5A. Material Accounting Policies
The financial statements have been prepared using the material and other accounting policies and
measurement bases summarized below:
a) Revenue Recognition
Revenue from contract with customer is recognised upon transfer of control of promised products or
services to customers on complete satisfaction of performance obligations for an amount that reflects
the consideration which the Company expects to receive in exchange for those products or services.
Revenue is measured based on the transaction price which is the consideration, adjusted for discounts
and other incentives, if any, as per contracts with the customers. Revenue also excludes taxes or
amounts collected from customers in its capacity as agent. The specific recognition criteria from
various stream of revenue is described below:
• Sale of Goods
Revenue from sale of goods is recognised when the Company transfers control of the goods,
generally on delivery, or when the goods have been dispatched to the customer's specified location
as per the terms of contract, provided the company has not retained any significant risk of
ownership or future obligation with respect to the goods dispatched.
• Dividends:
Revenue is recognised when the Company’s right to receive the payment is established, which is
generally when shareholders approve the dividend.
• Interest Income:
Interest income is accrued on a time basis, by reference to the principal outstanding and at the
effective interest rate applicable, which is the rate that exactly discounts estimated future cash
receipts through the expected life of the financial asset to that asset's net carrying amount on initial
recognition.
• Other incomes have been recognized on accrual basis in the financial statements, except when there
is uncertainty of collection.
b) Impairment of Financial Assets:
In accordance with Ind AS 109 ‘Financial Instruments’, the Company applies Expected Credit Loss
(‘ECL’) model for measurement and recognition of impairment loss for financial assets. ECL is the
weighted-average of difference between all contractual cash flows that are due to the Company in
accordance with the contract and all the cash flows that the Company expects to receive, discounted at
the original effective interest rate, with the respective risks of default occurring as the weights. When
estimating the cash flows, the Company is required to consider:
All contractual terms of the financial assets (including prepayment and extension) over the expected
life of the assets;
Cash flows from the sale of collateral held or other credit enhancements that are integral to the
contractual terms.
Trade Receivables: In respect of trade receivables, the Company applies the simplified approach of
Ind AS 109 ‘Financial Instruments’, which requires measurement of loss allowance at an amount equal
to lifetime expected credit losses. Lifetime expected credit losses are the expected credit losses that
result from all possible default events over the expected life of a financial instrument.
Other Financial Assets: In respect of its other financial assets, the Company assesses if the credit risk
on those financial assets has increased significantly since initial recognition. If the credit risk has not
increased significantly since initial recognition, the Company measures the loss allowance at an amount
equal to 12-month expected credit losses, else at an amount equal to the lifetime expected credit losses.
When making this assessment, the Company uses the change in the risk of a default occurring over the
expected life of the financial asset. To make that assessment, the Company compares the risk of a
default occurring on the financial asset as at the balance sheet date with the risk of a default occurring
on the financial asset as at the date of initial recognition and considers reasonable and supportable
information, that is available without undue cost or effort, that is indicative of significant increases in
credit risk since initial recognition. The Company assumes that the credit risk on a financial asset has
not increased significantly since initial recognition if the financial asset is determined to have a low
credit risk at the balance sheet date.
c) Taxation:
Income tax expense comprises current tax expense and the net change in the deferred tax asset or
liability during the year. Current and deferred taxes are recognised in Statement of Profit and Loss,
except when they relate to items that are recognised in other comprehensive income or directly in
equity, in which case, the current and deferred tax are also recognised in other comprehensive income
or directly in equity, respectively.
1. Current Tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or
paid to the taxation authorities. Current income tax(including Minimum Alternate Tax (MAT)) is
measured at the amount expected to be paid to the tax authorities in accordance with the Income-Tax
Act, 1961 enacted in India. The tax rates and tax laws used to compute the amount are those that are
enacted or substantially enacted, at the reporting date.
Current income tax relating to items recognised outside the statement of profit and loss is recognised
outside the statement of profit and loss (either in other comprehensive income (OCI) or in equity).
