2) SIGNIFICANT ACCOUNTING POLICIES
a) Basis of preparation, measurement and significant accounting policies
Compliance with Ind AS
The financial statements of the company have been prepared in accordance with Indian
Accounting Standards (Ind AS) notified under the Companies (Indian Accounting
Standards) Rules, 2015 (as amended from time to time) and presentation requirement of
Division II of schedule III to the Companies Act, 2013 (Ind AS compliant Schedule III), as
applicable. The Ind AS are prescribed under Section 133 of the Act read with Rule 3 of
the Companies (Indian Accounting Standards) Rules, 2015, as amended
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)
[Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions
of the Act.
Historical Cost Convention
The financial statements have been prepared on a historical cost basis, except for the
following:
- certain financial assets and liabilities that are measured at fair value
(a) Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants on the measurement date. The
Company uses valuation techniques that are appropriate in the circumstances for which
sufficient data are available to measure fair value, maximizing the use of relevant
observable inputs and minimizing the use of unobservable inputs. All assets and
liabilities for which fair value is measured or disclosed in the financial statements are
categorized within the fair value hierarchy, described as follows, based on the lowest
level input that is significant to the fair value measurement as a whole:
• 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.
(b) Current vis-a-vis non-current classification
The company presents assets and liabilities based on current and 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,
• Cash or cash equivalent unless restricted from being exchanged or used to settle
a liability for atleast 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
Deferred tax assets and liabilities are classified as noncurrent
assets and liabilities.
The assets and liabilities reported in the Balance Sheet are classified on a "current/non-
current basis", with separate reporting of assets held for sale and liabilities. Current
assets, which include cash and cash equivalents, are assets that are intended to be
realized, sold or consumed during the normal operating cycle of the Company or in the
12 months following the balance sheet date; current liabilities are liabilities that are
expected to be settled during the normal operating cycle of the Company or within the
12 months following the close of the financial year. The deferred tax assets and liabilities
are classified as non-current assets and liabilities.
(c) Functional and presentation currency
The financial statements are prepared in Indian Rupees (INR), which is the Company's
functional currency. All financial information presented in INR has been rounded to the
nearest lakhs.
(d) Revenue Recognition
i. Recognition of Revenue from Sale of Products (Copper and Copper Alloys
Products):
Revenue from sale of products is recognized when the significant risks and
rewards of ownership have been transferred to the buyer, recovery of the
consideration is probable, the associated cost can be estimated reliably, there is no
continuing effective control or managerial involvement with the goods, and the
amount of revenue can be measured reliably. Revenue is recognized to the extent
that it is probable that the economic benefits will flow to the Company and the
revenue can be reliably measured. Revenue from sale of products is not
recognized on the grounds of prudence, until realized in respect of delayed
payments as recovery of amounts are not certain.
Revenue from sale of products is measured at the fair value of the consideration
received or receivable, taking into account contractually defined terms of payment
and excluding taxes or duties collected on behalf of the government. Revenue from
operations includes sale of products, services, service tax, excise duty, GST and
adjusted for discounts (net).
ii. Interest Income.
Interest income from a financial asset is recognized 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, with reference to the
principal outstanding and at the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts through the expected life of
the financial asset to that asset's net carrying amount on initial recognition.
e) Property, plant and equipment
Recognition & Measurement
Items of property, plant and equipment are measured at cost less accumulated
depreciation and accumulated impairment losses, if any. Cost includes
expenditures that are directly attributable to the acquisition of the asset. The cost
of self-constructed assets includes the cost of materials and other costs directly
attributable to bringing the asset to a working condition for its intended use.
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.
When parts of an item of property, plant and equipment have different useful
lives, they are accounted for as separate items (major components) of property,
plant and equipment. Capital work in progress is stated at cost, net of
accumulated impairment loss, if any. An item of property, plant and equipment
and any significant part initially recognised is derecognised upon disposal or
when no future economic benefits are expected from its use or disposal. Gains and
losses upon disposal of an item of property, plant and equipment are determined
by comparing the proceeds from disposal with the carrying amount of property,
plant and equipment and are recognised net within "Other income/ Selling and
other expense" in the statement of profit and loss.
The cost of replacing part of an item of property, plant and equipment is
recognised in the carrying amount of the item if it is probable that the future
economic benefits embodied within the part will flow to the Company and its cost
can be measured reliably. The costs of repairs and maintenance are recognised in
the statement of profit and loss as incurred.
Items of property, plant and equipment acquired through exchange of non¬
monetary assets are measured at fair value, unless the exchange transaction lacks
commercial substance or the fair value of either the asset received or asset given
up is not reliably measurable, in which case the asset exchanged is recorded at the
carrying amount of the asset given up.
Depreciation methods, estimated useful lives and residual value:
Depreciation is recognised in the statement of profit and loss on a straight-line basis
over the estimated useful lives of property, plant and equipment. Land is not
depreciated but subject to impairment. Depreciation methods, useful lives and
residual values are reviewed at each reporting date and any changes are considered
prospectively
* The estimated useful life of plant and equipment has been taken as 30 years since
the asset is purchased during the year.
- 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.
