2 SUMMARY OF MATERIAL ACCOUNTING POLICY
INFORMATION2.01 Basis of preparation
The financial statements of the Company have been prepared
in accordance with Indian Accounting Standards (Ind AS) as
defined in Rule 2(1)(a) of the Companies (Indian Accounting
Standards) Rules, 2015 and as amended from time to time
and presentation requirements of division II of schedule III of
the Companies Act, 2013 (Ind AS compliant schedule III) and
relevant amendment rules issued thereafter, prescribed under
Section 133 of the Companies Act, 2013 (Ind AS compliant
schedule III).
2.02 Overall consideration
These financial statements have been prepared on going
concern basis using the material accounting policy information
and measurement basis summarised below:
These accounting policies have been used throughout all
periods presented in financial statements."
2.03 Basis of measurement
The financial statements are prepared on Historical Cost
basis except financial assets and liabilities that are measured
at fair value (Refer accounting policy regarding Financial
Instruments). The accounting policies not specifically referred
to otherwise, are consistent and in consonance with generally
accepted accounting principles. All income and expenditure
are being accounted for on accrual basis.
Historical cost is generally based on the fair value of the
consideration given in exchange for goods and services.
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.
2.04 Functional and presentation currency
These financial statements are presented in Indian Rupees
('), which is the Company's functional currency. All financial
information presented in ' have been rounded off to nearest
lakhs as per requirements of schedule III of Companies Act,
2013 except when otherwise indicated.
2.05 Use of estimates and judgements
The preparation of financial statements in conformity with Ind
AS, management is required to make estimates, judgements
and assumptions that affect the reported amount of assets
and liabilities and the disclosure of contingent liabilities at
the date of the financial statements and reported amount of
revenues and expenses during the reporting period. Actual
results could differ from those estimates. Estimates and
underlying assumption are renewed at each balance sheet
date. Any revision to accounting estimates is recognized in
the period in which the same is determined.
2.06 Critical accounting judgements, estimates and
assumptions
The preparation of the Company's financial statements under
IND AS requires management to make judgments, estimates
and assumptions that affect the reported amounts of revenues,
expenses, assets and liabilities and the related disclosures
and the disclosure of contingent liabilities. Uncertainty about
these assumptions and estimates could result in outcomes
that require a material adjustment to the carrying amount of
assets or liabilities affected in future periods.
Judgements
In the process of applying the Company's accounting policies,
management has made the following judgements, which have
the most significant effect on the amounts recognised in the
financial statements:
(i) Leases
The Company determines the lease term as the non¬
cancellable term of the lease, together with any periods
covered by an option to extend the lease if it is reasonably
certain to be exercised, or any periods covered by an
option to terminate the lease, if it is reasonably certain
not to be exercised.
The Company has several lease contracts that include
extension and termination options. The Company
applies judgement in evaluating whether it is reasonably
certain whether or not to exercise the option to renew or
terminate the lease. That is, it considers all relevant factors
that create an economic incentive for it to exercise either
the renewal or termination. After the commencement
date, the Company reassesses the lease term if there
is a significant event or change in circumstances that is
within its control and affects its ability to exercise or not to
exercise the option to renew or to terminate (e.g., leasehold
improvements or costs relating to the termination of the
lease, and the importance of the underlying asset to
Company's operations taking into account the location
of the underlying asset and the availability of suitable
alternatives).
Further, the Company has exercised its judgement in
using a single discount rate to a portfolio of leases with
reasonably similar characteristics."
(ii) Contingencies
Contingent liabilities may arise from the ordinary course
of business in relation to claims against the Company,
including legal, contractor, land access and other claims.
By their nature, contingencies will be resolved only when
one or more uncertain future events occur or fail to occur.
The assessment of the existence, and potential quantum,
of contingencies inherently involves the exercise of
significant judgments and the use of estimates regarding
the outcome of future events.
(iii) Recognition of deferred tax assets
The extent to which deferred tax assets can be recognised
is based on an assessment of the probability that
future taxable income will be available against which
the deductible temporary differences can be utilised. In
addition, significant judgement is required in assessing
the impact of any legal or economic limits or uncertainties
in various tax jurisdictions.
