1B. Material Accounting Policies:
The material accounting policies applied in the
preparation of these financial statements are set out
below. These policies have been consistently applied to
all the years presented, unless otherwise stated.
(a) Basis of Preparation
i. Compliance with Ind AS
The financial statements comply in all material
aspects with Indian Accounting Standards (Ind AS)
notified under Section 133 of the Companies Act,
2013 (the Act) and Companies (Indian Accounting
Standards) Rules, 2015 (as amended from time to
time) and presentation requirements of Division II
of Schedule III to Companies Act, 2013, (Ind AS
compliant Schedule III), as applicable to financial
statements.
The financial statements are presented in H and all
values are rounded to the nearest lakhs (H 00,000),
except when otherwise indicated.
ii. Historical Cost Convention
These financial statements have been prepared on
a historical cost basis, except as disclosed in the
accounting policies below:
• Certain financial assets and liabilities are
measured at fair value;
• Defined Benefit Plans - plan assets measured at
fair value; and
• Share-Based payments.
iii. Current Versus Non-current Classification
The Company presents assets and liabilities in the
balance sheet based on current/ non-current
classification. An asset is treated as current when it is:
• Expected to be realized or intended to be sold
or consumed in normal operating cycle
• Held primarily for the purpose of trading
• Expected to be realized 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 products and the time
between the acquisition of assets for processing
and their realization in cash and cash equivalents,
the Company has ascertained its operating cycle
as twelve months for the purpose of current / non¬
current classification of assets and liabilities.
(b) Foreign Currency Translation
i. Functional and Presentation Currency
Items included in the financial statements of the
Company are measured using the currency of the
primary economic environment in which the entity
operates ('the functional currency'). The financial
statements are presented in Indian currency
(INR), which is the Company's functional and
presentation currency.
ii. Transactions and Balances
Foreign currency transactions are translated into
the functional currency using the exchange rates
at the dates of the transactions. Realized gains
and losses on settlement of foreign currency
transactions are recognized in the Statement of
Profit and Loss. Foreign currency denominated
monetary assets and liabilities at the year-end are
translated at the year-end exchange rates, and the
resultant exchange difference is recognized in
the Statement of Profit and Loss. Non-monetary
foreign currency items are carried at cost.
(c) Property, Plant and Equipment
Property, plant and equipment are stated at
historical cost less depreciation and impairment
loss, if any. Historical cost includes expenditure that
is directly attributable to the acquisition of the items
including capital spares which are identified as a
part of property, plant and equipment.
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 associated with the item will
flow to the Company and the cost of the item can
be measured reliably. The carrying amount of any
component accounted for as a separate asset is
derecognized when replaced. All other repairs and
maintenance are charged to the Statement of Profit
and Loss during the reporting period in which they
are incurred.
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.
Capital Work-In-Progress
Cost and direct expenses incurred for construction of
assets or assets to be acquired, which are not ready to
use in the manner intended by the management are
disclosed under Capital Work-In-Progress.
Depreciation Methods, Estimated Useful Lives and
Residual Value
The useful lives of the assets are based on technical
estimates approved by the Management, and are lower
than or same as the useful lives prescribed under
schedule II to the Companies Act, 2013 in order to
reflect the period over which depreciable assets are
expected to be used by the Company. Depreciation is
calculated on a pro-rata basis on the straight line
method so as to write-down the cost of property, plant
and equipment to its residual value systematically over
its estimated useful life based on useful life of the
assets as prescribed under Part C of Schedule II to the
Companies Act, 2013 except in case of following assets,
wherein based on internal assessment and technical
evaluation, a different useful life has been determined.
Estimated useful lives, residual values and depreciation
methods are reviewed annually, taking into account
commercial and technological obsolescence as well as
normal wear and tear and adjusted prospectively, if
appropriate.
(d) Leases
As a Lessee
The Company assesses whether a contract is or
contains a lease, at inception of a contract. 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. To
assess whether a contract conveys the right to
control the use of an identified asset, the Company
assesses whether:
(i) the contract involves the use of an identified
asset
(ii) the Company has substantially all of the
economic benefits from use of the asset through
the period of the lease and
(iii) the Company has the right to direct the use of
the asset.
At the commencement date of a lease, the
Company recognizes a liability to make lease
payments (i.e., the lease liability) and an asset
representing the right to use the underlying asset
during the lease term (i.e., the right-of-use asset).
Right-of-use assets are measured at cost, less any
accumulated depreciation, impairment losses and
adjusted for any re-measurement of lease liabilities.
The cost of right-of-use assets includes the amount
of lease liabilities recognized and lease payments
made at or before the commencement date. Right-
of-use assets are depreciated on a straight-line basis
over the shorter of the lease term and the estimated
useful lives of the assets. If ownership of the leased
asset transfers to the Company at the end of the
lease term or the cost reflects the exercise of a
purchase option, depreciation is calculated using
the estimated useful life of the asset.
