2 SIGNIFICANT ACCOUNTING POLICIES
a Basis of Preparation
These financial statements have been prepared in accordance with the Gener¬
ally Accepted Accounting Principles in India ('Indian GAAP') to comply with the
Accounting Standards specified under Section 133 of the Companies Act, 2013,
as applicable. The financial statements have been prepared under the historical
cost convention on accrual basis, except for certain financial instruments which
are measured at fair value.
b Use of estimates
The preparation of financial statements requires the management of the Com¬
pany to make estimates and assumptions that affect the reported balances of
assets and liabilities and disclosures relating to the contingent liabilities as at
the date of the financial statements and reported amounts of income and ex¬
pense during the year. Examples of such estimates include provisions for doubt¬
ful receivables, provision for income taxes, the useful lives of depreciable Prop¬
erty, Plant and Equipment and provision for impairment. Future results could
differ due to changes in these estimates and the difference between the actual
result and the estimates are recognised in the period in which the results are
known / materialise.
c Current-non-current classification
"An asset is classified as current when it satisfies any of the following criteria:
a. it is expected to be realised in, or is intended for sale or consumption in,
the company's normal operating cycle;
b. it is held primarily for the purposes of being traded;
c. it is expected to be realised within 12 months after the reporting date;
d. it is cash or cash equivalent unless it is restricted from being exchanged or
used to settle a liability for at least 12 months after the reporting date; or
Current assets include the current portion of non-current financial assets. All
other assets are classified as non-current."
A liability is classified as current when it satisfies any of the following criteria:
a. it is expected to be settled in the company's normal operating cycle;
b. it is held primarily for the purposes of being traded;
c. it is due to be settled within 12 months after the reporting date; or
d. the company does not have an unconditional right to defer settlement of
the liability for at least 12 months after the reporting date;
Current liabilities include the current portion of non-current financial liabilities.
All other liabilities are classified as non-current.
d Property, Plant and Equipment
Property, plant and equipment (PPE) are carried at the cost of acquisition or
construction less accumulated depreciation. The cost of PPE comprises its pur¬
chase price net of any trade discounts and rebates, any import duties and other
taxes (other than those subsequently recoverable from the tax authorities), any
directly attributable expenditure on making the asset ready for its intended use,
other incidental expenses and interest on borrowings attributable to acquisition
of qualifying PPE up to the date it is ready for its intended use.
f Impairment of assets
At each balance sheet date, the management reviews the carrying amounts of
its assets included in each cash generating unit to determine whether there is
any indication that those assets were impaired. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent of
impairment. Recoverable amount is the higher of an asset's net selling price and
value in use. In assessing value in use, the estimated future cash flows expect¬
ed from the continuing use of the asset and from its disposal are discounted to
their present value using a pre-tax discount rate that reflects the current market
assessments of time value of money and the risks specific to the asset. Reversal
of impairment loss is recognised as income in the statement of profit and loss.
g Investment
Long-term investments and current maturities of long-term investments are
stated at cost, less provision for other than temporary diminution in value. Cur¬
rent investments, except for current maturities of long-term investments, com¬
prising investments in mutual funds, government securities and bonds are stat¬
ed at the lower of cost and fair value.
h Inventories
Inventories are stated at the lower of cost of net realisable value. Net realisable
value means 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
The Company considers all short term, highly liquid investments that are readily
convertible into known amounts of cash and which are subject to an insignifi¬
cant risk of changes in value, to be cash equivalents.
j Revenue recognition
Revenue from sale of goods is recognised at the time of delivery of goods.
Service revenue is recognised after performance of the service contract is com¬
pleted. Recognition of revenue is based upon the condition that there is no
significant uncertainty exist regarding the amount of consideration that will be
derived from sale or services. Revenue is reported net of trade discounts, if any.
Dividend is recorded when the right to receive payment is established. Interest
income is recognised on time proportion basis taking into account the amount
outstanding and the rate applicable.
k Employee Benefits
Short term benefits such as salary, bonus, leave salary and other benefits are
accounted on accrual basis. Defined contribution plans includes company's con¬
tributions towards state plans for the employees, such as EPF, ESI etc. where
contributions made towards such plans are charged to revenue as and when
they become due to the company.
Defined benefit plans includes gratuity, liability of which is provided in the books
of account on the basis of actuarial valuation made at the end of year.
l Borrowing Cost
As per AS 16, borrowing costs directly attributable to the acquisition, construc¬
tion or production of qualifying assets, which are assets that necessarily take a
substantial period of time to get ready for their intended use or sale, are added
to the cost of those assets, until such time as the assets are substantially ready
for their intended use or sale.
m Foreign currency transactions
Income and expense in foreign currencies are converted at exchange rates pre¬
vailing on the date of the transaction. Foreign currency monetary assets and lia¬
bilities other than net investments in non-integral foreign operations are trans¬
lated at the exchange rate prevailing on the balance sheet date and exchange
gains and losses are recognised in the statement of profit and loss. Exchange
difference arising on a monetary item that, in substance, forms part of an enter¬
prise's net investments in a non-integral foreign operation are accumulated in a
foreign currency translation reserve.
n Taxation
Current tax comprises taxes on income and measured at the amount expected
to be paid to the tax authorities, using the applicable tax rates.
Deferred tax expense or benefit is recognised on timing differences being the
difference between taxable income and accounting income that originate in one
period and is likely to reverse in one or more subsequent periods. Deferred tax
assets and liabilities are measured using the tax rates and tax laws that have
been enacted or substantively enacted by the balance sheet date.
Advance taxes and provisions for current income taxes are presented in the bal¬
ance sheet after off-setting advance tax paid and income tax provision arising in
the same tax jurisdiction for relevant tax paying units and where the Company
is able to and intends to settle the asset and liability on a net basis.
The Company offsets deferred tax assets and deferred tax liabilities if it has a
legally enforceable right and these relate to taxes on income levied by the same
governing taxation laws.
o Earnings per Share
Basic Earnings per Share is computed by dividing the net profit after tax by
weighted average number of equity shares outstanding during the year. Diluted
Earnings per Share is computed by dividing net profit after tax by the weight¬
ed average number of equity shares considered for deriving basic earnings per
share and also the weighted average number of equity shares that could have
been issued upon conversion of all dilutive potential equity shares.
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