2. SIGNIFICANT ACCOUNTING POLICIES :
2.1 Statement of compliance:
A. Basis of preparation and Presentation
These financial statements are prepared in accordance with Indian Accounting Standards (herein after referred to as
“Ind AS”) notified under Section 133 of the Companies Act, 2013 (“Act”) read with Companies (Indian Accounting
Standards) Rules, 2015 as amended, and the other relevant provisions of the Act.
The company's presentation and functional currency is Indian rupees. All amounts in these financial statements,
except per share amounts and unless as stated otherwise, have been rounded off to two decimal places and have
been presented in lakhs.
B. Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following:
• Certain financial assets and liabilities are measured at fair value.
• Defined benefit plans where plan assets measured at fair value.
Fair value is the price that would be received on sale of an asset or paid to transfer a liability in an orderly transaction
between market participations at the measurement date, regardless of whether that price is directly observable
or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company
considers the characteristics of the asset or liability if market participants take those characteristics into account
when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes
in these financial statements is determined on such a basis, leasing transactions that are within the scope of Ind AS
116, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in
Ind AS 2 or value in use in Ind AS 36.
In addition, for financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on
the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to
the fair value measurement in its entirety, which are described as follows:
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity
can access at the measurement date;
• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or
liability, either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the asset or liability.
2.2 Use of estimates:
The preparation of the financial statements in conformity with Ind AS requires the Management to make estimates and
assumptions considered in the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at
the date of the accounts and reported amounts of income and expenses during the year. The management believes that
the estimates used in the preparation of financial statements are prudent and reasonable. The said estimates are based
on the facts and events, that existed as at the reporting date, or that occurred after that date but provide additional
evidence about conditions existing as at the reporting date.
Actual results could differ from those estimates. The most significant techniques for estimation are described in the
accounting policies below. Critical accounting judgments and the key sources of estimation or uncertainty in applying
the Company's accounting policies arise in relation to property, plant and equipment, impairment of assets, current
asset provisions, deferred tax, retirement benefits and provisions. The detailed accounting policies, including underlying
judgments and methods of estimations for each of these items are discussed below.
2.3 Current versus non-current classification:
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification. An asset is
current when it is:
• Expected to be realised or intended to sold or consumed in normal operating cycle
• Held primarily for the purpose of trading
• Expected to be realised within twelve months after the reporting period, or
• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months
after the reporting period
All other assets are classified as non-current.
A liability is current when:
• It is expected to be settled in normal operating cycle
• It is held primarily for the purpose of trading
• It is due to be settled within twelve months after the reporting period, or
• 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 other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Based on the nature of activities of the Company and the time between the acquisition of assets for processing and their
realization in cash or cash equivalents the Company has determined its operating cycle as 12 months for the purpose of
classification of its assets and liabilities as current and non-current.
2.4 Property, plant and equipment:
Freehold land is carried at historical cost. All other items of property, plant and equipment (PPE) are stated at cost, less
accumulated depreciation and impairment losses. Cost includes all direct costs and expenditures incurred to bring
the asset to its working condition and location for its intended use. Historical cost includes expenditure that is directly
attributable to the acquisition of the item.
An item of property, plant and equipment is recognised as an asset if it is probable that future economic benefits
associated with the item will flow to the Company and its cost can be measured reliably. This recognition principle is
applied to the costs incurred initially to acquire an item of property, plant and equipment and also to costs incurred
subsequently to add to, replace part of, or service it. All other repair and maintenance costs, including regular servicing,
are recognised in the statement of profit and loss as incurred.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. The gain or loss arising on disposal of an asset is determined as
the difference between the sale proceeds and the carrying amount of the asset and is recognised in the statement of
profit and loss.
Depreciation:
Depreciation is recognized to write off the cost of assets (other than freehold land) less their residual values over
their useful lives. These charges are commenced from the dates the assets are available for their intended use and are
spread over their estimated useful economic lives. The estimated useful lives, residual values and depreciation method
are determined and reviewed at the end of each year, with the effect of any changes in estimate accounted for on a
prospective basis. When significant parts of PPE are required to be replaced at intervals, company depreciates them
separately based on their specific useful lives.
Depreciation on PPE is provided as per the useful life prescribed in Schedule II of the Companies Act, 2013 except in
case of the following category of PPE in whose case the life of the items of PPE has been assessed based on technical
advice, taking into account the nature of the asset, the estimated usage of the asset, the operating condition of the asset,
past history of replacement, anticipated technological changes, manufacturer's warranties and maintenance support etc.
Depreciation on PPE is provided as per the useful life prescribed in Schedule II of the Companies Act, 2013.
