1.2 Summary of Material accounting policies
a) Property, Plant and Equipment:
The cost of an item of Property, Plant and Equipment
(‘PPE’) is recognised as an asset if, and only if,
it is probable that the future economic benefits
associated with the item will flow to the Company
and the cost can be measured reliably,
PPE are initially recognised at cost. The initial cost of
PPE comprises its purchase price (including import
duties and non-refundable purchase taxes but
excluding any trade discount and rebates), and any
directly attributable costs of bringing the asset to its
working condition and location for its intended use.
Subsequent to initial recognition, PPE are stated
at cost less accumulated depreciation and
accumulated impairment losses, if any. Subsequent
expenditure relating to PPE is capitalized only when it
is probable that future economic benefits associated
with these will flow to the Company and the cost
of the item can be measured reliably. When an
item of PPE is replaced, then its carrying amount is
derecognised and the cost of the new item of PPE is
recognised. Further, in case the replaced part was not
depreciated separately, the cost of the replacement
is used as an indication to determine the cost of
the replaced part at the time it was acquired. All
other repair and maintenance cost are recognised in
Statement of profit and loss as incurred. 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.
An item of PPE and any significant part initially
recognised is derecognized upon disposal or when
no future economic benefits are expected from
its use or disposal. Any gains or losses arising
from de-recognition of PPE are measured as the
difference between the net disposal proceeds and
the carrying amount of the asset and are recognised
in the Statement of profit and loss when the PPE is
derecognised.
The Company identifies and determines cost of
each component/part of the asset separately, if the
component/part has a cost which is significant to
the total cost of the asset and has useful life that is
materially different from that of the remaining asset.
b) Intangible Assets:
Intangible Assets are stated at historical cost
less accumulated amortisation and accumulated
impairment loss, if any. Profit or Loss on disposal of
intangible assets is recognised in the Statement of
Profit and Loss.
c) Capital Work in Progress & Capital Advances:
Capital work-in-progress comprises the cost of
assets that are yet not ready for their intended
use at the balance sheet date. Advances given
towards acquisition of fixed assets outstanding at
each balance sheet date are classified as Capital
Advances under Other Non-Current Assets.
d) Depreciation and Amortization:
Depreciation on PPE (other than free hold and lease
hold land) has been provided based on useful life
of the assets in accordance with Schedule II of
the Companies Act, 2013, on Written Down Value
Method. Freehold land is not depreciated. Leasehold
land and leasehold improvements are amortized over
the primary period of lease. Depreciation methods,
useful lives and residual value are reviewed at
each reporting date and adjusted prospectively, if
appropriate.
e) Revenue Recognition:
Revenue is measured at the fair value of consideration
received or receivable. Amounts disclosed as revenue
are inclusive of excise duty and net of returns, trade
discount or rebates and applicable taxes and duties
collected on behalf of the government and which are
levied on such sales.
The Company recognises revenue when the amount
of revenue can be reliably measured and it is
probable that future economic benefits will flow to
the Company.
i. Revenue from sales is recognised when goods
are supplied and control over the Goods sold is
transferred to the buyer which is on dispatch/
delivery as per the terms of contracts and no
significant uncertainty exists regarding the
amount of the consideration that will be derived
from the sales of the goods. This is considered
the appropriate point where the performance
obligations in the contracts are satisfied as the
Group no longer has control over the inventory
sales are presented net of returns, trade
discounts rebates and Goods and service tax
(GST).
ii. Revenue from services is recognised pro-rata as
and when services are rendered over a specified
period of time. The company collects goods
and service tax on behalf of the government
and therefore it is not an economic benefit
flowing to the company. Hence it is excluded
from the revenue.Interest income is recognised
using effective interest method on time
proportion basis taking in to account the amount
outstanding.
iii. Dividend income from investment is recognised
when the Company’s right to receive is
established by the reporting date, which is
generally when shareholders approve the
dividend.
f) Lease:
The determination of whether an arrangement is
(or contains) a lease is based on the substance of
the arrangement at the inception of the lease. The
arrangement is, or contains, a lease if fulfilment of
the arrangement is dependent on the use of a specific
asset or assets and the arrangement conveys a right
to use the asset or assets, even if that right is not
explicitly specified in an arrangement.
