4. Summary of material accounting policies
Accounting policy information is expected to be material
if users of an entity's financial statements would need it
to understand other material information in the financial
statements.
The Company applied the guidance available under
paragraph 117B of Ind AS 1, Presentation of Financial
Statements in evaluating the material nature of the
accounting policies.
The following are the material accounting policies for the
Company:
A) Foreign Currency transactions
Transactions in foreign currencies are initially
recorded by the Company at their respective
functional currency spot rates at the date, the
transaction first qualifies for recognition. However,
for practical reasons, the Company uses an average
rate, if the average approximates the actual rate at
the date of the transaction.
Monetary assets and liabilities denominated in
foreign currencies are translated at the functional
currency spot rates of exchange 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 based on
historical cost in a foreign currency are translated at
the exchange rate at the date of the initial 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 was
measured.
The gain or loss arising on translation of non¬
monetary items measured at fair value is treated
in line with the recognition of the gain or loss on
the change in fair value of the item (i.e., translation
differences on items whose fair value gain or loss is
recognised in other comprehensive income ("OCI")
or profit or loss are also recognised in OCI or profit or
loss, respectively).
B) Property Plant & Equipment Recognition and
measurement
Property, Plant and Equipment are stated at cost
of acquisition or construction less accumulated
depreciation and impairment loss, if any. The cost
includes expenditures that are directly attributable
to the acquisition of the asset i.e., freight, duties
and taxes applicable and other expenses related
to acquisition and installation. The cost of self-
constructed assets includes the cost of materials and
other costs directly attributable to bringing the asset
to a working condition for its intended use. Borrowing
costs that are directly attributable to the construction
or production of a qualifying asset are capitalized as
part of the cost of that asset.
Directly attributable costs include:
• Cost of Employee Benefits arising directly
from Construction or acquisition of PPE.
• Cost of Site Preparation.
• Initial Delivery & Handling costs.
• Professional Fees and
• Costs of testing whether the asset is functioning
properly, after deducting the net proceeds from
selling any item produced while bringing the
asset to that location and condition (such as
samples produced when testing equipment).
When parts of an item of property, plant and
equipment have different useful lives, they are
accounted for as separate items (major components)
of property, plant and equipment.
Gains and losses upon 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 the statement of profit
and loss.
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 will be de¬
recognized. The cost of repairs and maintenance
are recognized in the statement of profit and loss as
incurred.
Items of property, plant and equipment acquired
through exchange of non-monetary assets are
measured at fair value, unless the exchange
transaction lacks commercial substance or the fair
value of either the asset received or asset given up
is not reliably measurable, in which case the asset
exchanged is recorded at the carrying amount of the
asset given up.
Depreciation
Depreciation is recognized in the statement of profit
and loss on a straight-line basis over the estimated
useful lives of property, plant and equipment based
on the Companies Act, 2013 ("Schedule II"), which
prescribes the useful lives for various classes of
tangible assets. For assets acquired or disposed of
during the year, depreciation is provided on pro rata
basis. Land is not depreciated.
Depreciation methods, useful lives and residual
values are reviewed at each reporting date and
adjusted prospectively, if appropriate.
Advances paid towards the acquisition of property,
plant and equipment outstanding at each reporting
date is disclosed as capital advances under other
non-current assets. The cost of property, plant and
equipment not ready to use before such date are
disclosed under capital work- in-progress. Assets
not ready for use are not depreciated.
The Company assesses at each balance sheet
date whether there is objective evidence that an
asset or a group of assets is impaired. An asset's
carrying amount is written down immediately to its
recoverable amount if the asset's carrying amount
is greater than its estimated recoverable amount.
Recoverable amount is higher of the value in use or
fair value less cost to sell.
Intangible assets
Acquiring computer software is capitalized on the
basis of the costs incurred to acquire and bring to
use the specific software. The Intangible assets that
are acquired by the Company and that have finite
useful lives are measured at cost less accumulated
amortization and accumulated impairment losses.