Advances paid towards acquisition of property, plant and equipment outstanding at the year-end are classified as
capital advances under other non-current assets.
Assets classified as held for sale
An item of Property Plant and Equipment is classified as held for sale at the time when the Management is committed to
sell/ dispose off the asset based on agreements entered into with the customer, and the asset is expected to be sold ,
disposed off within one year from the date of classification. Assets classified as held for sale are measured at lower of
cost and net realisable value.
2.5 Investment property
Investment Property is property (land or building or a part of building) held either to earn rental income or for capital
appreciation or for both, but not for sale in the ordinary course of business, use in production or supply of goods or
services or for administrative purposes.
Investment properties are measured initially at cost, including transaction costs, Subsequent to initial recognition,
investment properties are stated at cost less accumulated depreciation and accumulated impairment loss, if any.
The Company depreciates building component of investment property over 30 years from the date of original purchase.
Investment properties are derecognised either when they have been disposed of or when they are permanently
withdrawn from use and no future economic benefit is expected from their disposal.
The difference between the net disposal proceeds and the carrying amount of the asset is recognised in profit or loss
in the period of depreciation.
Transfers are made to (or from) investment property only when there is a change in use. For a transfer from investment
property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of
change in use.
2.6 Investment in subsidiaries
Investment in subsidiaries are recorded at cost and reviewed for impairment at each reporting date.
2.7 Inventories
Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on a first-in-first-
out basis. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion
and costs necessary to make the sale.
2.8 Leasing:
Leases:
The Company accounts for its leases in accordance with Ind AS 116.
At inception of a contract, the Company assesses whether the contract is, or contains, a lease. A contract is, or contains,
a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for
consideration. The Company reassesses a lease only if the terms and conditions of the contract are changed. In case
of a lease that, at the commencement date, has a lease term of 12 months or less or in case of low value assets, the
Company recognises the lease payments associated with those leases as an expense on either a straight-line basis over
the lease term or another systematic basis. The Company's leases mainly consist of lands and buildings taken on lease for
its showrooms/workshops.
Initial measurement
At the commencement date, a lessee shall measure the right-of-use asset at cost and measure the lease liability at the
present value of the lease payments that are not paid at that date.
The lease payments shall be discounted using the interest rate implicit in the lease, if that rate can be readily determined.
If that rate cannot be readily determined, the lessee shall use the lessee's incremental borrowing rate.
Subsequent measurement
Right-of-use assets:
After the commencement date, the Company measures the right-of-use asset by applying a cost model:
(a) Cost less any accumulated depreciation and any accumulated impairment losses; and
(b) adjusted for any remeasurement of the lease liability
If the lease transfers ownership of the underlying asset to the lessee by the end of the lease term or if the cost of the
right-of-use asset reflects that the lessee will exercise a purchase option, the lessee shall depreciate the right-of-use asset
from the commencement date to the end of the useful life of the underlying asset. Otherwise, the lessee shall depreciate
the right-of-use asset from the commencement date to the earlier of the end of the useful life of the right-of-use asset
or the end of the lease term. Ind AS 36, Impairment of Assets, is applied to determine whether the right-of-use asset is
impaired and to account for any impairment loss identified.
Lease liability
After the commencement date, the Company measures the lease liability by:
(a) increasing the carrying amount to reflect interest on the lease liability;
(b) reducing the carrying amount to reflect the lease payments made; and
(c) remeasuring the carrying amount to reflect any reassessment or lease modifications or to reflect revised in-substance
fixed lease payments
2.9 Impairment of Non Financial Assets:
At each balance sheet date, the Company reviews the carrying amounts of its property, plant and equipment to determine
whether there is any indication that the carrying amounts of those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated in order to determine the extent of impairment loss
(if any). When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the
recoverable amount of the cash generating unit to which the asset belongs. When a reasonable and consistent basis of
allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are
allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be
identified.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows
have not been adjusted.
If recoverable amount of asset (or cash-generating unit) is estimated to be less than carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized
immediately in the statement of profit and loss.
When an impairment loss subsequently reverses, the carrying amount of the asset (or cash- generating unit) is increased
to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the
carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash
generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the statement of profit and
loss.
2.10 Foreign Currency transactions and translation:
The financial statements of the Company are presented in INR, which is the functional currency of the company.
In preparing the financial statements of the Company, transactions in currencies other than the functional currency are
recorded at the rates of exchange prevailing on the date of the transaction. At the end of each reporting period,
monetary items denominated in foreign currencies are retranslated at the rates prevailing at the end of the reporting
period. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates
prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical
cost in a foreign currency are not translated.
