NOTE - 3 - SIGNIFICANT ACCOUNTING POLICIES:
(a) Financial instruments
1. Financial Assets:
i) Classification
The Company classifies its financial assets in the following measurement categories:
• Those measured at 'Amortized cost' and
• Those to be measured subsequently at either 'Fair value through other comprehensive income'
(FVTOCI) or' Fair value through profit or loss' (FVTPL).
The classification depends on the Company's business model for managing the financial assets and
the contractual terms of the cash flows.
• A financial asset is measured at amortized cost if it meets both following conditions and is
not designated as at FVTPL:
- the asset is held within a business model whose objective is to hold assets to collect
contractual cash flows; and
- the contractual terms of a financial asset give rise on specified dates to cash flows that
are solely payments of principal and interest on the principal amount outstanding.
• A debt investment is measured at FVOCI if it meets both following conditions and is not
designated as at FVTPL:
- the asset 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 are solely payments of principal and interest on the principal amount outstanding.
• Financial assets are not reclassified after their initial recognition except if and in the period
the Company changes its business model for managing financial assets.
ii) Measurement
At initial recognition, the company measures a financial asset when it becomes a party to the
contractual provisions of the instruments and measures at its fair value except trade receivables
which are initially measured at transaction price. Transaction costs are incremental costs that are
directly attributable to the acquisition of the financial asset. Transaction costs of financial assets
iv) De-recognition
The Company derecognizes a financial asset when the contractual rights to the cash flows from the
financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction
in which substantially all the risks and rewards of ownership of the financial asset is transferred or
in which the Company neither transfers nor retains substantiallyall the risks and rewards of ownership
and does not retain control of the financial asset.
If the Company enters transactions whereby it transfers assets recognized on its balance sheet, but
retains either all or substantially all the risks and rewards of the transferred assets, the transferred
assets are not derecognized.
2. Financial liabilities:
i) Classification, subsequent measurement and gains and losses
Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is
classified as at FVTPL if it is classified as held- for- trading, or it is a derivative or it is designated as
such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and
losses, including any interest expense, are recognized in profit or loss. Other financial liabilities are
subsequently measured at amortized cost using the effective interest method. Interest expense and
foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on de-recognition
is also recognized in profit or loss.
ii) De-recognition
The Company derecognizes a financial liability when its contractual obligations are discharged or
cancelled or expired.
The Company also derecognizes a financial liability when its terms are modified and the cash flows
under the modified terms are substantially different. In this case, a new financial liability based on
the modified terms is recognized at fair value. The difference between the carrying amount of the
financial liability extinguished and the new financial liability with modified terms is recognized in
the profit or loss.
3. Offsetting
Financial assets and financial liabilities are off set and the net amount presented in the balance sheet
when, and only when, the Company currently has a legally enforceable right to set off the amounts and
it intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.
) Property, plant and equipment
1. Recognition and measurement
Items of property, plant and equipment are measured at cost, which includes capitalized borrowing costs,
less accumulated depreciation, and accumulated impairment losses, if any.
Cost of an item of property, plant and equipment comprises its purchase price, including import duties and
non-refundable purchase taxes, after deducting trade discounts and rebates, any directly attributable cost
of bringing the item to its working condition for its intended use and estimated costs of dismantling and
removing the item and restoring the site on which it is located.
The cost of a self-constructed item of property, plant and equipment comprises the cost of materials and
direct labour, any other costs directly attributable to bringing the item to working condition for its intended
use, and estimated costs of dismantling and removing the item and restoring the site on which it is located.
If significant parts of an item of property, plant and equipment have different useful lives, then they are
accounted for as separate items (major components) of property, plant and equipment.
Any gain or loss on disposal of an item of property, plant and equipment is recognized in profit or loss.
2. Recent pronouncements
Ministry of Corporate Affairs ("MCA") notifies new standards or amendments to the existing standards
under Companies (Indian Accounting Standards) Rules as issued from time to time. For the year ended
March 31, 2026, MCA has not notified any new standards or amendments to the existing standards
applicable to the Company.
3. Subsequent expenditure
Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated
with the expenditure will flow to the Company.
4. Depreciation
Depreciation is calculated on cost of items of property, plant and equipment less their estimated residual
values over their estimated useful lives using the straight-line method, and is generally recognized in the
statement of profit and loss.
Depreciation method, useful lives and residual values are reviewed at each financial year-end and adjusted if
appropriate. Based on technical evaluation and consequent advice, the management believes that its estimates
of useful lives as given above best represent the period over which management expects to use these assets.
