3. SIGNIFICANT ACCOUNTING POLICIES
3.1 Revenue Recognition & Other Income
• Revenue is recognized upon transfer of control of the products to customers at a point in time i.e. when the products are
delivered to the carrier in an amount that reflects the consideration that the company expects to receive in exchange for
those products
• Dividend is recognized at the time of receipt.
• Interest income is accrued on a time proportion basis, by reference to the principal outstanding and effective interest rate
applicable.
• Interest subsidy and Electricity duty are accounted for on the basis of receipts or where there is reasonable assurance that
the Company will comply with the conditions attaching to them and that the subsidies will be received or when actually
received by the Company. Subsidies from the Government are recognized in profit or loss on a systematic basis over the
periods in which the Company recognizes as expenses the related costs for which the subsidies are intended to compensate.
3.2 Property, Plant, Equipment (PPE) and Intangible Assets:
The Company has elected to continue with the carrying value of Property, Plant and Equipment ('PPE') recognized as of
transition date measured as per the Previous GAAP and use that carrying value as its deemed cost of the PPE as on the
transition date.
Property, Plant, Equipment and Intangible Assets (Fixed Assets) are stated at cost, net of accumulated depreciation and
impairment losses if any. The cost comprises purchase price, borrowing cost capitalization if criteria and met and directly
attribute cost of bringing attributable cost of bringing the assets to its working condition for the intended use. Any trade
discounts and rebates are deducted in arriving at the purchase price.
Subsequent expenditure related to an item of fixed assets is added to its book value only if it increased the future benefits
from the existing asset beyond its previously assessed standard of performance. All other expenses on existing Property,
Plant, Equipment and Intangible Assets, including day to day repair and maintenance expenditure and cost of replacing
parts, are charged to statement of profit and loss for the period during which such expenses are incurred.
The Company adjusts exchange difference arising on transaction of long-term foreign currency monetary items pertaining
to the acquisition of a depreciable asset to the cost of the assets and depreciates the same over the remaining life of
project.
An item of property, plant and equipment is derecognized upon the disposal or when no future benefits are expected
from its use or disposal. Gains and losses on disposal of an item of property, plant and equipment are determined by
comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognized
net within other income / expenses in the statement of profit and loss.
Property, Plant and Equipment (Fixed Assets) under installation or under construction as at Balance Sheet are shown as
Capital Work in Progress.
3.3 Depreciation
The depreciable amount of an asset is determined after deducting its residual value. Where the residual value of an asset
increases to an amount equal to or greater than the asset's carrying amount, no depreciation charge is recognized till the
asset's residual value decreases below the asset's carrying amount. Depreciation of an asset begins when it is available
for use, i.e., when it is in the location and condition necessary for it to be capable of operating in the intended manner.
Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale in accordance with
IND AS 105 and the date that the asset is derecognized. The estimated useful lives of assets are as follows:
Impairments of non-financial assets:
The Company assesses at each balance sheet date whether there is any indication that an asset or cash generating unit
(CGU) may be impaired. Indefinite life intangibles are subject to a review for impairment annually or more frequently if
events or circumstances indicate that it is necessary. If any such indication exists, the Company estimates the recoverable
amount of the asset. The recoverable amount is the higher of an asset's or CGU's fair value less costs of disposal or its
value in use. Where 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 the 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
the fair value less costs of disposal, recent market transactions are considered. An impairment loss is recognized if the
carrying amount of an asset or CGU exceeds its recoverable amount, Impairment losses are recognized in the statement
of profit and loss.
If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, an
impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that
would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
3.4 Employee Benefits
(i) Short term employee benefits:
All employee benefits payable wholly within twelve months of rendering the service are classified as short-term employee
benefits. Undiscounted value of benefits such as salaries, incentives, allowances and bonus are recognized in the period
in which the employee renders the related service.
(ii) Long term benefits:
Defined Contribution Plans:
The Company contributes to the employee's approved provident fund scheme. The Company's contribution paid/payable
under the scheme is recognized as an expense in the statement of profit and loss during the period in which the employee
renders the related services.