Estimates and assumptions
The key assumptions concerning the future and other
key sources of estimation uncertainty at the reporting
date, that have a significant risk of causing a material
adjustment to the carrying amounts of assets and
liabilities within the next financial year, are described
below. The Company based its assumptions and estimates
on parameters available when these financial statements
were prepared. Existing circumstances and assumptions
about future developments, however, may change due to
market changes or circumstances arising that are beyond
the control of the Company. Such changes are reflected in
the assumptions as and when they occur.
(i) Estimation of defined benefit obligation
The cost of the defined benefit plan and other post¬
employment benefits and the present value of such
obligation are determined using actuarial valuations.
An actuarial valuation involves making various
assumptions that may differ from actual developments
in the future. These include the determination of the
discount rate, future salary increases, mortality rates
and attrition rate. Due to the complexities involved
in the valuation and its long-term nature, a defined
benefit obligation is highly sensitive to changes in
these assumptions. All assumptions are reviewed at
each reporting date.
(ii) Useful lives of depreciable/amortizable assets
Management reviews its estimate of the useful lives
of depreciable/amortizable assets at each reporting
date, based on the expected utility of the assets.
Uncertainties in these estimates relate to technical
and economic obsolescence that may change the
utility of certain property, plant and equipment.
(iii) Impairment of trade receivables
Trade receivables do not carry any interest and
are stated at their normal value as reduced by
appropriate allowances for estimated irrecoverable
amounts. Individual trade receivables are written off
when management deems them not to be collectible.
Impairment is recognised based on the expected
credit losses, which are the present value of the cash
shortfall over the expected life of the financial assets.
(iv) Fair value measurement of financial instruments
Management applies valuation techniques to
determine the fair value of financial instruments
(where active market quotes are not available)
and non-financial assets. This involves developing
estimates and assumptions consistent with how
market participants would price the instrument.
Management bases its assumptions on observable
data as far as possible but this is not always available.
In that case management uses the best information
available. Estimated fair values may vary from the
actual prices that would be achieved in an arm's length
transaction at the reporting date.
(v) Impairment of non-financial assets
Impairment of non-financial assets is based on
assessment of several external and internal factors
which could result in deterioration of recoverable
amount of the assets.
(vi) Assessment of potential markdown of inventories
The Company makes provisions for slow moving, non¬
moving and/ or obsolete stock, based on the analysis
of inventories, past experience, current trend and
future expectations, depending upon the category
of goods.
(vii) Right to recover returned goods and
refund liabilities:
The methodology and assumptions used to estimate
expected sales return involves significant judgments
by the management. Such estimates are monitored
and adjusted regularly in the light of contractual
and legal obligations, historical trend and past
experience. Once the uncertainty associated with
the expected sales returns is resolved, revenue is
adjusted accordingly.
(viii) Incremental borrowing rate for leases
The Company cannot readily determine the interest
rate implicit in the lease, therefore, it uses its
incremental borrowing rate (IBR) to measure lease
liabilities. The IBR is the rate of interest that the
Company would have to pay to borrow over a similar
term, and with a similar security, the funds necessary
to obtain an asset of a similar value to the right-of-
use asset in a similar economic environment. The IBR
therefore reflects what the Company 'would have to
pay’, which requires estimation when no observable
rates are available or when they need to be adjusted
to reflect the terms and conditions of the lease. The
Company estimates the IBR using observable inputs
(such as market interest rates) when available and is
required to make certain entity-specific estimates.
2.07 Current and Non-Current classification
The Company presents assets and liabilities in the balance
sheet based on current/non-current classification.
An asset is current when it is:
• Expected to be realized or intended to be sold or consumed
in normal operating cycle;
• Held primarily for the purpose of trading;
• Expected to be realized within twelve months after the
reporting period; or
• Cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least twelve
months after the reporting period.
• Current assets include current portion of non-current
financial assets.
All other assets are classified as non-current.
A liability is current when it is:
• Expected to be settled in normal operating cycle;
• It is held primarily for the purpose of trading;
• Due to be settled within twelve months after the reporting
period; or
• There is no unconditional right to defer settlement of the
liability for at least twelve months after the reporting period.
• Current Liabilities include current portion of non-current
financial liabilities.
All other liabilities are classified as non-current."
Deferred tax assets and Deferred tax liabilities are classified
as non-current assets and non-current liabilities respectively.
