Note 2 Significant Accounting Policies
The significant accounting policies applied by the company in the preparation of its financial statements are listed below. Such
accounting policies has been applied consistently to all the periods presented in these financial statements, unless otherwise
indicated.
a) Property, Plant and Equipment
i. Recognition and initial measurement
Property, plant and equipment are stated at their cost of acquisition. The cost comprises purchase price, taxes (against
which input has not been availed), borrowing cost if capitalization criteria are met and directly attributable cost of bringing
the asset to its working condition for the intended use. Any trade discount and rebates are deducted in arriving at the
purchase price. Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as
appropriate, only when it is probable that future economic benefits attributable to such subsequent cost associated with
the item will flow to the Company. All other repair and maintenance costs are recognized in Statement of Profit or Loss
as incurred.
ii. Subsequent measurement (depreciation and useful lives)
Depreciation on Property, plant and equipment is provided on the straight-line method arrived on the basis of the useful
life prescribed under Schedule II of the Companies Act, 2013. The residual values, useful lives and method of depreciation
are reviewed at each financial year end and adjusted prospectively, if appropriate.
iii. De-recognition
An item of Property, plant and equipment and any significant part initially recognized 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.
iv. Component Accou nti ng
The Company identifies and determines cost of each component of an asset separately, if the component has a materially
different useful life as compared to entire asset and its cost is significant of the total cost.
v. Depreciation and Useful Lives
Depreciation on Property, plant and equipment is provided on the straight-line method arrived on the basis of the useful
life prescribed under Schedule II of the Companies Act, 2013.
The residual values, useful lives and method of depreciation are reviewed at each financial year end and adjusted
prospectively, if appropriate.
b) Intangible assets
i. Recognition and initial measurement
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible
assets are carried at cost less any accumulated amortization and accumulated impairment losses, if any.
ii. Subsequent measurement (amortization and useful lives)
All finite-lived intangible assets are accounted for using the cost model whereby capitalized costs are amortized over
their estimated useful lives. Residual values and useful lives are reviewed at each reporting date and any change in the
same is accounted for prospectively.
iii. De-recognition
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.
c) Capital Work in Progress
Capital work in progress represents expenditure incurred in respect of capital projects and are carried at cost. Cost comprises
purchase cost, related acquisition expenses and other direct expenses.
d) Inventories
Inventories are measured at the lower of cost and net realizable value.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
i. Raw materials and Construction material cost includes cost of purchase and other costs incurred in bringing the
inventories to their present location and condition. Cost is determined on weighted average cost method.
ii. Finished goods cost includes direct materials, labor, a proportion of manufacturing overheads based on normal operating
capacity. Cost is determined on weighted average cost method.
iii. Real estate: Land and building held as real estate inventory is valued at cost or net realizable value whichever is lower.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion
and estimated costs necessary to make the sale.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and
the estimated costs necessary to make the sale.
e) Impairment of non-financial assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication
exists, or when annual impairment testing for an asset is required, the Company estimates the asset's recoverable amount.
An asset's recoverable amount is the higher of an asset's or cash-generating unit's (CGU) fair value less costs of disposal
and its value in use. Impairment losses of continuing operations are recognized in the Statement of Profit and Loss.
After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.
f) Borrowing Cost
Borrowing costs that are attributable to the acquisition or construction 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. Other borrowing costs are
charged to Profit & Loss Account in the period in which they are incurred. Borrowing cost also includes exchange differences
to the extent regarded as an adjustment to the borrowing costs.
g) Foreign Currency Translations
Transactions in foreign currencies are initially recorded by the Company at the functional currency spot rate of exchange
prevailing on the date of the transaction.
Monetary assets and monetary liabilities denominated in foreign currencies and remaining unsettled at the end of the year are
converted at the functional currency spot rate of exchange prevailing on the reporting date. Differences arising on settlement
or conversion of monetary items are recognized in statement of profit and loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are recorded using the exchange
rates at the date of the transaction. Non-monetary items measured at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value is determined. 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.
h) Fair value measurement
i. The Company measures financial instruments, such as derivatives and certain investments at fair value at each reporting
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
ii. Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are 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 - The fair value of financial instruments quoted in active markets is based on their quoted closing price at the
balance sheet date.
Level 2 - The fair value of financial instruments that are not traded in an active market is determined by using valuation
techniques using observable market data. Such valuation techniques include discounted cash flows, standard valuation
models based on market parameters for interest rates, yield curves or foreign exchange rates, dealer quotes for similar
instruments and use of comparable arm's length transactions.