Management periodically evaluates positions taken in the tax returns with respect to situations in which
applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
2. Deferred Tax
Deferred tax assets and liabilities are recognised for deductible and taxable temporary differences
arising between the tax base of assets and liabilities and their carrying amount, except when the
deferred tax arises from the initial recognition of an asset or liability in a transaction that is not a
business combination and affects neither accounting nor taxable profit or loss at the time of the
transaction.
Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available
against which the deductible temporary differences, and the carry forward of unused tax credits and
unused tax losses can be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year
when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been
enacted or substantively enacted at the reporting date.
Deferred tax includes MAT tax credit. The Company recognises tax credits in the nature of MAT credit
as an asset only to the extent that there is convincing evidence that the Company will pay normal
income tax during the specified period, i.e., the period for which tax credit is allowed to be carried
forward. In the year in which the Company recognises tax credits as an asset, the said asset is created by
way of tax credit to the statement of profit and loss. The Company reviews such tax credit asset at each
reporting date to assess its recoverability.
5B Other Accounting Policies
The financial statements have been prepared using the material and other accounting policies and
measurement bases summarized below:
a. Current / Non-current Classification:
All assets and liabilities have been classified as current or non-current as per the Company’s normal
operating cycle and other criteria set-out in the Act. Deferred tax assets and liabilities are classified as
non-current assets and non-current liabilities, as the case may be. The operating cycle is the time
between the acquisition of assets for processing and their realisation in cash and cash equivalents.
Any asset or liability is classified as current if it satisfies any of the following conditions:
i) The asset/liability is expected to be realized/ settled in the Company’s normal operating cycle;
ii) The asset is intended for sale or consumption;
iii) The asset/liability is held primarily for the purpose of trading;
iv) The asset/liability is expected to be realized/ settled within twelve months after the reporting
period;
v) The asset is cash or cash equivalent unless it is restricted from being exchanged or used to settle
a liability for at least twelve months after the reporting date;
vi) In the case of a liability, the Company does not have an unconditional right to defer settlement
of the liability for at least twelve months after the reporting date.
All other assets and liabilities are classified as non-current. Deferred tax assets and liabilities are
classified as non-current assets and liabilities respectively.
For the purpose of current/non-current classification of assets and liabilities, the Company has
ascertained its normal operating cycle as twelve months. This is based on the nature of services and the
time between the acquisition of assets or inventories for processing and their realization in cash and
cash equivalents.
b. Financial Instruments:
Initial recognition and measurement
Financial assets and financial liabilities are recognized when the Company becomes a party to the
contractual provisions of the financial instrument and 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. Subsequent measurement of financial assets and financial liabilities is described
below:
Non-derivative Financial Assets
Subsequent measurement
Financial Assets carried at Amortized Cost
A financial asset is measured at the amortized cost, if both the following conditions are met:
a. The asset is held within a business model whose objective is to hold assets for collecting
contractual cash flows; and
b. 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 amortized cost using the
effective interest rate (‘EIR’) method.
Investments in Equity Instruments of Subsidiaries and Joint Ventures
Investments in equity instruments of subsidiaries and joint ventures are accounted for at cost in
accordance with Ind AS 27 ‘Separate Financial Statements’.
Investments in Other Equity Instruments
Investments in equity instruments which are held for trading are classified as at fair value through profit
or loss (‘FVTPL’). For all other equity instruments, the Company makes an irrevocable choice upon
initial recognition, on an instrument by instrument basis, to classify the same either as at fair value
through other comprehensive income (‘FVTOCI’) or FVTPL. Amounts presented in other
comprehensive income are not subsequently transferred to profit or loss. However, the Company
transfers the cumulative gain or loss within equity. Dividends on such investments are recognized in
profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment.