2.08 Operating expenses
Operating expenses are recognised in Statement of Profit or
Loss upon utilisation of the service or as incurred.
2.09 Equity, reserves and dividend payment
Equity shares are classified as equity. Incremental costs
directly attributable to the issue of new shares are shown in
equity as a deduction, net of tax, from the proceeds. Retained
earnings include current and prior period retained profits.
All transactions with owners of the Company are recorded
separately within equity.
2.10 Property plant and equipment
i) Initial measurement at recognition
An item of property, plant and equipment’s recognized as
an asset if and only if it is probable that future economic
benefits associated with the item will flow to the Company
and the cost of the item can be measured reliably.
Items of property, plant and equipment are measured
at cost less accumulated depreciation/amortization
and accumulated impairment losses. Cost includes
expenditure that is directly attributable to bringing the
asset, inclusive of non-refundable taxes & duties, to the
location and condition necessary for it to be capable of
operating in the manner intended by management.
When parts of an item of property, plant and equipment
have different useful life, they are recognized separately.
Items of spare parts, stand-by equipment and servicing
equipment which meet the definition of Property Plant and
Equipment are capitalized.
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.
Property, Plant and Equipment's which are not ready for
intended use as on the date of Balance Sheet are disclosed
as 'Capital Work-In-Progress'.
ii) Subsequent costs
Subsequent expenditure is recognized as an increase in
the carrying amount of the asset when it is probable that
future economic benefits deriving from the cost incurred
will flow to the enterprise and the cost of the item can be
measured reliably. The cost of replacing part of an item
of property, plant and equipment is recognized in the
carrying amount of the item if it is probable that the future
economic benefits embodied within the part will flow to
the Company and its cost can be measured reliably. The
carrying amount of the replaced part is derecognized. The
costs of the day-to-day servicing of Property, Plant and
Equipment are recognized in profit or loss as incurred.
iii) De-recognition
An item of property, plant and equipment are derecognized
when no future economic benefits are expected from
their use or upon their 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 in the statement of profit and loss.
iv) Depreciation/amortization methods, estimated
useful life's and residual value :-
Depreciation is recognized in profit or loss on a written
down value over the estimated useful life of each item
of Property, Plant and Equipment other than Freehold
Land which has unlimited useful life and therefore no
depreciation is charged on Land. Depreciation on additions
to/deductions from property, plant and equipment during
the year is charged on pro-rata basis from/up to the
date on which the asset is available for use/disposed.
Depreciation on property, plant and equipment is provided
on their estimated useful life as prescribed by Schedule II
of The Companies Act, 2013 as follows:
1) Buildings 30 years
2) Plant and Machinery 15 years
3) Furniture and Fixtures 10 years
4) Vehicles 08 years
5) Office Equipment's 05 years
6) Computer 03 years
7) Computer Server 06 years
8) Leasehold Improvements Over the period of lease
The residual values, useful lives and methods of
depreciation of property, plant and equipment are
reviewed at each financial year end and, if expectations
differ from previous estimates, the changes are
accounted for as a change in an accounting estimate and
adjusted prospectively.
2.11 Capital work-in-progress
These are assets which includes the cost of materials
and direct labour, borrowing costs, any other costs
directly attributable to bring the assets to the location and
condition necessary for it to be capable of operating in the
manner intended by management but not put to use as on
reporting date.
2.12 Other intangible assets
i) Initial recognition and measurement
An intangible asset is recognized if and only if it is probable
that the expected future economic benefits that are
attributable to the asset will flow to the Company and the
cost of the asset can be measured reliably.
Intangible assets that are acquired by the Company, which
have definite useful lives, are recognized at cost less
accumulated amortization and accumulated impairment
losses, if any. Cost includes any directly attributable
incidental expenses necessary to make the assets ready
for its intended use.
ii) Subsequent costs
Subsequent expenditure is recognized as an increase in
the carrying amount of the asset when it is probable that
future economic benefits deriving from the cost incurred
will flow to the enterprise and the cost of the item can be
measured reliably.
iii) De-recognition
An intangible asset is derecognized when no future
economic benefits are expected from their use or upon
their disposal. Gains and losses on disposal of an item
of intangible assets are determined by comparing the
proceeds from disposal with the carrying amount of
intangible assets and are recognized in the statement of
profit and loss.