Defined Benefit Plans:
Gratuity Liability is a defined benefit obligation and is provided on the basis of an actuarial valuation model made at the
end of the Financial Year. Contributions to such fund is charged to Profit & Loss Account. Actuarial Valuation of the
Gratuity is done at the end of the Financial Year and accounted for accordingly.
3.5 Inventories
Inventories consist of raw materials and finished goods. Raw material is valued at cost. Finished goods are valued at lower
of cost and net realizable value (NRV).
Cost of raw materials includes cost of purchases and other costs incurred in bringing the inventories to their present
location and condition.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion
and estimated costs necessary to make the sale. 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 used are expected to be sold
at or above cost.
3.6 Borrowing Cost
The total borrowing cost on the acquisition of fixed assets, if pertaining to the period up to the date on which the said
fixed assets have been put-to-use, has been capitalized in the respective fixed assets and the cost for the period after the
said fixed assets have been put-to-use has been debited to the Profit and Loss Account.
3.7 Investments
Investments, which are readily realizable and intended to be held for not more than one year from the date one which
such investments are made, are classified as current investments. All other investments are classified as long-term
investments.
On initial recognition, all investments are measured at cost. The cost comprises the purchase price and directly attributable
acquisition charges such as brokerage, fees and duties.
Current investments are carried at the lower of cost and fair value determined on an individual investment basis. Long¬
term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than
temporary in the value of such long-term investments.
On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited
to the statement of profit and loss.
3.8 Cash Flows and Cash and cash equivalent
Statement of cash flows is prepared in accordance with the indirect method prescribed in the relevant IND AS. For the
purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, cheques and
drafts on hand, deposits held with Banks, other short-term, highly liquid investments with original maturities of three
months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of
changes in value, and book overdrafts. However, Book overdrafts are to be shown within borrowings in current liabilities
in the balance sheet for the purpose of presentation.
3.9 Financial Assets:
A. Fair Value Assessment:
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, regardless of whether that price is directly observable or estimated
using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into
account the characteristics of asset and liability if market participants would take those into consideration. Fair value
for measurement and / or disclosure purposes in these Financial Statements is determined in such basis except for
transactions in the scope of Ind AS - 2, 17 and 36. Normally at initial recognition, the transaction price is the best evidence
of fair value.
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 those are appropriate in the circumstances and for which sufficient data are
available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable
inputs.
All financial assets and financial liabilities for which fair value is measured or disclosed in the Financial Statements are
categorized 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.
B. Subsequent Measurement:
For purposes of subsequent measurement financial assets are classified in three categories:
• Financial assets measured at amortized cost
• Financial assets at fair value through OCI
• Financial assets at fair value through profit or loss
C. Financial assets measured at amortized cost:
Financial assets are measured at amortized cost if the financials asset is held within a business model whose objective
is to hold financial assets in order to collect contractual cash flows and the contractual terms of the financial asset give
rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
These financials assets are amortized using the effective interest rate ('EIR') method, less impairment. 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. The EIR amortization is included in finance income in the Statement of Profit And Loss. The losses arising from
impairment are recognized in the Statement of Profit And Loss.
D. Financial assets at fair value through OCI ('FVTOCI'):
Financial assets are measured at fair value through other comprehensive income if the financial asset is held within a
business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the
contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding. At initial recognition, an irrevocable election is made (on an instrument-by¬
instrument basis) to designate investments in equity instruments other than held for trading purpose at FVTOCI. Fair value
changes are recognized in the other comprehensive income ('OCI'). However, the Company recognizes interest income,
impairment losses and reversals and foreign exchange gain or loss in the Statement of Profit And Loss. On de-recognition
of the financial asset other than equity instruments designated as FVTOCI, cumulative gain or loss previously recognized
in OCI is reclassified to the Statement of Profit and Loss.
