2.2 Summary of significant accounting policies
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 realised or intended to be 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.
Trade receivables which are expected to be realised within 12 months from the reporting date shall be classified as current.
Outstanding more than 12 months shall be shown as noncurrent only unless efforts for its recovery have been made and it
is likely that payment shall be received within 12 months from the reporting date. A Judicious decision shall be taken by
units in this regard.
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
A payable shall be classified as Trade Payable if it is in respect of the amount due on account of goods purchased or
services received in the normal course of business.
Trade payables which are expected to be settled within 12 months from the reporting date shall be shown as current.
The Company classifies all other liabilities as non-current
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
a) Revenue recognition
April 1, 2018, the Company has applied Ind AS 115 which establishes a comprehensive framework for determining
whether, how much and when revenue is to be recognised. Ind AS 115 replaces Ind AS 18 Revenue and Ind AS 11
Construction Contracts. The Company has adopted Ind AS 115 using the cumulative effect method. The effect of
initially applying this standard is recognised at the date of initial application (i.e. April 1, 2018). The impact of the
adoption of the standard on the financial statements of the Company is insignificant.
Revenue is recognised upon transfer of control of promised products or services to customers in an amount that
reflects the consideration which the Company expects to receive in exchange for those products or services.
Revenue is measured based on the transaction price, which is the consideration, adjusted for volume discounts,
service level credits, performance bonuses, price concessions and incentives, if any, as specified in the contract with
the customer. Revenue also excludes taxes collected from customers.
As the Company is engage only in manufacturing business and operating from single location only therefore
disaggregates revenue based on geography location and industrial vertical are not require.
The specific recognition criteria described below must also be met before revenue is recognised.
Sale of goods
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have
passed to the buyer, usually on delivery of the goods. Revenue from the sale of goods is measured at the fair value
of the consideration received or receivable, net of returns and allowances, trade discounts, volume rebates and cash
discounts.
Rendering of services
Income from services are recognized as and when the services are rendered.
Interest income
For all debt instruments measured either at amortised cost or at fair value through other comprehensive income,
interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated
future cash payments or receipts over the expected life of the financial instrument or a shorter period, where
appropriate, to the gross carrying amount of the financial asset or to the amortised cost of a financial liability.
When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the
contractual terms of the financial instrument (for example prepayment, extension, call and similar options) but does
not consider the expected credit losses. Interest income is included in other income in the statement of profit and loss.
b) Property, Plant and Equipment
Items of Property, plant and equipment including Capital-work in-progress are stated at cost, net of accumulated
depreciation and accumulated impairment losses, if any. Cost comprises the purchase price and any attributable cost
of bringing the asset to its working condition for its intended use. Such cost includes the cost of replacing part of the
plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met.
Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future
benefits from the existing asset beyond its previously assessed standard of performance. When significant parts of
plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their
specific useful lives. All other repair and maintenance costs are recognised in statement of profit or loss as an when
incurred. In respect of additions to /deletions from the Fixed Assets, depreciation is provided on pro-rata basis with
reference to the month of addition/deletion of the Assets.
The company, based on technical assessment made by technical expert and management estimate, depreciates certain
items of plant and equipment over estimated useful lives which are different from the useful life prescribed in
Schedule II to the Companies Act, 2013. The management believes that these estimated useful lives are realistic and
reflect fair approximation of the period over which the assets are likely to be used.
Depreciation method, useful lives and residual values are reviewed at each financial year-end and adjusted if
appropriate.
Leasehold improvements is amortized over the period of lease
Leasehold Land:
Lease premium paid on leasehold land is amortised over the life of the lease. 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.
c) Investments Properties
The company uses the carrying value as the deemed cost of investment properties. Investments in property that are
not intended to be occupied substantially for use by, or in the operations of the company, have been classified as
investment property. Investment properties are measured initially at its cost including transaction cost and where
applicable borrowing costs. Subsequent to initial recognition, investment properties are stated at cost less accumulated
depreciation and accumulated impairment loss, if any. Subsequent cost are included in the assets 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. All other repairs and
maintenance are charged to profit or loss during the reporting period in which they are incurred.
The company measures investment property using cost based measurement
The company depreciates its investment properties over the useful life which is similar to that of Property, Plant and
Equipment.
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 derecognition
d) Intangible assets
i) Intangible assets consisting of computer software is amortised over a period of 5 years on straight line basis
(SLM) from the date of acquisition.
ii) Other intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition,
intangible assets with definite life are carried at cost less any accumulated amortisation and accumulated impairment
losses. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related
expenditure is reflected in profit or loss in the period in which the expenditure is incurred. The amortisation period
and the amortisation method for an intangible asset with a definite useful life are reviewed at least at the end of each
reporting period.
