D Material Accounting Policiesa. Property, Plant & Equipment(i) Recognition and Measurement
Property, plant and equipment is initially measured at cost net of tax credit availed less
accumulated depreciation and accumulated impairment losses, if any. The cost of an item of
property, plant and equipment comprises:
- its purchase price, including import duties and non-refundable purchase taxes, after
deducting trade discounts and rebates.
- any costs directly attributable to bringing the asset to the location and condition necessary
for it to be capable of operating in the manner intended by management.
If significant parts of an item of property, plant and equipment have different useful lives,
then they are accounted for as separate items (major components) of property, plant and
equipment.
Subsequent expenditure is capitalised only if it is probable that future economic benefits
associated with the expenditure will flow to the Company and the cost of the item can be
measured reliably.
When significant parts of Property, Plant and Equipment are required to be replaced, the
Company derecognises the replaced part and recognises the new part with its own associated
useful life and it is depreciated accordingly.
(ii) Depreciation
Depreciable amount for property, plant and equipment is the cost of property, plant and
equipment less its estimated residual value.
Depreciation is provided on Straight Line Method over the estimated useful lives of the
property, plant and equipment prescribed under Schedule II to the Companies Act, 2013 on
pro rata basis.
The estimated useful lives, residual values and depreciation methods are reviewed by the
management at each reporting date and adjusted if appropriate.
(iii) Disposal or Retirement
Property, plant and equipment are derecognised either on disposal or when no economic
benefits are expected from its use. The gain or loss arising from disposal of property, plant
and equipment are determined by comparing the proceeds from disposal with the carrying
amount of property, plant and equipment and recognised in the Statement of Profit and Loss
in the year of occurrence.
b. Capital Work In Progress
Capital work in progress includes the acquisition/commissioning cost of assets under expansion/
acquisition and pending commissioning. Expenditure of revenue nature related to such acquisition/
expansion is also treated as capital work in progress and capitalised along with the asset.
c. Leases
(i) As a lessee
The Company's lease assets primarily consist of land and buildings. The Company assesses
whether a contract contains a lease at the inception of the contract. Leases of assets (other
than short term leases or leases for which the underlying asset is of low value) are recognised
if the lease contract conveys the right to the Company to control the use of an identified asset
for a period of time in exchange for consideration. A contract conveys the right to control the
use of an identified asset for a period of time, if throughout the period of lease, the Company
has both of the following:
a) The right to obtain substantially all of the economic benefits from use of the identified
asset.
b) The right to direct the use of the identified asset.
At the date of commencement of lease, the Company recognises a Right-Of-Use asset and a
corresponding lease liability for all lease arrangements in which it is a lessee except for leases
for a term of twelve months or less (short term leases) and low value leases. For short term
leases and low value leases, the Company recognises the lease payments as an expense on
a straight-line basis over the lease term. Certain lease arrangements includes the options to
extend or terminate the lease before the end of the lease term. Right-of-use assets and lease
liabilities include these options when it is reasonably certain that they will be exercised.
The right-of-use asset is initially measured at cost, which comprises the initial amount of the
lease liability adjusted for any lease payments made at or before the commencement date,
plus any initial direct costs incurred. The right-of-use is subsequently depreciated using the
straight-line method from the commencement date to the the end of the lease term.
The lease liability is initially measured at the present value of the lease payments that are not
paid at the commencement date discounted using the the incremental borrowing rate in the
country of domicile of the leases. The lease liability is measured at amortised cost using the
effective interest method. It is remeasured when there is a change in future lease payments
or if Company changes its assessment of whether it will exercise a purchase, extension or
termination option. When the lease liability is remeasured, a corresponding adjustment is
made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the
carrying amount of the right-of-use asset has been reduced to zero.
Lease liability and Right Of Use asset have been separately presented in the Balance Sheet and
lease payments have been classified as financing cash flows.
As a lessor
The Company's lease assets primarily consist of buildings and plant & machinery.
Leases for which the Company is a lessor is classified either as a finance or operating lease.
Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the
lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
For operating leases, rent income is recognised as income on a straight line basis over lease
term unless the receipts are structured to increase in line with expected general inflation.
d. Intangible Assets(i) Initial RecognitionAcquired 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.
Internally generated intangible assets
Expenditure on research activities is recognised as expenses in the period in which it is incurred.
An internally generated intangible asset arising from development is recognised if, and only if,
all of the following conditions have been met:
a) It is technically feasible to complete the intangible asset so that it will be available for use
or sale.
b) There is an intention to complete the asset.
c) There is an ability to use or sell the asset.
d) The asset will generate future economic benefits.
e) Adequate resources are available to complete the development and to use or sell the
asset.
f) The expenditure attributable to the intangible asset during development phase can be
measured reliably.
Where no internally generated intangible asset can be recognised, the development expenditure
is recognised in the Statement of Profit and Loss in the period in which it is incurred.
(ii) Amortisation
Amortisation is calculated to write off the cost of intangible assets less their estimated residual
values using the Straight-Line Method over their estimated useful lives, and is recognised in
Statement of Profit and Loss.