Depreciation on additions / disposals is provided on a pro-rata basis i.e. from /upto the date on which
asset is ready for use / disposed off.
(c) Inventories
Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the
first-in first-out formula, and includes expenditure incurred in acquiring the inventories, production or conversion
costs and other costs incurred in bringing them to their present location and condition. In the case of manufactured
inventories and work-in-progress, cost includes an appropriate share of fixed production overheads based on
normal operating capacity.
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of
completion and selling expenses.
The net realizable value of work-in-progress is determined with reference to the selling prices of related finished
products.
Raw materials, components and other supplies held for use in the production of finished products are not written
down below cost except in cases where material prices have declined and it is estimated that the cost of the
finished products will exceed their net realizable value.
Related items or items of the similar nature are grouped for comparison of cost and net realizable value.
(d) Impairment of assets
1. Impairment of financial assets
The Company recognizes loss allowances for financial assets measured at amortized cost using expected
credit loss model.
At each reporting date, the Company assesses whether financial assets carried at amortized cost is credit-
impaired. A financial asset is 'credit- impaired' when one or more events that have a detrimental impact
on the estimated future cash flows of the financial asset, have occurred.
For trade receivables, the Company always measures the loss allowance at an amount equal to lifetime
expected credit losses.
For all other financial assets, the Company measures loss allowances at an amount equal to twelve months
expected credit losses unless there has been a significant increase in credit risk from initial recognition in
which those are measured at life time expected credit risk.
Life time expected credit losses are the expected credit losses that result from all possible default events
over the expected life of a financial asset. Twelve months expected credit losses are the portion of lifetime
expected credit losses that represent the expected credit losses that result from default events on a
financial instrument that are possible within the twelve months after the reporting date (or a shorter
period if the expected life of the instrument is less than twelve months)
When determining whether the credit risk of a financial asset has increased significantly since initial
recognition and when estimating expected credit losses, the Company considers reasonable and supportable
information that is relevant and available without undue cost or effort. This includes both quantitative and
qualitative information and analysis, based on the Company's historical experience and informed credit
assessment and including forward-looking information.
The Company assumes that the credit risk on a financial asset has increasedsignificantly if it is more than
360 days past due. The Company considers a financial asset to be in default when the borrower is unlikely
to pay its credit obligations to the Company in full.
Measurement of expected credit losses
Expected credit losses are a probability-weighted estimate of credit losses. Credit losses are measured as
the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Company in
accordance with the contract and the cash flows that the Company expects to receive).
Presentation of allowance for expected credit losses in the balance sheet
Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying
amount of the assets.
Write-off
The gross carrying amount of a financial asset is written off (either partially or in full) to the extent
that there is no realistic prospect of recovery. This is generally the case when the Company determines
that the debtor does not have assets or sources of income that could generate sufficient cash flows to
repay the amounts subject to the write- off. However, financial assets that are written off could still be
subject to enforcement activities in order to comply with the Company's procedures for recovery of
amounts due.
2. Impairment of non-financial assets
The Company's non-financial assets are reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated.
An impairment loss is recognized if the carrying amount of an asset exceeds its estimated recoverable
amount. Impairment losses are recognized in the statement of profit and loss.
In respect of assets for which impairment loss has been recognized in prior periods, the Company reviews
at each reporting date whether there is any indication that the loss has decreased or no longer exists. An
impairment loss is reversed if there has been a change in the estimates used to determine the recoverable
amount. Such a reversal is made only to the extent that the asset's carrying amount does not exceed the
carrying amount that would have been determined, net of depreciation or amortization, if no impairment
loss had been recognized.
(e) Employee benefits1. Short term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the
related service is provided.
2. Defined contribution plan
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions
to State plans and will have no legal or constructive obligation to pay further amounts. The Company
makes contributions towards Government administered provident fund scheme. Obligations for contributions
to defined contribution plans are recognized as an employee benefit expense in profit or loss in the
periods during which the related services are rendered by employees.
Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in future
payments is available.
3. Defined benefit plan
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The
Company's obligation in respect of defined benefit plans is calculated by estimating the amount of benefit
that employees have earned in the current and prior periods.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that
relates to past service ('past service cost' or 'past service gain') or the gain or loss on curtailment is
recognized immediately in profit or loss. The Company recognizes gains and losses on the settlement of
a defined benefit plan when the settlement occurs.
|