Amortisation
Amortisation is recognized in the statement of profit
and loss on a straight-line basis over the estimated
useful lives of intangible assets or on any other basis
that reflects the pattern in which the asset's future
economic benefit is expected to be consumed by the
entity. Intangible assets that are not available for use
are amortized from the date they are available for
use. The estimated useful lives are as follows:
The amortisation period and the amortisation
method for intangible assets with a finite useful life
are reviewed at each reporting date.
C) 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.
a) Financial assets
Initial recognition and measurement
All financial assets are recognized initially at
fair value plus, in the case of financial assets
not recorded at fair value through profit or loss,
transaction costs that are attributable to the
acquisition of the financial asset. Purchases or
sales of financial assets that require delivery
of assets within a time frame established by
regulation or convention in the marketplace
(regular way trades) are recognized on the trade
date, i.e., the date that the Company commits to
purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement,
financial assets are classified in four categories:
• Debt instruments at amortised cost.
• Debt instruments at fair value through
other comprehensive income (FVTOCI).
• Debt instruments, derivatives and equity
instruments at fair value through profit or
loss (FVTPL).
• Equity instruments measured at fair
value through other comprehensive
income (FVTOCI).
Debt instruments at amortised cost
A 'debt instrument' is measured at the
amortised cost, if both of the following
conditions are met: (i) The asset is held within
a business model whose objective is to hold
assets for collecting contractual cash flows;
and (ii) 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.
Amortised 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 amortisation is included in finance
income in the statement of profit and loss. The
losses arising from impairment are recognised
in the statement of profit and loss. This category
generally applies to trade and other receivables.
Debt instrument at FVTOCI
A 'debt instrument' is classified as FVTOCI, if
both of the following criteria are met: (i) The
objective of the business model is achieved
both by collecting contractual cash flows and
selling the financial assets; and (ii) The asset's
contractual cash flows represent SPPI.
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 OCI. However,
the Company recognizes interest income,
impairment losses and foreign exchange gain
or loss in the statement of profit and loss. On
de-recognition of the asset, cumulative gain or
loss previously recognised in OCI is reclassified
from the equity to statement of profit and loss.
Interest earned whilst holding FVTOCI debt
instrument is reported as interest income using
the EIR method.
Debt instrument at FVTPL
FVTPL is a residual category for debt
instruments. Any debt instrument, which does
not meet the criteria for categorization as at
amortized cost or as FVTOCI, is classified as
FVTPL. Debt instruments included within the
FVTPL category are measured at fair value with
all changes recognized in the statement of
profit and loss.
Equity Instruments
All equity investments in the scope of Ind AS 109
are measured at fair value. Equity instruments
which are held for trading are classified as
FVTPL. If the Company decides to classify
an equity instrument as FVTOCI, then all fair
value changes on the instrument, excluding
dividends, are recognized in the OCI and there
is no subsequent reclassification of these fair
value gains and losses to the statement of profit
and loss. Equity instruments included within
the FVTPL category are measured at fair value
with all changes recognized in the statement of
profit and loss.
Derecognition
A financial asset (or, where applicable, a part of
a financial asset or part of a group of similar
financial assets) is primarily derecognized (i.e.,
removed from the Company's balance sheet)
when:
a) The rights to receive cash flows from the
asset have expired, or
b) The Company has transferred its rights to
receive cash flows from the asset or has
assumed an obligation to pay the received
cash flows in full without material delay
to a third party under a 'pass-through'
arrangement; 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.
When the Company has transferred its rights to
receive cash flows from an asset or has entered
a pass- through arrangement, it evaluates
if and to what extent it has retained the risks
and rewards of ownership. When it has neither
transferred nor retained substantially all the
risks and rewards of the asset, nor transferred
control of the asset, the Company continues to
recognize the transferred asset to the extent
of the Company's continuing involvement. In
that case, the Company also recognises an
associated liability. The transferred assets and
the associated liability are measured on a basis
that reflects the rights and obligations that the
Company has retained.