Level 3 - The fair value of financial instruments that are measured on the basis of entity specific valuations using inputs
that are not based on observable market data (unobservable inputs).
iii. 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 or each case.
i) Revenue Recognition
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on
behalf of third parties. A performance obligation is a promise in a contract to transfer a distinct good or service (or a bundle of
goods and services) to the customer and is the unit of account in Ind AS 115. A contract's transaction price is allocated to each
distinct performance obligation and recognized as revenue, as, or when, the performance obligation is satisfied. Revenue
is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of
payments and excludes taxes and duties collected on behalf of the government. The Company recognizes revenue from the
following major sources:
i. Operating Income:
Sale of goods
Revenue from the sale of goods is recognized when the goods are delivered and titles have passed, at which time all the
following conditions are satisfied:
• the Company has transferred to the buyer the significant risks and rewards of ownership of the goods;
• the Company retains neither continuing managerial involvement to the degree usually associated with ownership
nor effective control over the goods sold;
• the amount of revenue can be measured reliably;
• it is probable that the economic benefits associated with the transaction will flow to the Company; and
• the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Rendering of Service:
Revenue from services is recognised upon satisfaction of performance obligation towards rendering of such services.
Following are the conditions to recognize the revenue from rendering the service:
• the amount of revenue can be measured reliably
• it is probable that the economic benefits associated with the transaction will flow to the entity
• the stage of completion of the transaction at the end of the reporting period can be measured reliably; and
• the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.
Lease rentals
Lease payments from operating leases are recognized as Income on either a straight-line basis or another systematic
basis which is more representative of the pattern in which the benefit from the use of the underlying asset is diminished.
Revenue from lease rentals is disclosed net of indirect taxes, if any.
ii. Other Non-Operating Income
Interest income:
Interest income is recognized on time proportion basis taking into account the amount outstanding and rate applicable.
Dividend income:
Dividend income is recognized when the Company's right to receive the dividend is established, it is probable that the
economic benefits associated with the dividend will flow to the entity and the amount of the dividend can be measured
reliably i.e., in case of interim dividend, on the date of declaration by the Board of Directors; whereas in case of final
dividend, on the date of approval by the shareholders.
Other Income:
All other incomes are accounted on accrual basis.
j) 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.
i. Financial Assets
Financial assets are recognized when the Company becomes a party to the contractual provisions of the instrument.
a) Initial recognition and measurement
All financial assets are recognized at fair value on initial recognition. Transaction costs that are directly attributable
to the acquisition of financial assets, which are not at fair value through profit or loss, are added to the fair value on
initial recognition.
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 recognized on the trade date, i.e., the date that the
Company commits to purchase or sell the asset.
b) Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
• Financial assets at amortized cost
A financial asset is subsequently measured at amortized cost if it is held within a business model whose
objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial
asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal
amount outstanding. After initial measurement, debt instruments at amortized cost are subsequently measured
at amortized cost using the Effective Interest Rate (EIR) method, less impairment, if any. The amortization of
EIR and loss arising from impairment, if any is recognized in the Statement of Profit and Loss.
“Amortized cost is calculated by considering any discount or premium on acquisition and fees or costs that are
an integral part of the EIR. The effect of EIR amortization is included as finance costs in the Statement of Profit
and Loss.”
• Financial assets at fair value through other comprehensive income (FVTOCI)
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within
business model whose objective is achieved by both collecting contractual cash flows and selling financial
assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
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 the other comprehensive income (OCI).
On derecognition, cumulative gain or loss previously recognized in OCI is reclassified from the equity to 'other
income' in the Statement of Profit and Loss.
• Financial assets as Equity Investments
All investments in equity instruments classified under financial assets are initially measured at fair value, the
Company may, on initial recognition, irrevocably elect to measure the same either at FVOCI or FVTPL.
The Company makes such election on an instrument-by-instrument basis. A fair value change on an equity
instrument is recognized as other income in the Statement of Profit and Loss unless the Company has elected to
measure such instrument at FVOCI. Fair value changes excluding dividends, on an equity instrument measured
at FVOCI are recognized in OCI. Amounts recognized in OCI are not subsequently reclassified to the Statement
of Profit and Loss. Dividend income on the investments in equity instruments are recognized as 'other income'
in the Statement of Profit and Loss.
• Financial assets at fair value through profit or loss
Financial assets which are not classified in any of the above categories are subsequently measured at fair value
through profit or loss. Any debt instrument, which does not meet the criteria for categorization as at amortized
cost or as FVTOCI, is classified as at 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 Statement of Profit and Loss.
c) 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:
The rights to receive cash flows from the asset have expired, or
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.
d) Impairment
I n accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and
recognition of impairment loss on the financial assets that are debt instruments, and are measured at amortized
cost e.g., loans, debt securities, deposits and trade receivables or any contractual right to receive cash or another
financial asset that result from transactions that are within the scope of Ind AS 115.