Estimated useful lives by major class of intangible assets are as follows:
Software - 3 to 6 years
Technical know-how - 10 years"
(iii) Derecognition
An item of intangible asset is derecognised either on disposal or when no economic benefits are
expected from its use or disposal. The gain or loss arising from disposal of intangible assets are
determined by comparing the proceeds from disposal with the carrying amount of intangible
assets and recognised in the Statement of Profit and Loss in the period of occurrence.
e. Impairment of non-financial assets
At the end of each reporting period, the Company reviews the carrying amounts of its tangible
and intangible assets to determine whether there is any indication that the assets have suffered an
impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in
order to determine the extent of impairment loss (if any).
If the recoverable amount of asset is estimated to be less than its carrying amount, the carrying
amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an
expense in the Statement of Profit and Loss.
When an impairment loss subsequently reverses, the carrying amount of an asset is increased
to the revised estimate of its recoverable amount, so that the increased carrying amount does
not exceed the carrying amount that would have been determined had no impairment loss been
recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately
in the Statement of Profit and Loss.
f. Investment in Subsidiaries and Associate
Investment in equity shares of subsidiaries and associates over which the Company has
significant influence are recorded at cost less accumulated impairment, if any, and reviewed
for impairment at each reporting date. Investment in associates without significant influence
are classified as financial assets under Ind AS 109 and measured at Fair Value Through Profit
or Loss (FVTPL), with fair value changes recognised in the Statement of Profit and Loss.
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 subsidiaries and
associate, the difference between net disposal proceeds and the carrying amounts are recognized
in the Statement of Profit and Loss.
g. Financial Instruments
A financial instrument is a contract that gives rise to financial asset of one entity and financial
liability or equity instrument of another entity.
I. Financial Assets
Financial assets are recognised when the Company becomes a party to the contractual
provisions of the instrument.
(i) Initial recognition and measurement
All financial assets are recognized at fair value on initial recognition, except for trade
receivables which are initially measured at transaction price. Transaction costs that are
directly attributable to the acquisition of financial assets, which are not at fair value
through profit or loss, are added to the fair value on initial recognition.
(ii) Subsequent measurement and classification
For the purpose of subsequent measurement, the financial assets are classified into three
categories on the basis of its business model for managing the financial assets :
- Financial assets at amortised cost
- Financial assets at Fair Value through Other Comprehensive Income (FVTOCI)
- Financial assets at Fair Value through profit or loss (FVTPL)
(iii) Financial assets at amortised cost
A financial asset is subsequently measured at amortised cost if it is held within a business
model whose objective is to hold assets for collecting contractual cash flows and the
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 amortised
cost using the effective interest rate (EIR) method, less impairment, if any. The EIR
amortisation is included in other income in the Statement of Profit and Loss. The losses
arising from impairment are recognised in the Statement of Profit and Loss.
(iv) Financial asset at Fair Value Through Other Comprehensive Income (FVTOCI)
A financial asset is measured at Fair Value Through Other Comprehensive Income
(FVTOCI) if it 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.
Debt instruments included within the FVTOCI category are measured initially as well as
at each reporting date at fair value. Fair value movements are recognized in the other
comprehensive income (OCI).
Interest income measured using the EIR method and impairment losses, if any are
recognised in the Statement of Profit and Loss. On derecognition, cumulative gain or
loss previously recognised in OCI is reclassified from the equity to 'other income' in the
Statement of Profit and Loss.
(v) Financial asset at Fair Value Through Profit or Loss (FVTPL)
A financial asset which are not classified in any of the above categories are measured
at FVTPL. Such financial assets are measured at fair value with all changes in fair value,
including interest income and dividend income if any, recognised as 'other income' in the
Statement of Profit and Loss.
(vi) Financial assets as Equity Investments
All equity instruments other than investment in subsidiaries and associate over which the
company has significant influence are initially measured at fair value; the Company may,
on initial recognition, irrevocably elect to measure the same either at FVTOCI or FVTPL.
The Company makes such election on an instrument-by-instrument basis. A fair value
change on an equity instrument is recognised as other income in the Statement of
Profit and Loss unless the Company has elected to measure such instrument at FVTOCI.
Fair value changes excluding dividends, on an equity instrument measured at FVTOCI are
recognised in OCI. Amounts recognised in OCI are not subsequently reclassified to the
Statement of Profit and Loss. Dividend income on the investments in equity instruments
are recognised as 'other income' in the Statement of Profit and Loss.
(vii) Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a Company of
similar financial assets) is derecognised (i.e. removed from the Company's balance sheet)
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 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.
(viii) Impairment of financial assets
The Company recognizes loss allowance using the Expected Credit Loss (ECL) model for
financial assets which are not classified as fair value through profit and loss. Loss allowance
for trade receivables with no significant financing component is measured at an amount
equal to lifetime ECL. For all other financial assets, expected credit losses are measured
at an amount equal to the 12-month ECL, unless there has been a significant increase in
credit risk from initial recognition in which case those are measured at lifetime ECL.
For trade receivables only, the Company applies the simplified approach permitted by Ind
AS 109 Financial Instruments, which requires expected lifetime losses to be recognised
from initial recognition of the receivables. The application of simplified approach does not
require the Company to track changes in credit risk.