Company as a Lessee
A lease is classified at the inception date as a finance
lease or an operating lease. A lease that transfers
substantially all the risks and rewards incidental to
ownership to the Company is classified as a finance
lease.
Finance leases are capitalised at the commencement
of the lease at the inception date fair value of the
leased property or, if lower, at the present value of
the minimum lease payments. Leases payments are
apportioned between finance charges and reduction
of the lease liability so as to achieve a constant rate
of interest on the remaining balance of the liability.
Finance charges are recognised in finance costs
in the statement of profit and loss, unless they are
directly attributable to qualifying assets, in which
case they are capitalised in accordance with the
Company’s general policy on the borrowing costs.
Contingent rentals are recognised as expenses in the
periods in which they are incurred.
A leased asset is depreciated over the useful life of
the asset. However, if there is no reasonable certainty
that the Company will obtain ownership by the end
of the lease term, the asset is depreciated over the
shorter of the estimated useful life of the asset and
the lease term.
Operating lease payments are generally recognised
as an expense in the profit or loss on a straight-line
basis over the lease term. Where the rentals are
structured solely to increase in line with expected
general inflation to compensate for the lessor’s
expected inflationary cost increases, such increases
are recognised in the year in which such benefits
accrue. Contingent rentals arising under operating
leases are also recognised as expenses in the periods
in which they are incurred.
The Company has elected not to recognise right-of-
use assets and lease liabilities for short-term leases
that have a lease term of 12 months or less and
leases of low-value assets. The Company recognises
the lease payments associated with these leases as
an expense on a straight-line basis over the lease
term.
Company as a lessor
Rental income from operating lease is generally
recognised on a straight-line basis over the term of
the relevant lease. Where the rentals are structured
solely to increase in line with expected general
inflation to compensate for the Company’s expected
inflationary cost increases, such increases are
recognised in the year in which such benefits
accrue. Initial direct costs incurred in negotiating
and arranging an operating lease are added to the
carrying amount of the leased asset and recognised
over the lease term on the same basis as rental
income. Contingent rents are recognised as revenue
in the period in which they are earned.
Amounts due from lessees under finance leases
are recorded as receivables at the Company’s net
investment in the leases. Finance lease income is
allocated to accounting periods so as to reflect a
constant periodic rate of return on the Company’s net
investment outstanding in respect of the leases.
g) Inventories:
Inventories are valued at lower of the cost determined
on weighted average basis or net realisable value. The
comparison of cost and net realisable value is made
on an item-by-item basis. Damaged, unserviceable
and inert stocks are valued at net realizable value.
Determination Cost of raw materials, packing
materials and stores spares and consumables
Stocks is determined so as to exclude from the cost,
taxes and duties which are subsequently recoverable
from the taxing authorities.
Cost of finished goods and work-in-progress includes
the cost of materials, an appropriate allocation of
overheads and other costs incurred in bringing the
inventories to their present location and condition.
h) Impairment of assets:
Goodwill and intangible assets that have an indefinite
useful life are not subject to amortisation and are
tested annually for impairment, or more frequently
if event or changes are indicative in circumstances
indicate that they might be impaired. Assets that
have a definite useful life are tested for impairment
whenever events or changes in circumstances
that indicate that the carrying amount may not be
recoverable. Management periodically assesses
using external and internal sources, whether there
is an indication that an asset may be impaired.
An Impairment loss is recognised for the amount
by which the assets carrying amount exceeds its
recoverable amount. An impairment loss is charged
to the Profit and Loss Account in the year in which an
asset is identified as impaired. An impairment loss
recognized in prior accounting periods is reversed
if there has been change in the estimate of the
recoverable amount.
i) 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. Financial
instruments also include derivative contracts such as
foreign currency foreign exchange forward contracts,
futures and currency options.