The company follows 'Simplified Approach' for recognition of impairment allowance. This approach doesn't require
the Company to track changes in credit risk. Rather, it recognizes impairment allowances based on lifetime ECLs at
each reporting date, right from its initial recognition.
ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract
and all the cash flows that the entity expects to receive, discounted at the original EIR. Lifetime ECL is expected
credit losses resulting from all possible defaults over the expected life of a financial instrument. ECL impairment loss
allowance (or reversal) recognized during the period is recognized as income/ expense in the statement of profit and
loss. This amount is reflected under the head 'other expenses' in the statement of profit and loss.
ii. Financial Liabilities
a) Initial recognition and measurement
Financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition
or issue of financial liabilities (other than financial liabilities at fair value through profit or loss) are added to or
deducted from the fair value of the financial liabilities, as appropriate, on initial recognition.
b) Subsequent measurement
Financial liabilities are carried at amortized cost using the effective interest method. After initial recognition, interest¬
bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. Gains and
losses are recognized in profit or loss when the liabilities are derecognized as well as through the EIR amortization
process. Amortized cost is calculated by considering any discount or premium on acquisition and fees or costs
that are an integral part of the EIR. The EIR amortization is included as finance costs in the statement of profit and
loss. For trade and other payables maturing within one year from the balance sheet date, the carrying amounts
approximate fair value due to the short maturity of these instruments.
c) Derecognition
A financial liability is derecognized 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, 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
recognized in the Statement of Profit and Loss.
d) 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 recognized amounts and there is an intention to settle on a net basis,
to realize the assets and settle the liabilities simultaneously.
iii. Share Capital
Ordinary equity shares
Incremental costs directly attributable to the issue of ordinary equity shares, are recognized as a deduction from equity.
iv. Derivative financial instruments and hedge accounting
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently
re-measured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value
depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged
and the type of hedge relationship designated.
The company designates their derivatives as hedges of foreign exchange risk associated with the cash flows of highly
probable forecast transactions. (Cash flow hedges).
The company documents at the inception of the hedging transaction the economic relationship between hedging
instruments and hedged items including whether the hedging instrument is expected to offset changes in cash flows
of hedged items. The company documents its risk management objective and strategy for undertaking various hedge
transactions at the inception of each hedge relationship.
The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of
the hedged item is more than 12 months; it is classified as a current asset or liability when the remaining maturity of the
hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability.
Cash flow hedges that qualify for hedge accounting
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges
is recognized in the other comprehensive income in cash flow hedging reserve within equity, limited to the cumulative
change in fair value of the hedged item on a present value basis from the inception of the hedge. The gain or loss relating
to the ineffective portion is recognized immediately in Statement of profit and loss.
When forward contracts are used to hedge forecast transactions, gains or losses relating to the effective portion of the
change in the spot component of the forward contracts are recognized in other comprehensive income in cash flow
hedging reserve within other equity.
The change in the forward element of the contract that relates to the hedged item ('aligned forward element') is
recognized within other comprehensive income in the costs of hedging reserve within equity. In some cases, the entity
may designate the full change in fair value of the forward contract (including forward points) as the hedging instrument. In
such cases, the gains and losses relating to the effective portion of the change in fair value of the entire forward contract
are recognized in the cash flow hedging reserve within other equity.
Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss.
When a hedging instrument expires, or is sold or terminated, or when a hedge no longer meets the criteria for hedge
accounting, any cumulative deferred gain or loss and deferred costs of hedging in equity at that time remains in equity
until the forecast transaction occurs. When the forecast transaction is no longer expected to occur, the cumulative gain or
loss and deferred costs of hedging that were reported in equity are immediately reclassified to profit or loss within other
gains/(losses).
I f the hedge ratio for risk management purposes is no longer optimal but the risk management objective remains
unchanged and the hedge continues to qualify for hedge accounting, the hedge relationship will be rebalanced by
adjusting either the volume of the hedging instrument or the volume of the hedged item so that the hedge ratio aligns
with the ratio used for risk management purposes. Any hedge ineffectiveness is calculated and accounted for in profit or
loss at the time of the hedge relationship rebalancing. Amounts accumulated in equity are reclassified to profit or loss in
the periods when the hedged item affects profit or loss.
k) Investments in Subsidiaries
Investments in subsidiaries 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 the difference between net disposal proceeds and the carrying amounts are recognized in the
statement of Profit and Loss.
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