E. Financial assets at fair value through profit or loss ('FVTPL'):
Any financial asset that does not meet the criteria for classification as at amortized cost or as financial assets at fair value
through other comprehensive income is classified as financial assets at fair value through profit or loss. Further, financial
assets at fair value through profit or loss also include financial assets held for trading and financial assets designated upon
initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired
for the purpose of selling or repurchasing in the near term. Financial assets at fair value through profit or loss are fair
valued at each reporting date with all the changes recognized in the Statement of Profit And Loss.
F. De-recognition:
The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or
when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.
If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control
the financial asset, the Company recognizes its retained interest in the asset and an associated liability for amounts it may
have to pay.
G. Impairment of Financial Assets:
The Company assesses impairment based on expected credit loss ('ECL') model on the following:
• Financial assets that are measured at amortized cost; and
• Financial assets measured at FVTOCI
ECL is measured through a loss allowance on a following basis:
• The 12 month expected credit losses (expected credit losses that result from those default events on the financial
instruments that are possible within 12 months after the reporting date)
• Full life time expected credit losses (expected credit losses that result from all possible default events over the life
of financial instruments)
3.10 Financial Liabilities:
The Company's financial liabilities include trade payable.
A. Initial recognition and measurement:
All financial liabilities at initial recognition are classified as financial liabilities at amortized cost or financial liabilities
at fair value through profit or loss, as appropriate. All financial liabilities classified at amortized cost are recognized
initially at fair value net of directly attributable transaction costs. Any difference between the proceeds (net of
transaction costs) and the fair value at initial recognition is recognized in the Statement of Profit And Loss.
B. Subsequent measurement:
The subsequent measurement of financial liabilities depends upon the classification as described below:-
• Financial Liabilities classified as Amortized Cost:
Financial Liabilities that are not held for trading and are not designated as at FVTPL are measured at
amortized cost at the end of subsequent accounting periods. 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.
Interest expense that is not capitalized as part of costs of assets is included as Finance costs in the Statement
of Profit And Loss.
• Financial Liabilities classified as Fair value through profit And loss (FVTPL):
Financial liabilities classified as FVTPL includes financial liabilities held for trading and financial liabilities
designated upon initial recognition as FVTPL. Financial liabilities are classified as held for trading if they are
incurred for the purpose of repurchasing in the near term. Financial liabilities designated upon initial
recognition at FVTPL only if the criteria in Ind AS 109 is satisfied.
Exports benefits are accounted for in the year of exports based on the eligibility and when there is certainty
of receiving the same.
C. De-recognition:
A financial liability is de-recognized when the obligation under the liability is discharged / cancelled / expired.
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
de recognition of the original liability and the recognition of a new liability. The difference in the respective
carrying amounts is recognized in the Statement of Profit and Loss.
D. 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.
Other incomes, other than interest and dividend are recognized when the same are due to be received and right
to receive such other income is established.
3.11 Foreign Currency Transactions
a. Initial Recognition
On initial recognition, transactions in foreign currencies are recorded in the functional currency (i.e., Indian Rupee), by
applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency
at the date of the transaction.
b. Measurement of foreign currency items at reporting date
Foreign currency monetary items are translated at the closing exchange rates. Non-monetary items that are measured at
historical cost in a foreign currency, are translated using the exchange rate at the date of the transaction. Non-monetary
items that are measured at fair value in a foreign currency, are translated using the exchange rates at the date when the
fair value is measured.
c. Recognition of exchange difference
Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from
those at which they were translated on initial recognition during the period or in previous financial statements is recognized
in profit or loss in the period in which they arise.
3.12. Taxation
i) Current Tax is determined as the amount of tax payable u/s 115 BAB in respect of Book Profit of the financial year.
ii) Deferred tax on account of timing differences, being the difference between taxable income and accounting income that
originate in one period and are capable of reversal in one or more subsequent periods, is provided using the tax rates
and tax laws enacted or substantially enacted by the Balance sheet date.
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