2.5 Summary of Material Accounting Policies
(a) Property, Plant and Equipment
Property, Plant and Equipment are stated at cost after deducting trade discount and rebates less accumulated depreciation and
impairment losses, if any. Such cost includes purchase price, borrowing cost, non-refundable purchase taxes, any cost directly
attributable to bringing the assets to its working condition for its intended use, net charges on foreign exchange contracts and
adjustments arising from exchange rate variations attributable to the assets.
Property, Plant and Equipment which are significant to the total cost of that item of Property, Plant and Equipment and having
different useful life are accounted separately.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable
that future economic benefits associated with the item will flow to the entity and the cost can be measured reliably.
The Company has opted cost model as its accounting policy for measurement after recognition.
Depreciation on Property, Plant and Equipment is provided using Straight Line Method taking life of the assets as given in the
Schedule -II of Companies Act, 2013 on 95% ofvalue of assets.
The residual values, useful lives and methods of depreciation of Property, Plant and Equipment are reviewed at each financial year
end and adjusted prospectively, if appropriate
Gains or losses arising from derecognition of a Property, Plant and Equipment 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 asset is
derecognised.
Property, Plant and Equipment are evaluated for recoverability whenever there is any indication that their carrying amounts may not
be recoverable. If any such indication exists, the recoverable amount (i.e. higher of the fair value less cost to sell and the value-in-use)
is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from
other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or
CGU) is reduced to its recoverable amount. An impairment loss is recognised in the statement of profit and loss.
(b) IntangibleAssets
Intangible assets purchased are measured at cost as of the date of acquisition, as applicable, less accumulated amortisation and
accumulated impairment, if any.
The Company has opted cost model as its accounting policy for measurement after 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 recognised in the Statement of Profit and Loss when the asset is derecognised.
The Company’s intangible assets comprises assets with finite useful life which are amortised on a straight-line basis over the period
oftheir expected useful life.
Intangible assets with finite life are evaluated for recoverability whenever there is any indication that their carrying amounts may not
be recoverable. If any such indication exists, the recoverable amount (i.e. higher of the fair value less cost to sell and the value-in-use)
is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from
other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or
CGU) is reduced to its recoverable amount. An impairment loss is recognised in the statement of profit and loss
(c) Inventories
Inventories consists of raw materials, Work in progress, finished goods and stores and spares. Inventories are valued at the lower of
cost and net realisable value except wastage which is valued at net realisable value. The cost of inventories shall comprise all costs of
purchase, cost of conversion and other costs incurred in bringing the inventories to their present, location and condition. The costs of
inventories are assigned using the first in, first out (FIFO) formula. When inventories are sold, the carrying amount of those
inventories shall be recognised as an expense in the period in which the related revenue is recognised.
(d) Cash and Cash Equivalents
Cash and cash equivalents comprise of cash on hand, cash at banks, short-term deposits and short-term, highly liquid investments
that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
(e) Financial Instruments
Financial Assets
Initial Recognition and Measurement
The company recognises a financial asset when it becomes party to the contractual provisions of the instrument. All Financial Assets
are initially recognised at fair value. Transaction costs that are directly attributable to the acquisition or issue of Financial Assets,
which are not at Fair Value through Profit or Loss, are adjusted to the fair value on initial recognition
Where the fair value of the financial asset at initial recognition differs from the transaction price an entity account for the difference as
follows:
• As a gain or loss, if that fair value is evidenced by a quoted price in an active market for an identical asset or liability,
• Is deferred in other cases. The deferred difference is recognised as a gain or loss only to the extent it arises from a change in
factor (including time) that market participants would take into account when pricing the asset or liability.
Subsequent Measurement
Financial Assets measured at Amortised Cost
A Financial Asset is measured at Amortised 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 represent
solely payments of principal and interest on the principal amount outstanding.
Financial Assets measured at Fair Value through Other Comprehensive Income
A Financial Asset is measured at FVTOCI if it is held within a 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 represents solely payments of principal and interest on the principal amount outstanding.
Financial Assets measured at Fair Value through Profit or Loss
A Financial Asset which is not classified in any of the above categories are measured at FVTPL.
Investment in subsidiary is measured at cost
Investments in associates are measured at cost.
Impairment of Financial Assets
In accordance with Ind AS 109, the Company uses ‘Expected Credit Loss’ (ECL) model, for evaluating impairment of Financial
Assets other than those measured at Fair Value Through Profit and Loss (FVTPL).
Expected Credit Losses are measured through a loss allowance at an amount equal to:
• The 12-months expected credit losses (expected credit losses that result from those default events on the financial instrument
that are possible within 12 months after the reporting date); or
• Full lifetime expected credit losses (expected credit losses that result from all possible default events over the life of the
financial instrument).
For Trade Receivables the Company applies ‘simplified approach’ which requires expected lifetime losses to be recognised from
initial recognition of the receivables. The Company uses historical default rates to determine impairment loss on the portfolio of
trade receivables. At every reporting date these historical default rates are reviewed and changes in the forward-looking estimates are
analysed.
For other assets, the Company uses 12 month ECL to provide for impairment loss where there is no significant increase in credit risk.
If there is significant increase in credit risk full lifetime ECL is used.
Reclassification of Financial Assets
Financial assets are reclassified subsequent to their recognition, if the Company changes its business model for managing those
financial assets. Changes in business model are made and applied prospectively from the reclassification date which is the first day of
immediately next reporting period following the changes in business model in accordance with principles laid down under Ind AS
109 - Financial Instruments.
Financial Liabilities
Initial Recognition and Measurement
The company recognises a financial liability when it becomes party to the contractual provisions of the instrument. All Financial
Liabilities are recognised at fair value and in case of financial liabilities classified as ‘subsequently measured at amortised cost’ are
shown net of directly attributable cost.
Where the fair value of the financial liability at initial recognition differs from the transaction price an entity account for the
difference as follows:
• As a gain or loss, if that fair value is evidenced by a quoted price in an active market for an identical asset or liability,
• Is deferred in other cases. The deferred difference is recognised as a gain or loss only to the extent it arises from a change in
factor (including time) that market participants would take into account when pricing the asset or liability.
Subsequent Measurement
Financial Liabilities which are classified as ‘subsequently measured at amortised cost’ are carried at amortised cost using the
effective interest method.
Hedge Accounting
The Company uses derivative financial instruments such as forward contracts to mitigate the risk of changes in exchange rates. At the
inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company
wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge.
Hedges that meet the criteria for hedge accounting are accounted for as follows:
Fair Value Hedge
The Company designates derivative contracts as hedging instruments to mitigate the risk of change in fair value of hedged item due to
movement in foreign exchange rates. The gain or loss on the hedging instrument is recognised in profit or loss. The hedging gain or
loss on the hedged item adjusts the carrying amount of the hedged item and is recognised in profit or loss.
Derecognition of Financial Instruments
The Company derecognises a Financial Asset when the contractual rights to the cash flows from the Financial Asset expire or it
transfers the Financial Asset and the transfer qualifies for derecognition under Ind AS 109. A Financial liability (or a part of a
Financial liability) is derecognised when the obligation specified in the contract is discharged or cancelled or expires.
|