iv) Amortization
1) Trade Mark and Brand Name 5 years
2) Computer Software (ERP) 10 years
3) Computer Software (Others) 5 years
2.13 Impairment of non-financial assets
Assets are tested for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be
recoverable and impairment loss is recognised for the amount
by which the asset's carrying amount exceeds its recoverable
amount. The recoverable amount is higher of an asset's fair
value less costs of disposal and value in use. For the purpose
of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash inflows
which are largely independent of the cash inflows from other
assets or Company of assets (cash generating units). If at the
balance sheet date, there is an indication that a previously
assessed impairment loss no longer exists, the recoverable
amount is reassessed and the asset is reflected at the
recoverable amount subject to a maximum of depreciated
historical cost and the same is accordingly reversed in the
statement of profit and loss.
2.14 Investment property
Investment property are measured at cost less accumulated
depreciation and impairment losses, if any. Depreciation on
building is calculated using the written down value method
to allocate their cost, net of their residual values, over the
estimated useful lives (i.e. 60 years) as prescribed in Schedule
II to the Companies Act, 2013 .Though the Company measures
investment property using cost based measurement, the
fair value of investment property is disclosed in the notes.
Fair values are determined based on an annual evaluation
performed by an accredited external independent valuer
applying valuation model acceptable internationally.
2.15 Inventories
Inventories of raw materials, work-in-progress, finished
goods, stock-in-trade are valued at the lower of cost and net
realisable value. However, the inventories of raw materials are
considered to be realisable at cost if the finished products,
in which they will be used, are expected to be sold at or
above cost. The cost of inventories of items that are not
ordinarily interchangeable shall be assigned by using specific
identification of their individual costs and other items shall be
assigned by using first in first out (FIFO) cost formula .
Costs incurred in bringing each product to its present location
and condition are accounted for as follows:
• Raw materials: cost includes cost of purchase and other
costs incurred in bringing the inventories to their present
location and condition.
• Work in progress: cost includes raw material costs plus
conversion costs depending upon the stage of completion.
• Finished goods: cost includes cost of direct materials and
labour and a proportion of manufacturing overheads based
on the normal operating capacity.
• Stock in trade: Cost includes cost of purchase and other
costs incurred in bringing the inventories to their present
location and condition.
The Company considers the age and nature of the product
to which inventory pertains for determining the net realisable
value for slow moving and obsolete inventories. Such
inventories are thereafter marked down to their estimated
net realisable value, i.e. what the Company expects to realise
from sale of such inventory.
2.16 Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise
cash at banks and cash in hand and short-term deposits
with an original maturity of three months or less, it also which
are subject to insignificant risk of change in value. Further,
it includes amount receivable with respect to credit card
receivable, electronic wallet, UPI, etc. which are normally
received within one day from the date of transaction and are
subject to insignificant risk of changes in value.
2.17 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:
Financial assets are recognised when the Company
becomes a party to the contractual provisions of
the instrument.
a) Initial recognition and measurement
Financial instruments are measured initially at fair
value adjusted for transaction costs, except for those
carried at fair value through profit or loss which are
measured initially at fair value.
However, trade receivables that do not contain a
significant financing component are initially measured
at transaction price.
If the Company determines that the fair value at initial
recognition differs from the transaction price, the
Company accounts for that instrument at that date
as follows:
a. At the measurement basis mentioned above if
that fair value is evidenced by a quoted price in an
active market for an identical asset or liability (i.e.
a Level 1 input) or based on a valuation technique
that uses only data from observable markets. The
Company recognises the difference between the
fair value at initial recognition and the transaction
price as a gain or loss.
b. I n all other cases, at the measurement basis
mentioned above, adjusted to defer the difference
between the fair value at initial recognition and
the transaction price. After initial recognition, the
Company recognises that deferred difference as
a gain or loss only to the extent that it arises from
a change in a factor (including time) that market
participants would take into account when
pricing the asset or liability.
b) Subsequent measurement
Financial assets are subsequently classified and
measured at:
• Financial assets at amortised cost
• Financial assets at fair value through profit and loss
(FVTPL)
• Financial assets at fair value through other
comprehensive income (FVTOCI).
c) De-recognition
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 balance sheet) when:
• The contractual rights to receive cash flows from
the asset have expired, or
• The Company has transferred its contractual rights
to receive cash flows from the asset.
ii) Financial liabilities
a) Initial recognition and measurement
All financial liabilities are recognized at fair value and
in case of loans, net of directly attributable cost. Fees
of recurring nature are directly recognised in the
Statement of Profit and Loss as finance cost.
b) Subsequent measurement
Financial liabilities are carried at amortized cost
using the effective interest method. Amortized cost
is calculated by taking into account any discount or
premium on acquisition and any material transaction
that are any integral part of the effective interest rate.