1. Financial assets
Classification
The Company shall classify financial assets as
subsequently measured at amortised cost, fair
value through other comprehensive income
(FVOCI) or fair value through profit and loss
(FVTPL) on the basis of its business model
for managing the financial assets and the
contractual cash flow characteristics of the
financial asset.
Initial recognition and measurement
All financial assets are recognised 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 market place
(regular way trades) are recognised on the trade
date, i.e., the date that the Company commits to
purchase or sell the asset.
Debt instruments
Ý A ‘debt instrument’ is measured at the
amortised 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.
Ý 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 and fees or costs
that are an integral part of the EIR. The EIR
amortisation is included in finance income
in the profit and loss.
Ý Debt instruments included within the
fair value through profit and loss (FVTPL)
category are measured at fair value with
all changes recognized in the statement of
profit and loss.
Investments in subsidiaries, associates and
joint venture
Ý Investments in subsidiaries and joint
venture are carried at cost less accumulated
impairment losses, if any. Where an
indication of impairment exists, the carrying
amount of the investment is assessed and
written down immediately to its recoverable
amount. On disposal of investments in
subsidiaries and joint venture, the difference
between net disposal proceeds and the
carrying amounts are recognized in the
statement of profit and loss.
Equity instruments
Ý The Company subsequently measures all
equity investments in Companies/Mutual
funds other than equity investments
in subsidiaries, at fair value. Dividends
from such investments are recognised in
profit and loss as other income when the
Company’s right to receive payments is
established.
De-recognition
A financial asset derecognized only when:
Ý The rights to receive cash flows from the
asset have expired, or
Ý 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.
Ý When the Company has transferred its rights to
receive cash flows from an asset or has entered
into 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 of the
risks and rewards of the asset, nor transferred
control of the asset, the Company continues
to recognise the transferred asset to the extent
of the Company’s continuing involvement. In
that case, the Company also recognises an
associated liability. The transferred asset and
the associated liability are measured on a basis
that reflects the rights and obligations that the
Company has retained.
Ý Continuing involvement that takes the form of a
guarantee over the transferred asset is measured
at the lower of the original carrying amount of the
asset and the maximum amount of consideration
that the Company could be required to repay.
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 following financial assets and credit
risk exposure:
a) Financial assets that are debt instruments,
and are measured at amortised cost e.g.,
loans, debt securities, deposits, and bank
balance
b) Trade receivables or any contractual right
to receive cash or another financial asset
that result from transaction that are within
the scope of IND AS 18.- The application
of simplified approach does not require
the Company to track changes in credit
risk. Rather, it recognises impairment
loss allowance based on lifetime ECLs at
each reporting date, right from its initial
recognition.
2. Financial liabilities
Initial recognition and measurement
All financial liabilities are recognised 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 liabilities at fair value through profit
and loss
Financial liabilities at fair value through profit and
loss include financial liabilities held for trading
and financial liabilities designated upon initial
recognition as at fair value through profit and
loss. Financial liabilities are classified as held
for trading if they are incurred for the purpose of
repurchasing in the near term. This category also
includes derivative financial instruments entered
into by the Company that are not designated as
hedging instruments in hedge relationships as
defined by Ind-AS 109.
Gains or losses on liabilities held for trading are
recognised in the profit and loss.
Derecognition
A financial liability is derecognised 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 derecognition 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.
j) Fair Value Measurement:
The Company’s measures Financial Instruments 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.
The Company uses valuation techniques that are
appropriate in the circumstances and for which
sufficient data are available to measure fair value,
maximising the use of relevant observable inputs and
minimising the use of unobservable inputs.