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 or loss when the
asset is derecognised. Research costs are expensed as an when incurred. Development expenditures on an individual
project are recognised as an intangible asset when the Company can demonstrate technical and commercial feasibility
of making the asset available for use or sale.
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any
accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development
is complete and the asset is available for use. It is amortised over the period of expected future benefit. Amortisation
expense is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of
another asset
e) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes
a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset.
All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and
other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange
differences to the extent regarded as an adjustment to the borrowing costs.
f) Foreign Currency Transactions and balances
Transactions in foreign currency are recorded applying the exchange rate at the date of transaction. Monetary assets
and Transactions in foreign currency are recorded applying the exchange rate at the date of transaction. Monetary
assets and liabilities denominated in foreign currency remaining unsettled at the end of the year, are translated at
the closing rate prevailing on the Balance Sheet date. Non-monetary items which are carried in terms of historical
cost denominated in foreign currency are reported using the exchange rate at the date of transaction. Exchange
differences arising as a result of the above are recognized as income or expenses in the statement of profit and loss.
Exchange difference arising on the settlement of monetary items at rates different from those at which they were
initially recorded during the year, or reported in previous financial statements, are recognised as income or expenses
in the year in which they arise.Foreign exchange difference on foreign currency borrowings, loans given, settlement
gain/loss and fair value gain/loss on derivative contract relating to borrowings are accounted and disclosed under
finance cost. Such exchange difference does not include foreign exchange difference regarded as an adjustment to
the borrowings cost and capitalised with cost of assets
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is
directly or indirectly observable
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is
unobservable
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines
whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest
level input that is significant to the fair value measurement as a whole) at the end of each reporting period. For the
purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the
nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
This note summarises accounting policy for fair value. Other fair value related disclosures are given in the relevant
notes.
h) Leases
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at
the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on
the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is
not explicitly specified in an arrangement.
For arrangements entered into prior to 1 April 2016, the company has determined whether the arrangement contain
lease on the basis of facts and circumstances existing on the date of transition.
Company as a lessee
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially
all the risks and rewards incidental to ownership to the Company is classified as a finance lease. Finance leases are
capitalised at the commencement of the lease at the inception date fair value of the leased property or, if lower, at
the present value of the minimum lease payments. Lease payments are apportioned between finance charges and
reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability.
Finance charges are recognised in finance costs in the statement of profit and loss, unless they are directly attributable
to qualifying assets, in which case they are capitalized in accordance with the Company’s general policy on the
borrowing costs. Contingent rentals are recognised as expenses in the periods in which they are incurred. A leased
asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company
will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful
life of the asset and the lease term.
Operating lease payments are recognised as an expense in the statement of profit and loss on a straight-line basis over
the lease term. Company as a lessor
Leases in which the Company does not transfer substantially all the risks and rewards of ownership of an asset are
classified as operating leases. Rental income from operating lease is recognised on a straight-line basis over the term
of the relevant lease.
Leases are classified as finance leases when substantially all of the risks and rewards of ownership transfer from the
Company to the lessee. Amounts due from lessees under finance leases are recorded as receivables at the Company’s
net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant
periodic rate of return on the net investment outstanding in respect of the lease.
i) Inventories
(i) Stores and spares, packing materials and raw materials are valued at lower of cost or net realisable value and
for this purpose, cost is determined on moving weighted average basis. However, the aforesaid items are not
valued below cost if the finished products in which they are to be incorporated are expected to be sold at or
above cost.
(ii) Semi-finished products, finished products and by-products are valued at lower of cost or net realisable value
and for this purpose, cost is determined on standard cost basis which approximates the actual cost. Cost
of finished goods includes excise duty, as applicable. Variances, exclusive of abnormally low volume and
operating performance, are adjusted to inventory
(iii) Traded goods are valued at lower of cost and net realizable value. Cost includes cost of purchase and other
costs incurred in bringing the inventories to their present location and condition. Cost is determined on a
weighted average basis.
Net realisable 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.
j) 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. Recoverable amount is determined for an individual asset, unless
the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.
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. In
determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions
can be identified,an appropriate valuation model is used. These calculations are corroborated by valuation multiples,
quoted share prices for publicly traded companies or other available fair value indicators.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an
indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists,
the Company estimates the asset’s or CGU’s recoverable amount. A previously recognised impairment loss is reversed
only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last
impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its
recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no
impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of profit or
loss. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognised.
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