Trade and other payables maturing within one year
from the balance sheet date are carried at transaction
value and the carrying amounts approximate fair value
due to the short maturity of these instruments.
Financial liabilities carried at fair value through profit or
loss are measured at fair value with all changes in fair
value recognised in the statement of profit and loss.
c) De-recognition
A financial liability is derecognized 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 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 or loss.
2.18 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 realise the asset
and settle the liability simultaneously. The legally enforceable
right must not be contingent on future events and must
be enforceable in the normal course of business and in the
event of default, insolvency or bankruptcy of the group or
the counterparty.
2.19 Fair value measurement
The Company measures financial instruments, such as,
derivatives at fair value at each balance sheet date. 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:
• In the principal market for the asset or liability, or
• 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, maximizing the use of relevant
observable inputs and minimizing the use of unobservable
inputs. All assets and 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:
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 recognized in the financial
statements on a recurring basis, the Company determines
whether transfers have occurred between levels in the
hierarchy by re-assessing categorization (based on the lowest
level input that is signify cant to the fair value measurement
as a whole) at the end of each reporting period. The Company
determines the policies and procedures for both recurring
fair value measurement, such as derivative instruments and
unquoted financial assets measured at fair value, and for non¬
recurring measurement, such as assets held for distribution in
discontinued operations.
External valuers are involved for valuation of significant
assets and liabilities. The management select external valuer
on various criteria such as market knowledge, reputation
, independence and whether professional standard are
maintained by valuer.The management decides, after
discussion with external valuers, which valuation techniques
and inputs to be used for each case.
At each reporting date, the management analysis the
movement in value of assets and liabilities which are required
to be remeasured and reassessed as per the Company's
accounting policies. For this analysis management verifies the
major inputs applied in the latest valuation by agreeing the
information in the valuation computations to contracts and
other relevant documents.
The management, in conjunction with the Company's external
valuers, also compare the change in fair value of each assets
and liabilities with relevant external sources to determine
whether change is reasonable.
For the purpose of fair value disclosures, the Company has
determine class of assets and liabilities on the basis of nature,
characteristics and the risk of assets and liabilities and the
level of fair value hierarchy as explained above.
This note summarises accounting policy for fair value. Other
fair value related disclosures are given in the relevant notes.
Quantative disclosures of fair value measurement hierarchy
(note no. 51)
Financial instruments (including those carries at amortized
cost: note no. 52)
2.20 Impairment of financial assets
In accordance with Ind AS 109, the Company applies expected
credit loss (ECL) model for measurement and recognition of
impairment loss on the trade receivables or any contractual
right to receive cash or another financial asset that result
from transactions that are within the scope of Ind AS 115.
The Company follows 'simplified approach’ for recognition
of impairment loss allowance on trade receivables or any
contractual right to receive cash or another financial asset.
Rather, it recognises impairment loss allowance based on
lifetime ECLs at each reporting date, right from its initial
recognition. As a practical expedient, the Company uses a
provision matrix to determine impairment loss allowance on
portfolio of its trade receivables. The provision matrix is based
on its historically observed default rates over the expected life
of the trade receivables and is adjusted for forward-looking
estimates. At every reporting date, the historical observed
default rates are updated and changes in the forward-looking
estimates are analysed.
For recognition of impairment loss on other financial assets and
risk exposure, the Company determines that whether there
has been a significant increase in the credit risk since initial
recognition. The credit risk has not increased significantly,
12-month ECL is used to provide for impairment loss. However,
if credit risk of customer has increased significantly, lifetime
ECL is used. If, in a subsequent period, credit quality of the
instrument improves such that there is no longer a significant
increase in credit risk since initial recognition, then the entity
reverts to recognising impairment loss allowance based on
12-month ECL.
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