II. Financial Liabilities(i) Classification
The Company classifies all financial liabilities as subsequently measured at amortised cost
except hybrid instruments with embedded derivatives where the embedded derivative
cannot be measured separately either at inception or at the end of a subsequent reporting
financial period in which case it is measured at Fair Value through Profit or Loss. In case
the embedded derivatives can be separated, the same is measured at Fair Value Through
Profit or Loss and the host contract is measured at amortised cost.
(ii) Initial recognition and measurement
All financial liabilities are recognised initially at fair value and, in case of loans and
borrowings and payables, net of directly attributable transaction costs.
(iii) Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured
at amortised cost using the Effective Interest Rate (EIR) method. Amortised cost is
calculated by taking into account any discount or premium on acquisition and transactions
costs. The EIR amortisation is included as finance costs in the Statement of Profit and Loss.
Gains and losses are recognised in Statement of Profit and Loss when the liabilities are
derecognised.
(iv) Financial guarantee contracts
Financial guarantee contracts issued by a Company are initially measured at their fair
values and, if not designated as at FVTPL, are subsequently measured at the amount
initially recognised less cumulative amount of income recognised in accordance with Ind
AS.
(v) Compound financial instruments
Compound financial instruments issued by the Company which can be converted into
fixed number of equity shares at the option of the holders irrespective of changes in
the fair value of the instrument are accounted by separately recognising the liability and
the equity components. The liability component is initially recognised at the fair value
of a comparable liability that does not have an equity conversion option. The equity
component is initially recognised at the difference between the fair value of the compound
financial instrument as a whole and the fair value of the liability component. The directly
attributable transaction costs are allocated to the liability and the equity components
in proportion to their initial carrying amounts. Subsequent to initial recognition, if the
embedded derivative in the liability component of compound financial instrument can
be separated and measured, then the same is measured at fair value and designated as
FVTPL, while the remaining liability component is subsequently measured at amortised
cost using Effective Interest Rate method. The equity component of a compound financial
instrument is not remeasured subsequently.
(vi) 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.
III. Derivative financial instruments
The Company uses derivative financial instruments, such as forward currency contracts to
hedge its foreign currency risks. Such derivative financial instruments are initially recognised
at fair value on the date on which a derivative contract is entered into and are subsequently
re-measured at fair value. Derivatives are carried as financial assets when the fair value is
positive and as financial liabilities when the fair value is negative.
(i) Cash flow hedge
The Company classifies foreign exchange forward contracts that hedge foreign currency
risk associated with highly probable forecast transactions as cash flow hedge and measures
them at fair value. The effective portion of changes in the fair value of derivatives that are
designated and qualify as cash flow hedges is recognised in other comprehensive income
and accumulated under hedging reserve. The gain or loss relating to the ineffective portion
is recognised immediately in the profit or loss, and is included in the 'Other income/
expenses' line item. Amounts previously recognised in other comprehensive income and
accumulated in equity relating to effective portion (as described above) are reclassified to
the consolidated profit or loss in the periods when the hedged item affects consolidated
profit or loss, in the same line as the recognised hedged item. The effective portion of the
hedge is determined at the lower of the cumulative gain or loss on the hedging instrument
from inception of the hedge and the cumulative change in the fair value of the hedged item
from the inception of the hedge and the remaining gain or loss on the hedging instrument
is treated as ineffective portion. Hedge accounting is discontinued when the hedging
instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for
hedge accounting. When a forecast transaction is no longer expected to occur, the gain or
loss accumulated in equity is recognised in profit or loss.
(ii) Fair value hedge
Changes in fair value of the designated portion of derivatives that qualify as fair value
hedges are recognised in profit or loss immediately, together with any changes in the
fair value of the hedged asset or liability that are attributable to the hedged risk. Hedge
accounting is discontinued when the hedging instrument expires or is sold, terminated, or
exercised, or when it no longer qualifies for hedge accounting.
IV 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 recognised amounts and
there is an intention to settle on a net basis or to realize the assets and settle the liabilities
simultaneously.
V Incremental costs directly attributable to the issue of ordinary equity shares, are recognised as
a deduction from equity.
h. Inventories
Inventories are valued at lower of cost and net realizable value. Costs are computed on weighted
average basis and are net of GST credits.
Raw materials, packing materials and stores: Cost includes cost of purchase and other costs
incurred in bringing the inventories to the present location and condition.
Finished Goods and Work in Progress: In case of manufactured inventories and work in progress,
cost includes all costs of purchase, an appropriate share of production overheads based on the
normal operating capacity and other costs incurred in bringing the inventories to the present
location and condition.
Net Realizable Value: Net realizable value is the estimated selling price in the ordinary course of
business, less the estimated costs of completion and the estimated costs necessary to make the
sale.
i. Cash and Cash Equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank, cash on hand and short
term deposits with an original maturity of three months or less, which are subject to an insignificant
risk of changes in value.
For the purpose of the statement of cash flow, cash and cash equivalents consists of cash 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.
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