- All assets and liabilities for which fair value
is measured or disclosed in the financial
statements are categorised 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 recognised in
the financial statements on a recurring basis, the
Company determines whether transfers have
occurred between levels in the hierarchy by re¬
assessing categorisation (based on the lowest level
input that is significant to the fair value measurement
as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the
Company has determined classes of assets and
liabilities on the basis of the nature, characteristics
and risks of the asset or liability and the level of the
fair value hierarchy as explained above.
k) Foreign Currency and Translation balances:
Transactions in foreign currencies entered into
by the Company are accounted in the functional
currency at the exchange rates prevailing on the date
of the transaction. Monetary assets and liabilities
denominated in foreign currency are translated at
functional currency closing rate of exchange at the
reporting date. Exchange differences arising on
foreign exchange transactions settled during the year
are recognised in the statement of profit and loss.
l) Trade Receivables:
Trade receivables are recognised initially at fair value
and subsequently measured at amortised cost using
the effective interest method, less provision for
Expected Credit Loss.
m) Trade Payables:
These amounts represent liabilities for goods and
services provided to the Company prior to the end
of financial year which are unpaid. The amounts are
usually unsecured. Trade and other payables are
presented as current liabilities unless payment is not
due within twelve months after the reporting period.
They are recognised initially at their fair value.
n) Income Taxes:
Income tax expenses comprises of current and
deferred tax expense and is recognised in the
statement of profit or loss except to the extent that
it relates to items recognized directly in equity or
in OCI, in which case, the tax is also recognised in
directly in equity or OCI respectively.
Current tax:
Current tax is the amount expected tax payable or
recoverable on the taxable profit or loss for the year
and any adjustment to the tax payable or recoverable
in respect of previous years. It is measured using tax
rates enacted or substantively enacted by the end of
reporting period. 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.
Deferred tax:
Deferred Income Tax is recognised using the Balance
sheet approach. Deferred income tax assets and
liabilities are recognised for deductible and taxable
temporary differences arising between the tax base
of assets and their carrying amount, except when the
deferred income tax arises from the initial recognition
of an assets 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 income 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.
The carrying amount of deferred income tax assets
is reviewed at each reporting date and reduced to
the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of
the deferred income tax asset to be utilised.
Deferred tax assets and liabilities are measured using
substantively enacted tax rates expected to apply to
taxable income in the years in which the temporary
differences are expected to be received or settled.
Deferred tax assets and liabilities are offset when
they relate to income taxes levied by the same
taxation authority and the relevant entity intends to
settles its current tax assets and liabilities on a net
basis.
o) Cash and Cash Equivalents
For the purpose of presentation in the statement
of cash flows, cash and cash equivalents includes
cash in hand, demand deposits with banks, other
short term 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, and bank
overdrafts. Bank overdrafts are shown in current
liabilities in the balance sheet.
p) Employee Benefits
Short term Employee Benefits
All employee benefits payable wholly within twelve
months of rendering the service are classified as short
term employee benefits and they are recognized in
the period in which the employee renders the related
service. The Company recognizes the undiscounted
amount of short term employee benefits expected
to be paid in exchange for services rendered as
a liability (accrued expense) after deducting any
amount already paid.
Post Employment Benefits
I. Defined Contribution Plan
Defined contribution plans are employee
state insurance scheme and Government
administered pension fund scheme for all
applicable employees and superannuation
scheme for eligible employees.
Recognition and measurement of defined
contribution plans:
The Company recognizes contribution payable to
a defined contribution plan as an expense in the
Statement of Profit and Loss when the employees
render services to the Company during the
reporting period. If the contributions payable
for services received from employees before the
reporting date exceeds the contributions already
paid, the deficit payable is recognized as a
liability after deducting the contribution already
paid. If the contribution already paid exceeds the
contribution due for services received before the
reporting date, the excess is recognized as an
asset to the extent that the prepayment will lead
to, for example, a reduction in future payments
or a cash refund.
II. Defined Benefit plans:
Provident Fund scheme
The Company makes specified monthly
contributions towards Employee Provident
Fund scheme in accordance with the statutory
provisions
Gratuity scheme
The Company operates a defined benefit
gratuity plan for employees. The Company
contributes to a separate entity (a fund)
administered by LIC, towards meeting the
Gratuity obligation.
