Note-2 Summary of significant accounting policies
a) Basis of preparation of financial statements
• These financial statements are prepared in accordance with Indian Generally Accepted Accounting
Principles (GAAP) under the historical cost convention on the accrual basis. GAAP comprises
mandatory accounting standards as prescribed under Section 133 of the Companies Act, 2013 ('the
Act'), read with Rule 7 of the Companies (Accounts) Rules, 2014 (as amended from time to time) and
presentation requirements of Division I of Schedule III to the Companies Act, 2013.
• The accounting policies have been consistently applied by the Company are consistent with those
used in the previous year.
• The Company's financial statements are presented in Indian Rupees which is also its functional
currency and all values are rounded to nearest lacs (f in lacs).
b) Use of estimates
• The preparation of the financial statements in conformity with GAAP requires Management to make
estimates and judgments that affect the reported balances of assets and liabilities and disclosure
relating to contingent liabilities as at the date of the financial statements and reported amounts of
income and expenses during the period for the periods presented. Management believes that the
estimates used like Net realizable value of Inventories etc. in the preparation of financial statements
are prudent and reasonable. Future results could differ from these estimates.
c) Property, plant and equipment (PPE)
• Property, plant and equipment have been stated at cost of acquisition inclusive of expenses directly
attributable / related to the acquisition/ construction/erection of such assets. GST and other
applicable taxes paid on acquisition of property, plant and equipment are capitalized to the extent not
available/ utilizable as input tax credit under GST or other relevant law in force.
• Expenditure incurred on renovation and modernization of PPE on completion of the originally estimated
useful life resulting in increased life and/or efficiency of an existing asset, is added to the cost of the
related asset. In the carrying amount of an item of PPE, the cost of replacing the part of such an item is
recognized when that cost is incurred if the recognition criteria are met. The carrying amount of those
parts that are replaced is derecognized in accordance with the derecognition principles.
• After initial recognition, PPE is carried at cost less accumulated depreciation/amortization and
accumulated impairment losses, if any.
• An item of property, plant and equipment is derecognized upon disposal or when no future economic
benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset
(calculated as the difference between the net disposal proceeds and the carrying amount of the
asset) is included in the Statement of Profit and Loss when the asset is derecognized.
d) Capital Work in Progress
• Expenditure incurred on assets under construction is carried at cost under Capital Work in Progress.
Such costs comprises purchase price of asset including import duties and non-refundable taxes after
deducting trade discounts and rebates and costs that are 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.
• Cost directly attributable to projects under construction includes cost of employee benefits,
expenditure in relation to survey and investigation activities of the projects, cost of site preparation,
initial delivery and handling charges, installation and assembly costs, professional fees, expenditure
on maintenance and up-gradation etc. of common public facilities, depreciation on assets used in
construction of project, interest during construction and other costs, if attributable to construction of
projects. Such costs are accumulated under "Capital works in progress" and subsequently allocated
on systematic basis over major assets, other than land and infrastructure facilities, on commissioning
of projects.
e) Intangible Assets:
• Intangible assets acquired separately are measured on initial recognition at cost. After initial
recognition, intangible assets are carried at cost less any accumulated amortization and accumulated
impairment losses.
• An item of Intangible asset is derecognized upon disposal or when no future economic benefits are
expected from its use or disposal. Gains or losses arising from derecognition of an intangible asset are
measured as the difference between the net disposal proceeds and the carrying amount of the asset
and are recognized in the Statement of Profit and Loss when the asset is derecognized.
f) Depreciation and Amortization
• Depreciation on property, plant and equipment is provided on Straight Line Method based on
estimated useful life of the assets which is same as envisaged in schedule II of the Companies Act,
2013. However, assets costing 55,000 or less are fully depreciated in the year of purchase.
• The residual values, useful lives and method of depreciation of property, plant and equipment is
reviewed at each financial year end and adjusted prospectively, if appropriate.
• Freehold land is not depreciated.
• Amortization of Intangible Assets is provided on SLM basis considering estimated useful life of 5 Years.
g) Revenue Recognition
Sale of goods : -
• Revenue is recognized to the extent that it is probable that the economic benefits will flow to the
company and the revenue can be reliably measured.
• Revenue is recognized when the significant risks and rewards of ownership of the goods have passed
to the buyer which generally coincides with the dispatch/delivery of goods to customers and where
there is a reasonable certainty of acceptance of goods by the customer.
• Goods & Service Tax are not received by the company on its own account. Rather, it is tax collected on
value added to the commodity by the seller on behalf of the government. Accordingly, it is excluded
from revenue.
Interest Income :
• Interest income is recognized on a time proportion basis taking into account the amount outstanding
and the rate applicable.