Debt Instruments
Debt instruments are initially measured at amortized cost, FVTOCI or FVTPL till de-recognition on the
basis of:
i. the entity’s business model for managing the financial assets; and
ii. the contractual cash flow characteristics of the financial asset.
a. Measured at Amortized Cost
Financial assets that are held within a business model whose objective is to hold financial assets in
order to collect contractual cash flows that are solely payments of principal and interest, are
subsequently measured at amortized cost using the EIR method less impairment, if any. The
amortization of EIR and loss arising from impairment, if any, is recognized in the Standalone
Statement of Profit and Loss.
b. Measured at Fair Value through other Comprehensive Income
Financial assets that are held within a business model whose objective is achieved by both, selling
financial assets and collecting contractual cash flows that are solely payments of principal and
interest, are subsequently measured at FVTOCI. Fair value movements are recognized in the other
comprehensive income (‘OCI’). Interest income measured using the EIR method and impairment
losses, if any are recognized in the Standalone Statement of Profit and Loss. On de-recognition,
cumulative gain or loss previously recognized in OCI is reclassified from the equity to ‘other
income’ in the Standalone Statement of Profit and Loss.
c. Measured at Fair Value through Profit or Loss
A financial asset not classified as either amortized cost or FVTOCI, is classified as FVTPL. Such
financial assets are measured at fair value with all changes in fair value, including interest income
and dividend income, if any, recognized as ‘other income’ in the Standalone Statement of Profit and
Loss.
Investments in Mutual Funds
Investments in mutual funds are measured at FVTPL.
De-recognition of financial assets
A financial asset is primarily de-recognized when the contractual rights to receive cash flows from the
asset have expired or the Company has transferred its rights to receive cash flows from the asset.
Non-derivative Financial Liabilities
Subsequent measurement
Subsequent to initial recognition, all non-derivative financial liabilities are measured at amortised cost
using the effective interest method.
De-recognition of financial liabilities
A financial liability is de-recognized 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 recognized in the Standalone
Statement of Profit and Loss.
Derivative Financial Instruments
The Company holds derivative financial instruments in the form of future contracts to mitigate the risk
of changes in exchange rates on foreign currency exposure. The counterparty for these contracts are
scheduled commercial banks / regulated brokerage firms. Although these derivatives constitute hedges
from an economic perspective, they do not qualify for hedge accounting under Ind AS 109 ‘Financial
Instruments’ and consequently are categorized as financial assets or financial liabilities at FVTPL. The
resulting exchange gain or loss is included in other income / expenses and attributable transaction costs
are recognized in the Standalone Statement of Profit and Loss when incurred.
Financial Guarantee Contracts
Financial guarantee contracts are those contracts that require a payment to be made to reimburse the
holder for a loss it incurs because the specified party fails to make a payment when due in accordance
with the terms of a debt instrument. Financial guarantee contracts are recognized as a financial liability
at the time the guarantee is issued at fair value, adjusted for transaction costs that are directly
attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the
amount of expected loss allowance determined as per impairment requirements of Ind AS 109
‘Financial Instruments’ and the amount recognized less cumulative amortization.
Offsetting of Financial Instruments
Financial assets and financial liabilities are offset and the net amount is reported in the Standalone
Balance Sheet if there is a currently enforceable legal right to offset the recognized amounts and there is
an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
c. Fair Value Measurement:
The Company measures financial instruments, such as, derivatives at fair value at each Standalone 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
is 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 reassessing categorization
(based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each
reporting period.
The Company’s management 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.
d. Inventories:
Inventories are valued at the lower of cost or net realizable value. Cost includes purchase price, duties,
transport, handing costs and other costs directly attributable to the acquisition and bringing the inventories
to their present location and condition. Net realisable 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.
e. Employee Benefits:
Short Term Employee Benefits Employee benefits payable wholly within twelve months of rendering the
services are classified as short-term employee benefits and recognized in the period in which the employee
renders the related service. These are re-cognized at the undiscounted amount of the benefits expected to be
paid in exchange for that service.
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