The Company recognizes lease liabilities measured
at the present value of lease payments to be made
over the lease term. The lease payments also include
the exercise price of a purchase option reasonably
certain to be exercised by the Company. In
calculating the present value of lease payments, the
Company uses its incremental borrowing rate at the
lease commencement date.
After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of
interest and reduced for the lease payments made.
In addition, the carrying amount of lease liabilities is
re-measured if there is a modification or a change in
the lease term. The Company separately recognizes
the interest expense on the lease liability as finance
cost and the depreciation expense on the right-of-
use asset.
The Company accounts for a lease modification as a
separate lease when both of the following conditions
are met:
• The modification increases the scope of the
lease by adding the right to use one or more
underlying assets.
• The consideration for the lease increases
commensurate with the standalone price for the
increase in scope and any adjustments to that
stand-alone price reflects the circumstances of
the particular contract.
For a lease modification that fully or partially
decreases the scope of the lease the Company
decreases the carrying amount of the right-of-use
asset to reflect partial or full termination of the
lease. Any difference between those adjustments is
recognized in profit or loss at the effective date of
the modification.
The Company has elected to use the exemptions
proposed by the standard on lease contracts for
which the lease terms ends within 12 months as of
the date of initial application, and lease contracts
for which the underlying asset is of low value which
is considered to be H 3.5 Lakhs.
As a Lessor
Leases in which the Company does not transfer
substantially all the risks and rewards incidental to
ownership of an asset are classified as operating
leases. Rental income arising is accounted for on a
straight-line basis over the lease terms. Initial direct
costs incurred in negotiating and arranging an
operating lease are added to the carrying amount of
the leased asset and recognized over the lease term
on the same basis as rental income. Contingent rents
are recognized as revenue in the period in which they
are earned.
(e) Investment Property
Property that is held for long-term rental yields or for
capital appreciation or both, and that is not occupied
by the Company is classified as investment property.
Investment property is measured initially at its cost,
including related transaction costs and where
applicable borrowing costs. Subsequent expenditure
is capitalized to the asset's carrying amount only
when it is probable that future economic benefits
associated with the expenditure will flow to the
Company and the cost of the item can be measured
reliably. All other repairs and maintenance costs are
expensed when incurred.
Investment properties are depreciated using the
straight-line method over their estimated useful lives
which are 40 years.
Though the Company measures investment property
using cost based measurement, the fair value of
investment property is disclosed in the notes. Fair
values are determined based on an annual evaluation
performed by an accredited external independent
valuer.
Investment properties are derecognized 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 recognized in
profit or loss in the period of de-recognition.
(f) Intangible Assets
Intangible Assets are stated at acquisition cost, net
of accumulated amortization and accumulated
impairment loss, if any.
Amortization
Intangible assets comprise Goodwill, Trademarks,
Copyright and Technical Know-how. Intangible assets
(other than Goodwill) are amortized over the useful
life of assets, not exceeding 10 years.
The estimated useful life and amortization methods
are reviewed at the end of each annual reporting
period, with the effect of any changes in the
estimate being accounted for on a prospective basis.
Expenditure on research is recognized as an expense
when it is incurred. Development costs of products
are also charged to the Statement of Profit and Loss
unless all the criteria for capitalization have been met
by the Company. Development expenditures on an
individual project are recognized as an intangible
asset when the Company can demonstrate:
• The technical feasibility of completing the
intangible asset so that the asset will be available
for use or sale
• Its intention to complete and its ability and
intention to use or sell the asset
• How the asset will generate future economic
benefits
• The availability of resources to complete the asset
• The ability to measure reliably the expenditure
during development
(g) Impairment of Non-financial Assets
At each balance sheet date, the Company reviews
whether there is an indication that an asset may be
impaired. If any indication exists, the company
estimates the recoverable amount of its assets other
than inventory and deferred tax. An impairment loss
is recognized when the carrying amount of an asset
exceeds its recoverable amount. The recoverable
amount is determined as higher of the asset's fair
value less costs of disposal and value in use. For the
purpose of assessing impairment, assets are grouped
at the levels for which there are separately identifiable
cash flows (cash generating unit). Assessment is done
at each Balance Sheet date as to whether there is any
indication that an impairment loss recognized for an
asset in the prior accounting period may no longer
exist or may have decreased. An impairment loss is
reversed to the extent that the assets carrying
amount does not exceed the carrying amount that
would have been determined if no impairment loss
had previously been recognized.
(h) Inventories
Inventories of raw and packing materials, stores,
work-in-progress, finished goods and stock in trade
are valued at lower of cost or net realizable value.
- Cost is determined using standard cost method
that approximates actual cost.
- Cost of work-in-progress and finished goods
includes materials, labour and manufacturing
overheads and other costs incurred in bringing
the inventories to their present location and
condition.