Dividend Income :
• Dividend income is recognized when the company's right to receive dividend is established by the
reporting date.
h) Inventories:
• Inventories are valued at lower of cost and net realizable value, after providing for obsolesces, if any.
• Cost of stores & consumables and raw materials are computed on FIFO basis and cost of finished
goods are computed on Weighted average basis.
• Cost of Work in Progress and Finished Goods includes direct materials, labor, conversion and
proportion of manufacturing overheads incurred in bringing the inventories to their present location
and condition.
• The by-products are valued at net realizable value.
i) Borrowing Cost:
• Borrowing costs directly attributable to the acquisition, construction or production of an asset that
necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized
as part of the cost of the asset. All other borrowing costs are expensed in the period in which they
occur. Borrowing costs consist of interest and other costs that the company incurs in connection with
the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as
an adjustment to the borrowing costs.
j) Income Tax:
• Tax expenses comprises of current and deferred tax. Current income tax is measured at the amount
expected to be paid to the tax authority in accordance with the Income tax Act, 1961 enacted in India
and tax laws prevailing in the respective tax jurisdiction where company operate.
• Deferred tax on timing differences between taxable income and accounting income is accounted for,
using the tax rates and the tax laws enacted or substantially enacted as on the balance sheet date.
Deferred tax assets recognized only when there is a reasonable certainty of their realization.
k) Impairment:
• The Company assesses at each reporting date as to whether there is any indication that any property,
plant and equipment and intangible assets or group of assets, called cash generating units (CGU)
may be impaired. If any such indication exists the recoverable amount of an asset or CGU is
estimated to determine the extent of impairment, if any. When it is not possible to estimate the
recoverable amount of an individual asset, the Company estimates the recoverable amount of the
CGU to which the asset belongs.
• An impairment loss is recognized in the Statement of Profit and Loss to the extent, asset's carrying
amount exceeds its recoverable amount. The recoverable amount is higher of an asset's fair value
less cost of disposal and value in use. Value in use is based on the estimated future cash flows,
discounted to their present value using pre-tax discount rate that reflects current market
assessments of the time value of money and risk specific to the assets.
• The impairment loss recognized in prior accounting period is reversed if there has been a change in
the estimate of recoverable amount.
l) Cash Flow Statement
• Cash Flow Statement is prepared in accordance with the Indirect Method prescribed in the relevant
Accounting Standard. For the purpose of presentation in the cash flow statement, cash and cash
equivalents includes cash on hand and other highly liquid investments with 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.
m) Foreign exchange transactions
• The functional currency of the Company is Indian Rupee.
• The transactions in foreign currencies are stated at the rate of exchange prevailing on the date of
transactions.
• The difference on account of fluctuation in the rate of exchange prevailing on the date of transaction
and the date of realization is charged to the Statement of Profit and Loss.
• Differences on translations of Current Assets and Current Liabilities remaining unsettled at the year-
end are recognized in the Statement of Profit and Loss.
• In respect of transactions covered by Forward Foreign Exchange Contracts, the difference between the
forward rate and exchange rate at the inception of contract is recognized as income or expenses over
the life of the contract.
n) Employee Benefits:
Short Term Employee Benefits :
• The short term employee benefits expected to be paid in exchange for the services rendered by
employees are recognized as an expense during the period when the employees render the services.
Post-Employment Benefits :
Defined Contribution Plans :
• A defined contribution plan is a post-employment benefit plan under which the Company pays
specified contributions to a separate entity. The Company makes specified monthly contributions
towards Provident Fund and Contributory Pension Fund. The Company's contribution is recognised as
an expense in the Statement of Profit and Loss during the period in which the employee renders the
related service.
Defined Benefits Plans :
• 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 future pension
increases. 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.
• The company has recognized the gratuity payable to the employees as per the Payment of Gratuity
Act,1972. Leave encashment benefit is a long term benefit plan whereas Gratuity is a post retirement
benefit plan. The liability in respect of these benefits is calculated using the Projected Unit Credit
Method and spread over the period during which the benefit is expected to be derived from
employees' services.
o) Leases:
• Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the
leased item, are classified as operating leases. Operating lease payments are recognized as an
expense in the Statement of Profit and Loss.
p) Investments:
• Investments that are readily realizable and intended to be held for not more than a year 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 purchase price and
directly attributable acquisition charges such as brokerage, fees and duties. Current investments are
carried at 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 recognized when there is
an 'other than temporary' decline in the value of the investments.
q) Investment properties:
• An investment in land, which is not intended to be occupied substantially for use by, or in the
operations of, the company, is classified as investment property. Investment properties are stated at
cost, net of accumulated impairment losses, if any.
• The cost comprises purchase price, borrowing costs if capitalization criteria are met and directly
attributable cost of bringing the investment property to its working condition for the intended use. Any
trade discounts and rebates are deducted in arriving at the purchase price.
• 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.
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