down the asset to the extent
the Company does not have convincing evidence that it will pay normal tax during the specified period.
Deferred tax includes MAT tax credit.
xiii. Dividend distribution
The Company recognises a liability to make cash distributions to equity holders of the parent when the
distribution is authorised and the distribution is no longer at the discretion of the Company. As per the
corporate laws in India, a distribution is authorised when it is approved by the shareholders. A corresponding
amount is recognised directly in equity.
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