Spares that do not qualify to be recognized as
Property, Plant and Equipment are included in stores
and spares.
Net realizable 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.
(i) Trade Receivables
Trade receivables are measured at contracted price
and subsequently measured at amortized cost net
of any expected credit losses, if any. The Company
provides for expected credit loss using simplified
approach based on the probability of defaults which
are possible over the lifetime of assets.
(j) Cash and Cash Equivalents
For the purpose of presentation in the Statement of
cash flows, cash and cash equivalents include cash in
hand, demand deposits with banks and other short¬
term highly liquid investments with original 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.
(k) Financial Assets:
i. Initial Recognition and Measurement
All financial assets are recognized initially at fair
value plus transaction costs that are attributable to
the acquisition of the financial asset, except in the
case of financial assets not recorded at fair value
through profit or loss. Transaction costs of financial
assets carried at fair value through profit or loss are
expensed through the Statement of Profit and Loss.
Subsequent Measurement
For purposes of subsequent measurement, the
Company classifies its financial assets in the
following measurement categories:
• those to be measured subsequently at fair value
(either through other comprehensive income,
or through profit or loss), and
• those measured at amortized cost.
The classification depends on the entity's business
model for managing the financial assets and the
contractual terms of the cash flows. For assets
measured at fair value, gains and losses will either
be recorded in the Statement of Profit and Loss or
other comprehensive income. For investments in
debt instruments, this will depend on the business
model in which the investment is held. For
investments in equity instruments, this will depend
on whether the Company has made an irrevocable
election at the time of initial recognition to account
for the equity investment at fair value through other
comprehensive income.
Amortized Cost
Assets that are held for collection of contractual
cash flows where those cash flows represent solely
payments of principal and interest are measured at
amortized cost. A gain or loss on a debt investment
that is subsequently measured at amortized cost is
recognized in Statement of Profit and Loss when
the asset is derecognized or impaired. Interest
income from these financial assets is included in
finance income using the effective interest rate
method.
Fair Value through Other Comprehensive Income
(FVOCI)
Assets that are held for collection of contractual cash
flows and for selling the financial assets, where the
assets cash flows represent solely payments of
principal and interest, are measured at fair value
through other comprehensive income (FVOCI).
Movements in the carrying amount are taken through
OCI, except for the recognition of impairment gains
or losses, interest revenue and foreign exchange gains
and losses which are recognized in the Statement
of Profit and Loss. When the financial asset is
derecognized, the cumulative gain or loss previously
recognized in OCI is reclassified from equity to
Statement of Profit and Loss. Interest income from
these financial assets is included in other income
using the effective interest rate method.
Fair Value Through Profit or Loss (FVTPL)
Assets that do not meet the criteria for amortized
cost or FVOCI are measured at fair value through
profit or loss. A gain or loss on a debt investment
that is subsequently measured at fair value through
Profit or Loss is recognized in the Statement of Profit
and Loss in the period in which it arises. Interest
income from these financial assets is included in
other income.
ii. Derecognition
A financial asset is derecognized only when:
• the rights to receive cash flows from the
financial asset have expired, or
• the Company has transferred its rights to receive
cash flows from the financial asset or has
assumed an obligation to pay the received cash
flows to one or more recipient
Where the entity has transferred an asset, the
Company evaluates whether it has transferred
substantially all risks and rewards of ownership of
the financial asset. In such cases, the financial
asset is derecognized. Where the entity has not
transferred substantially all risks and rewards of
ownership of the financial asset, the financial asset
is not derecognized.
Where the entity has neither transferred a financial
asset nor retains substantially all risks and rewards
of ownership of the financial asset, the financial
asset is derecognized if the company has not
retained control of the financial asset. Where the
Company retains control of the financial asset, the
asset is continued to be recognized to the extent
of continuing involvement in the financial asset.
Expected credit losses are recognized for all
financial assets subsequent to initial recognition.
(l) Financial Liabilities
i. Classification as Liability or Equity
Financial liabilities and equity instruments issued
by the Company are classified according to the
substance of the contractual arrangements entered
into and the definitions of a financial liability and an
equity instrument.
ii. Initial Recognition and Measurement
Financial liabilities are recognized when the Company
becomes a party to the contractual provisions of the
instrument. Financial liabilities are initially measured
at the amortized cost unless at initial recognition,
they are classified as fair value through profit or loss.
iii. Subsequent Measurement
Financial liabilities are subsequently measured at
amortized cost using the effective interest rate
method. Financial liabilities carried at fair value
through profit or loss is measured at fair value with
all changes in fair value recognized in the Statement
of Profit and Loss.
iv. Derecognition
A financial liability is derecognized when the
obligation specified in the contract is discharged,
cancelled or expires.
Trade and Other 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 recognized initially at their fair
value.
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