Impairment of Financial Assets
The Company assesses at each balance sheet
date whether a financial asset or a group of
financial assets is impaired.
I n accordance with Ind AS 109, the Company
uses "Expected Credit Loss" (ECL) model, for
evaluating impairment of Financial Assets other
than those measured at Fair Value Through
Profit and Loss (FVTPL).
Expected credit losses are measured
through a loss allowance at an amount equal
to:
• The 12 months expected credit losses
(expected credit losses that result from
those default events on the financial
instrument that are possible within 12
months after the reporting date);
• Full lifetime expected credit losses
(expected credit losses that result from all
possible default events over the life of the
financial instrument)
The Company uses 12-month ECL to provide for
impairment loss where there is no significant
increase in credit risk. If there is a significant
increase in credit risk full lifetime ECL is used.
b) Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial
recognition, as financial liabilities at fair value
i.e., loans and borrowings, payables, or as
derivatives designated as hedging instruments
in an effective hedge, as appropriate. All
financial liabilities are recognized initially at fair
value and, in the case of loans and borrowings
and payables, net of directly attributable
transaction costs.
The Company's financial liabilities include
trade and other payables, loans and borrowings
including bank overdrafts, financial guarantee
contracts.
Subsequent measurement
The measurement of financial liabilities depend
on their classification.
Financial liabilities at fair value through profit
or loss
Financial liabilities at fair value through profit or
loss include financial liabilities held for trading
and financial liabilities designated upon initial
recognition as fair value through profit or loss.
Financial liabilities are classified as being held
for trading if they are incurred for the purpose
of repurchasing in the near term. This category
also includes derivative financial instruments
entered by the Company that are not designated
as hedging instruments
in hedge relationships as defined by Ind AS
109. Separated embedded derivatives are also
classified as held for trading, unless they are
designated as effective hedging instruments.
Gains or losses on liabilities held for trading are
recognised in the statement of profit and loss.
Financial liabilities designated upon initial
recognition at fair value through profit or loss
are designated as such at the initial date of
recognition, and only if the criteria in Ind AS
109 are satisfied. For liabilities designated as
FVTPL, fair value gains/losses attributable to
changes in own credit risk are recognized in
OCI. These gains/ losses are not subsequently
transferred to the statement of profit and loss.
However, the Company may transfer the
cumulative gain or loss within equity. All other
changes in the fair value of such liability are
recognised in the statement of profit and loss.
Loans and borrowings
After initial recognition, interest-bearing
borrowings are subsequently measured at
amortised cost using the EIR method. Gains and
losses are recognised in the statement of profit
and loss when the liabilities are derecognised
as well as through the EIR amortization
process. 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 amortisation is
included as finance costs in the statement of
profit and loss.
De-recognition
Financial liability is derecognised when the
obligation under the liability is discharged or
cancelled or 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 recognised in the statement of
profit and loss.
Reclassification of financial assets and
liabilities
The Company determines classification
of financial assets and liabilities on initial
recognition. After initial recognition, no re¬
classification is made for financial assets
which are equity instruments and financial
liabilities. For financial assets, which are debt
instruments, a re-classification is made only
if there is a change in the business model
for managing those assets. A change in the
business model occurs when the Company
either begins or ceases to perform an activity
that is significant to its operations. If the
Company reclassifies financial assets, it applies
the re- classification prospectively from the re¬
classification date, which is the first day of the
immediately next reporting period following the
change in business model. The Company does
not restate any previously recognised gains,
losses (including impairment gains or losses)
or interest.
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,
to realise the assets and settle the liabilities
simultaneously.
D) I nvestment in Subsidiaries, Associates and Joint
Ventures
The Company has accounted for its investments in
equity shares of Subsidiaries, at cost.