Exchange differences arising on the settlement of monetary items, and on retranslation of monetary items are included
in the statement of profit and loss for the period. Exchange differences arising on retranslation of non-monetary items
carried at fair value are included in statement of profit and loss for the period except for differences arising on the
retranslation of non-monetary items in respect of which gains and losses are recognised directly in other comprehensive
income.
2.11 Borrowing costs:
Borrowing costs directly attributable to the acquisition, construction 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. Investment income earned
on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from
the borrowing costs eligible for capitalization. All other borrowing costs are recognised in statement of profit or loss in
the period in which they are incurred.
2.12 Employee benefits:
2.12.1 Short term
Short term employee benefits are recognised as an expense at the undiscounted amount expected to be paid over the
period of services rendered by the employees to the Company. These benefits include compensated absences such
as paid annual leave.
2.12.2 Retirement benefit costs
The Company has both defined-contribution and defined-benefit plans, of which some have assets in special funds or
securities. The plans are financed by the Company and in the case of some defined contribution plans are financed by
the Company along with its employees.
2.12.2.1 Defined-contribution plans
These are plans in which the Company pays pre-defined amounts to separate funds and does not have any legal or
informal obligation to pay additional sums. These comprise of contributions to the employees' provident fund and
superannuation fund. The Company's payments to the defined-contribution plans are reported as expenses during the
period in which the employees perform the services that the payment covers.
2.12.2.2 Defined-benefit plans
For defined benefit retirement plans, the cost of providing benefits is determined using the Projected Unit Credit Method,
with actuarial valuation being carried out at each balance sheet date. Remeasurement, comprising actuarial gains and
losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding net interest),
is reflected immediately in the balance sheet with a charge or credit recognised in other comprehensive income in the
period in which they occur. Remeasurement recognised in other comprehensive income is reflected immediately in
retained earnings and is not reclassified to statement of profit and loss. Past service cost is recognised as an expense
when the plan amendment or curtailment occurs or when any related restructuring costs or termination benefits are
recognised, whichever is earlier. The service cost, net interest on the net defined benefit liability/ (asset) is treated as a
net expense within employment cost. The retirement benefit obligation recognised in the balance sheet represents the
present value of the defined-benefit obligation as reduced by the fair value plan assets.
2.12.3 Other long-term employee benefits
Compensated absences which accrue to employees and which can be carried to future periods but are expected
to be availed in twelve months immediately following the year end are reported as expenses during the year in which
the employees perform the services that the benefit covers and the liabilities are reported at the undiscounted amount
of the benefits after deducting amounts already paid. Where there are restrictions on availment of encashment of such
accrued benefit or where the availment is otherwise not expected to wholly occur in the next twelve months, the liability
on account of the benefit is actuarially determined using the projected unit credit method.
2.13 Taxation:
Income Tax expense represents the sum of current tax and deferred tax.
2.13.1 Current Tax
The current tax is based on taxable profit for the year. Taxable profit differs from 'profit before tax' as reported in the
statement of profit and loss because it excludes items of income or expense that are taxable or deductible in other years
and items that are never taxable or deductible. The Company's current tax is calculated using tax rates that have been
enacted or substantively enacted by the end of the reporting period.
2.13.2 Deferred Tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are
generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible
temporary differences, carry forward tax losses and allowances to the extent that it is probable that future taxable
profits will be available against which those deductible temporary differences, carry forward losses and allowances can
be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial
recognition of assets and liabilities in a transaction that affects neither taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent
that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred income tax
asset to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the liability
is settled or the asset is realised, based on the tax rates and tax laws that have been enacted or substantially enacted by
the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner
in which the Company expects, at the end of the reporting period, to cover or settle the carrying amount of its assets
and liabilities.
Current and deferred tax are recognised as an expense or income in the 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.
Deferred tax assets include unused tax credit on account of Minimum Alternative Tax (MAT) paid in accordance with the
tax laws in India, which is likely to give future economic benefits in the form of availability of set off against future income
tax liability. Accordingly, unused tax credit are recognised as deferred tax asset in the Balance sheet when the asset can
be measured reliably and it is probable that the future economic benefit associated with the asset will be realised.
2.14 Cash and cash equivalents:
Cash and cash equivalents comprise cash on hand and demand deposits with banks which are short-term, highly liquid
investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes
in value. Bank overdrafts are shown within borrowings in current liabilities in Balance Sheet.
2.15 Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted
for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments.
The cash flows from operating, investing and financing activities of the Company are segregated based on the available
information.
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