Pension Scheme:
The Company operates a defined benefit
pension plan for certain specified employees
and is payable upon the employee satisfying
certain conditions, as approved by the Board of
Directors.
Recognition and measurement of Defined Benefit
plans:
The cost of providing defined benefits is determined
using the Projected Unit Credit method with actuarial
valuations being carried out at each reporting date.
The defined benefit obligations recognized in the
Balance Sheet represent the present value of the
defined benefit obligations as reduced by the fair
value of plan assets, if applicable. Any defined benefit
asset (negative defined benefit obligations resulting
from this calculation) is recognized representing the
present value of available refunds and reductions in
future contributions to the plan.
All expenses represented by current service cost,
past service cost, if any, and net interest on the
defined benefit liability / (asset) are recognized in the
Statement of Profit and Loss. Remeasurements of
the net defined benefit liability / (asset) comprising
actuarial gains and losses and the return on the
plan assets (excluding amounts included in net
interest on the net defined benefit liability/asset),
are recognized in Other Comprehensive Income.
Such remeasurements are not reclassified to the
Statement of Profit and Loss in the subsequent
periods.
The Company presents the above liability/(asset)
as current and non-current in the Balance Sheet as
per actuarial valuation by the independent actuary;
however, the entire liability towards gratuity is
considered as current as the Company will contribute
this amount to the gratuity fund within the next twelve
months.
Other Long Term Employee Benefits:
The Company does not allow encashment of leave
Balance.
q) Research and Development
Revenue expenditure on Research and Development
is charged to Profit and Loss Account as incurred.
Capital expenditure on assets acquired for Research
and Development is added to PPE and depreciated
in accordance with the policies stated for Property,
Plant and Equipment and Intangible Assets.
r) Borrowing Cost
Borrowing costs, that are, attributable to the
acquisition, construction or production of qualifying
are capitalized as part of the costs of such assets.
A qualifying asset is one that necessarily takes a
substantial period of time to get ready for its intended
use or sale. All other borrowing costs are expensed in
the period in which they occur. Borrowing cost also
includes exchange differences to the extent regarded
as an adjustment to the borrowing costs.
s) Earnings per share
The Company presents basic and diluted earnings per
share (“EPS”) data for its equity shares. Basic EPS is
calculated by dividing the profit or loss attributable to
equity shareholders of the Company by the weighted
average number of equity shares outstanding during
the period. Diluted EPS is determined by adjusting
the profit or loss attributable to equity shareholders
and the weighted average number of equity shares
outstanding for the effects of all dilutive potential
ordinary shares, which includes all stock options
granted to employees.
The number of equity shares and potentially dilutive
equity shares are adjusted retrospectively for all
periods presented for any share splits and bonus
shares issues including for changes effected prior to
the approval of the financial statements by the Board
of Directors.
t) Current / Non-Current Classification:
The Company presents assets and liabilities in
the balance sheet based on current/non-current
classification as per IND AS 1
An asset is treated as current when it is:
(i) Expected to be realised or intended to be sold or
consumed in normal operating cycle
(ii) Held primarily for the purpose of trading
(iii) Expected to be realised within twelve months
after the reporting period, or
(iv) Cash or cash equivalent unless restricted from
being exchanged or used to settle a liability for at
least twelve months after the reporting period
AH other assets are classified as non-current.
A liability is current when:
(i) It is expected to be settled in normal operating
cycle.
(ii) It is held primarily for the purpose of trading
(iii) It is due to be settled within twelve months after
the reporting period, or
(iv) There is no unconditional right to defer the
settlement of the liability for at least twelve
months after the reporting period
The Company classifies all ither liabilities as non¬
current.
Deferred tax assets and liabilities are classified as
non-current assets and liabilities respectively.
The operating cycle is the time between the acquisition
of assets for processing and their realisation in cash
and cash equivalents. The company has identified
twelve months as its normal operating cycle.
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