E) Cash & Cash Equivalents
Cash and bank balances comprise of cash balance
in hand, in current accounts with banks, demand
deposits, short- term deposits, Margin Money
deposits and unclaimed dividend accounts. For
this purpose, "short-term" means investments
having maturity of three months or less from
the date of investment. Bank overdrafts that are
repayable on demand and form an integral part of
our cash management are included as a component
of cash and cash equivalents for the purpose of
the statement of cash flows. The Margin money
deposits, balance in dividend accounts which are
not due and unclaimed dividend balances shall be
disclosed as restricted cash balances.
F) Inventories
I nventories are valued at the lower of cost and net
realisable value.
Inventories consist of raw materials, stores and
spares, work-in-progress and finished goods and
they are measured at the lower of cost and net
realizable value.
The cost of all categories of inventories is based on
the weighted average method.
Cost includes expenditures incurred in acquiring
the inventories, production or conversion costs
and other costs incurred in bringing them to their
existing location and condition.
In the case of finished goods and work-in-progress,
cost includes an appropriate share of overheads
based on normal operating capacity. Stores and
spares, that do not qualify to be recognized as
property, plant and equipment, consists of packing
materials, engineering spares (such as machinery
spare parts) and consumables which are used
in operating machines or consumed as indirect
materials in the manufacturing process.
The net realizable value is the estimated selling price
in the ordinary course of business, less the estimated
costs of completion and selling expenses.
G) Impairment of non-financial assets
The carrying amounts of the Company's non-financial
assets, other than inventories and deferred tax assets
are reviewed at each reporting date to determine
whether there is any indication of impairment. If any
such indication exists, then the asset's recoverable
amount is estimated. For goodwill and intangible
assets that have indefinite lives or that are not yet
available for use, an impairment test is performed
each year at March 31.
The recoverable amount of an asset or cash¬
generating unit (as defined below) is the greater of
its value in use and its fair value less costs to sell.
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 or the cash-generating
unit. For the purpose of impairment testing, assets
are grouped together into the smallest group of
assets that generates cash inflows from continuing
use that are largely independent of the cash inflow
of other assets or groups of assets (the "cash¬
generating unit").
The Company bases its impairment calculation on
detailed budgets and forecast calculations, which
are prepared separately for each of the Company's
CGUs to which the individual assets are allocated.
These budgets and forecast calculations generally
cover a period of five years. For longer periods, a
long-term growth rate is calculated and applied to
project future cash flows after the fifth year. To
estimate cash flow projections beyond periods
covered by the most recent budgets/forecasts, the
Company extrapolates cash flow projections in the
budget using a steady or declining growth rate for
subsequent years, unless an increasing rate can
be justified. In any case, this growth rate does not
exceed the long-term average growth rate for the
products, industries, or country in which the entity
operates, or for the market in which the asset is
used.
An impairment loss is recognized in the statement of
profit and loss if the estimated recoverable amount
of an asset or its cash-generating unit is lower than
its carrying amount. Impairment losses recognized
in respect of cash- generating units are allocated
first to reduce the carrying amount of any goodwill
allocated to the units and then to reduce the carrying
amount of the other assets in the unit on a pro-rata
basis.
Reversal of Impairment of Assets
An impairment loss in respect of goodwill is not
reversed. In respect of other assets, impairment
losses recognized in prior periods are assessed at
each reporting date for any indications that the loss
has decreased or no longer exists. An impairment
loss is reversed if there has been a change in
the estimates used to determine the recoverable
amount. 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.
H) Employee Benefits
Short term employee benefits
Short-term employee benefits are expensed as the
related service is provided. A liability is recognized
for the amount expected to be paid if the Company
has a present legal or constructive obligation to pay
this amount as a result of past service provided by
the employee and the obligation can be estimated
reliably.
Defined contribution plans
The Company's contributions to defined contribution
plans are charged to the statement of profit and loss
as and when the services are received from the
employees.
