Note 2 Material Accounting Policies
The material accounting policies applied by the Company in the preparation of its standalone financial statements are
listed below. Such accounting policies have been applied consistently to all the periods presented in these financial
statements, unless otherwise indicated.
I. Basis of preparation
The Standalone financial statements are presented in Indian Rupees and all values are rounded to the nearest lakhs,
except when stated otherwise.
The Standalone financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS)
notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended).
The Standalone financial statements have been prepared on a historical cost basis, except for the following assets
and liabilities which have been measured at fair value:
- Defined Benefit Plans - planned assets
Current / Non-current Classification:
Company has determined current and non-current classification of its assets and liabilities in the financial statements
as per the requirement of Ind AS 1 - 'Presentation of Financial Statements', wherever applicable. Based on its
assessment, the Company has ascertained its normal operating cycle as 12 months for the purpose of current and non¬
current classification of its assets and liabilities.
II. Summary of Material Accounting policy
a) Revenue Recognition
i. Sale of Goods/Service
Revenue is recognised upon satisfaction of performance obligation at the amount of transaction price allocated
to the performance obligation. The transaction price of goods sold and services rendered is net of variable
consideration on account of various discounts, rebates or other similar items in a contract when they are highly
probable to be provided. Revenue excludes any amount collected as taxes on behalf of statutory authorities.
The Company recognizes revenue generally at the point in time when the products are delivered to customer
or when it is delivered to a carrier for export sale, which is when the control over product is transferred to the
customer.
Cylinder deposits received from dealers that have been outstanding for an extended period from whom there
has been no transactions made, are booked as service income due to non-compliance of the dealer agreement.
ii. Interest Income
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to
the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis,
by reference to the principal outstanding and at the effective interest rate applicable.
iii. Rental income
Rental income arising from operating leases is accounted over the lease period and is included in revenue in
the statement of profit or loss.
iv. Insurance Claim
Insurance Claims are accounted on receipt basis.
b) Property Plant & Equipment
Freehold land is carried at historical cost.
All other items of property, plant and equipment are stated at historical cost less recoverable tax and accumulated
depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
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 Company and the cost
of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the
reporting period in which they are incurred.
Property, plant, and equipment which are not ready for intended use as on the date of Balance Sheet are disclosed
as "Capital work-in-progress".
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is
classified as capital advances under "Other Non-Current Assets".
Depreciation methods, estimated useful lives and residual value:
Depreciation is calculated using the written down value method to allocate their cost, net of their residual values,
over their estimated useful lives.
The useful lives have been taken as prescribed in Schedule II to the Companies Act, 2013.
The residual value is not more than 5% of the original cost of the asset. The assets' residual values and useful lives
are reviewed, and adjusted if appropriate, at the end of each reporting period.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in
profit or loss.
c) Lease
The company identifies whether any transaction is a lease or have any embedded lease component. The
determination of whether an arrangement is a lease is based on the substance of the agreement. The agreement
is a lease if fulfilment of it is dependent on the use of a specific asset(s) and the arrangement conveys a right to use
the asset or assets, even if the right is not explicitly specified in an agreement.
In case the Company has entered in any agreement as a lessee, it recognizes the right to use of the asset conferred
under the arrangement as "Right of Use "as part of Property, Plant & equipment. The discounted cash flows of the
all the lease considerations including lease premium, which Company expects to pay during entire non-cancellable
period of lease arrangement is taken as initial recognition of asset with corresponding amount as 'lease liabilities.
Lease liabilities and Right of Use asset is remeasured or impaired annually based on available variables, using the
concept of materiality.
The assets under 'right of use' are depreciated using straight line method over the lease term. Similarly interest as
per incremental rate of borrowing is charged to lease liabilities. Lease payments are appropriated towards the lease
liabilities.
Lease transactions of low value (less than INR 8,000) or of short duration (less than 12 months) are not recognised
and thus rentals paid are charged off to Statement of Profit & Loss.
Lease liabilities are classified as non-current and current based on their due dates of discharging.
d) Investment in Subsidiary
The investments in subsidiaries are carried in the financial statements at historical cost.
Investments are reviewed for impairment as per Ind AS 36 on annual basis, in case there
are indicators of impairment.
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. [When it is not possible to estimate the recoverable amount of an
individual asset, the Company estimates the recoverable amount of the CGU to which the asset belongs]. When the
carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written
down to its recoverable amount.
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.
f) Financial Assets & Liabilities
i) Financial Assets
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 (FVTPL), transaction costs that are attributable to the acquisition of the financial
assets. However, trade receivables that do not contain a significant financing component are measured at
transaction prices.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in three categories:
- Debt instruments at amortised cost
- Debt / equity instruments at fair value through other comprehensive income (FVTOCI)
- Debt instruments, derivatives, and equity instruments at fair value through profit or loss (FVTPL)
Impairment of financial assets
The Company assesses on a forward-looking basis the expected credit loss associated with its assets carried at
amortised cost and FVOCI debt instruments. The impairment methodology applied depends on whether there
has been a significant increase in credit risk.
For trade receivables only, the Company applies the simplified approach permitted by Ind AS 109 Financial
Instruments, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
ii) Financial Liabilities
Initial recognition and measurement
All financial liabilities are recognised initially at fair value.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
- Financial liabilities at fair value through profit or loss
Financial liabilities are measured at fair value through profit or loss.
- Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised
cost using the Effective Interest Rate (EIR) method. Gains and losses are recognised in profit or loss when
the liabilities are de-recognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs
that are material and an integral part of the EIR. The EIR amortisation is included as finance costs in the
statement of profit and loss.
g) Foreign currency transactions
i) Functional and presentation currency
Items included in the financial statements of the Company are measured in Indian Rupee which is functional
and presentation currency
ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the date
of the transaction. Foreign exchange gain and loss resulting from the settlement of such transactions and from
the translation of monetary assets and liabilities foreign currencies at year end exchange rates are generally
recognised in profit or loss. They are deferred in other equity if they relate to qualifying cash flow hedges.
Foreign exchange differences arising on borrowings other than above are regarded as an adjustment to
borrowing costs and are presented in the statement of profit and loss. All other foreign exchange gains and
losses are presented in the statement of profit and loss on a net basis within other gains/(losses).
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange
rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at
fair value are reported as part of the fair value gain or loss.
h) Inventories
Raw materials, Consumables Stores:
Raw materials /Consumables Stores are valued at cost after providing for cost of obsolescence / depletion. Cost is
determined on weighted average basis.
Costs includes, expenses incurred in bringing each product to its present location and condition.
Stock in Trade:
Inventories are valued at the lower of cost and net realisable value. Cost is determined on weighted average basis.
Costs includes, expenses incurred in bringing each product to its present location and condition.
Finished goods and work in progress
Inventories are valued at the lower of cost and net realisable value.
Cost includes cost of direct materials and labour and a proportion of manufacturing overheads based on the normal
operating capacity but excluding borrowing costs. Cost of direct material is determined on weighted average basis.
For the purpose of valuation of Stock in Trade, Finished Goods and Work in Progress, Net realisable value means
the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated
costs necessary to make the sale.
i) Trade Receivable
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of
business.
j) Cash & Cash equivalent
Cash and cash equivalent in the balance sheet comprise cash on hand, bank balances and short-term deposits in
banks.
k) Income Taxes
Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the
taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or
substantively enacted, at the reporting date.
Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in
other comprehensive income or in equity). Current tax items are recognised in correlation to the underlying
transaction either in OCI or directly in equity.
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 tax is provided using the Balance sheet approach on temporary differences between the tax bases of
assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits
and any unused tax losses. Deferred 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 utilized.
The carrying amount of deferred 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 tax asset to be
utilized. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent
that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax
assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation
authority.
l) Borrowing costs
General and specific borrowing costs directly attributable to the acquisition, construction or production of
qualifying assets are added to the cost of those assets, until such time as the assets is substantially ready for their
intended use. The Company considers a period of twelve months or more as a substantial period. Qualifying assets
are assets that necessarily take a substantial period to get ready for their intended use.
Transaction costs in respect of long-term borrowings are amortised over the tenor of respective loans using
effective interest method.
All other borrowing costs are expensed in the period in which they are incurred.
m) Trade and other payable
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 unsecured. Trade and other payables are presented as current liabilities
unless payment is not due within 12 months after the reporting period.
n) Employee Benefit
Short Term Benefits
Liabilities for salaries, including non-monetary benefits that are expected to be settled wholly within 12 months
after the end of the period in which the employees render the related service are recognised in respect of
employees' services up to the end of the reporting period and are measured at the amounts expected to be paid
when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance
sheet.
Long Term Benefits
The liabilities for earned leave which are not expected to be settled wholly within 12 months after the end of the
period in which the employees render the related service. They are therefore measured as the present value of
expected future payments to be made in respect of services provided by employees
up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the
market yields at the end of the reporting period that have terms approximating to the terms of the related
obligation. Re-measurements as a result of experience adjustments and changes in actuarial assumptions are
recognised in profit or loss.
The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional
right to defer settlement for at least twelve months after the reporting period, regardless of when the actual
settlement is expected to occur.
Post-Employment Benefits
The company operates the following post-employment schemes:
- Defined Contribution plans such as provident fund and employee state insurance scheme
- Defined Benefit plans such as Gratuity
Defined Contribution Plans
The Company's contribution to provident fund (in case of contributions to the Regional Provident Fund office), and
employee state insurance scheme are considered as defined contribution plans, as the Company does not carry any
further obligations apart from the contributions made on a monthly basis and are charged as an expense based on
the amount of contribution required to be made. "
Defined Benefit Plans
The liability or asset recognised in the balance sheet in respect of gratuity plans is the present value of the defined
benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation
is calculated annually by actuary using the projected unit credit method."
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows
by reference to market yields at the end of the reporting period on government bonds that have terms
approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation
and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit and
loss."
Re-measurement gains and losses arising from experience adjustments, changes in actuarial assumptions and
return on plan assets (excluding interest income) are recognised in the period in which they occur, directly in other
comprehensive income. They are included in retained earnings in the statement of changes in equity and in the
balance sheet.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are
recognised immediately in profit or loss as past service cost.
Other Benefit Plans
Other employee benefits comprise of compensated absences/leaves. The actuarial valuation is done as per
projected unit credit method. The Company allocates accumulated leaves between short term and long term
liability based on actuarial valuation as at the end of the period.
o) Earnings per Share
Basic earnings per share
Basic earnings per share is calculated by dividing:
- the profit attributable to owners of the Company
- by the weighted average number of equity shares outstanding during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into
account:
- the after-income tax effect of interest and other financing costs associated with dilutive potential equity
- the weighted average number of additional equity shares that would have been outstanding assuming the
conversion of all dilutive potential equity shares.
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