Defined benefit plans
The liability in respect of defined benefit plans and
other post-employment benefits is calculated using
the projected unit credit method consistent with
the advice of qualified actuaries. The present value
of the defined benefit obligation is determined by
discounting the estimated future cash outflows
using interest rates of high-quality corporate bonds
that are denominated in the currency in which
the benefits will be paid, and that have terms to
maturity approximating to the terms of the related
defined benefit obligation. In countries where there
is no deep market in such bonds, the market interest
rates on government bonds are used. The current
service cost of the defined benefit plan, recognised
in the statement of profit and loss in employee
benefit expense, reflects the increase in the defined
benefit obligation resulting from employee service
in the current year, benefit changes, curtailments
and settlements. Past service costs are recognised
immediately in the statement of profit and loss.
The net interest cost is calculated by applying the
discount rate to the net balance of the defined
benefit obligation and the fair value of plan assets.
This cost is included in employee benefit expense
in the statement of profit and loss. Actuarial gains
and losses arising from experience adjustments
and changes in actuarial assumptions for defined
benefit obligation and plan assets are recognized
in OCI in the period in which they arise. When the
benefits under a plan are changed or when a plan is
curtailed, the resulting change in benefit that relates
to past service or the gain or loss on curtailment is
recognised immediately in the statement of profit
and loss. The Company recognises gains or losses
on the settlement of a defined benefit plan obligation
when the settlement occurs.
Termination benefits
Termination benefits are recognised as an expense
in the statement of profit and loss when the Company
is demonstrably committed, without realistic
possibility of withdrawal, to a formal detailed plan
to either terminate employment before the normal
retirement date, or to provide termination benefits
as a result of an offer made to encourage voluntary
redundancy. Termination benefits for voluntary
redundancies are recognised as an expense in the
statement of profit and loss if the Company has
made an offer encouraging voluntary redundancy, it
is probable that the offer will be accepted, and the
number of acceptances can be estimated reliably.
Other long-term employee benefits
The Company's net obligation in respect of other
long-term employee benefits is the amount of future
benefit that employees have earned in return for their
service in the current and previous periods. That
benefit is discounted to determine its present value.
Re-measurements are recognised in the statement of
profit and loss in the period in which they arise.
Compensated absences
The Company's current policies permit certain
categories of its employees to accumulate and carry
forward a portion of their unutilised compensated
absences and utilise them in future periods or receive
cash in lieu thereof in accordance with the terms of
such policies. The Company measures the expected
cost of accumulating compensated absences as the
additional amount that the Company incurs as a result
of the unused entitlement that has accumulated at
the reporting date. Such measurement is based on
actuarial valuation as at the reporting date carried
out by a qualified actuary.
Share-based payments
Employees of the group receive remuneration in the
form of Share-based payments, whereby employees
render services as consideration for equity
instruments.
Treasury Shares
Own equity instruments that are required (treasury
shares) are recognized at cost and deducted
from equity. No gain or loss is recognized in the
statement of profit and loss on the purchase, sale,
issue or cancellation of the Company's own equity
instruments. Any difference between the carrying
amount and the consideration, if reissued, is
recognized in the securities premium.
Equity-settled transactions
The cost of equity-settled transactions is determined
by the fair value at the date when the grant is made
using Black Scholes valuation model.
That cost is recognized, together with a
corresponding increase in share- based payment
(SBP) reserves in equity, over the period in which the
performance and/or service conditions are fulfilled
in employee benefits expense. The cumulative
expense recognized for equity-settled transactions
at each reporting date until the vesting date reflects
the extent to which the vesting period has expired
and the Company's best estimate of the number
of equity instruments that will ultimately vest. The
Statement of profit and loss expense or credit for
a period represents the movement in cumulative
expense recognized as at the beginning and end of
that period and is recognized in employee benefits
expense.
Service and non-market performance conditions
are not taken into account when determining the
grant date fair value of awards, but the likelihood
of the conditions being met is assessed as part
of the Company's best estimate of the number of
equity instruments that will ultimately vest. Market
performance conditions are reflected within the
grant date fair value.
The dilutive effect of outstanding options is reflected
as additional share dilution in the computation of
diluted earnings per share.
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