- Schedule II to the Companies Act, 2013 ("Schedule") prescribes the useful lives
for various classes of tangible assets. For certain class of assets, based on the
technical evaluation and assessment, the Company believes that the useful lives
adopted by it best represent the period over which an asset is expected to be
available for use. Accordingly, for these assets, the useful lives estimated by the
Company are different from those prescribed in the Schedule.
f) Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one
entity and a financial liability or equity instrument of another entity.
Financial assets - recognition
All financial assets are recognized initially at fair value plus, in the case of
financial assets not recorded at fair value through profit and loss, transaction costs
that are attributable to the acquisition of the financial asset. For purposes of
subsequent measurement, financial assets are classified in three categories:
• Debt instruments at amortized cost
A 'Debt instrument' is measured at the amortized cost if both the following
conditions are met:
a) The asset is held within a business model whose objective is to hold assets for
collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that
are solely payments of principal and interest (SPPI) on the principal amount
outstanding.
After initial measurement, such financial assets are subsequently measured at
amortized cost using the effective interest rate (EIR) method.
Amortized cost is calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of the EIR. The EIR
amortization is included in finance income in the Statement of Profit and Loss. The
losses arising from impairment are recognized in the Statement of Profit and Loss.
This category generally applies to trade and other receivables.
Debt instruments at fair value through other comprehensive income (FVTOCI). A
'debt instrument' is classified as at the FVTOCI if both of the following criteria are
met:
a) The objective of the business model is achieved both by collecting contractual
cashflows and selling the financial assets, and
b) The asset's contractual cash flows represent PPI.
Debt instruments included within the FVTOCI category are measured initially as
well as at each reporting date at fair value. Fair value movements are recognized in
the other comprehensive income (OCI). However, the Company recognizes interest
income, impairment losses and reversals and foreign exchange gain or loss in the
profit and loss. On derecognition of the asset, cumulative gain or loss previously
recognized in OCI is reclassified from the equity to profit and loss. Interest earned
whilst holding FVTOCI debt instrument is reported as interest income using the
EIR method.
• Debt instruments, derivatives and equity instruments at fair value through
Statement of Profit and Loss (FVTPL)
FVTPL is a residual category for debt instruments. Any debt instrument, which
does not meet the criteria for categorization as at amortized cost or as FVTOCI, is
classified as at FVTPL.
In addition, the Company may elect to designate a debt instrument, which
otherwise meets amortized cost or FVTOCI criteria, as at FVTPL. However, such
election is allowed only if doing so reduces or eliminates a measurement or
recognition inconsistency (Referred to as 'accounting mismatch'). The Company has
not invested in any equity instruments.
Debt instrument included within the FVTPL category are measured at fair value
with all changes recognized in the Statement of Profit and Loss.
Financial assets - derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group
of similar financial assets) is primarily derecognized (i.e. removed from the
Company's balance sheet) when:
• The rights to receive cash flows from the asset have expired, or
• The Company has transferred its rights to receive cash flows from the asset or
has assumed an obligation to pay the received cash flows in full without
material delay to a third party under a 'pass-forough' arrangement; and either
(a) The Company has transferred substantially all the risks and rewards of the
asset, or
(b) the Company has neither transferred nor retained substantially all the risks and
rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or
has entered into a pass-through arrangement, it evaluates if and to what extent it
has retained the risks and rewards of ownership. When it has neither transferred
nor retained substantially all of the risks and rewards of the asset, nor transferred
control of the asset, the Company continues to recognize the transferred asset to
the extent of the Company's continuing involvement. In that case, the Company
also recognizes an associated liability. The transferred asset and the associated
liability are measured on a basis that reflects the rights and obligations that the
Company has retained.
Impairment of financial assets
In accordance with Ind AS 109, the Company applies expected credit loss (ECL)
model for measurement and recognition of impairment loss on the following
financial assets:
• Financial assets that are debt instruments, and are measured at amortized
cost
o e.g., loans, debt securities, deposits and trade receivables
• Financial assets that are debt instruments and are measured as at FVTOCI
The Company follows 'simplified approach' for recognition of impairment loss
allowance on trade receivables. The application of simplified approach does not
require the Company to track changes in credit risk. Rather, it recognizes
impairment loss allowance based on lifetime ECLs at each reporting date, right from
its initial recognition. For recognition of impairment loss on other financial assets
and risk exposure, the Company determines whether there has been a significant
increase in the credit risk since initial recognition. If credit risk has not increased
significantly, 12-month ECL is used to provide for impairment loss. However, if
credit risk has increased significantly, lifetime ECL is used. If, in a subsequent
period, credit quality of the instrument improves such that there is no longer a
significant increase in credit risk since initial recognition, then the Company reverts
to recognizing impairment loss allowance based on12-month ECL.
Lifetime ECL are the expected credit losses resulting from all possible default events
over the expected life of a financial instrument. The 12-month ECL is a portion of the
lifetime ECL which results from default events that are possible within 12 months
after the reporting date.
ECL is the difference between all contractual cash flows that are due to the
Company in accordance with the contract and all the cash flows that the entity
expects to receive (i.e. all cash shortfalls), discounted at the original EIR.
ECL impairment loss allowance (or reversal) recognized during the period is
recognized as income/expense in the Statement of Profit and Loss (P&L). This
amount is reflected under the head 'other expenses' in the Statement of Profit and
Loss (P&L). The balance sheet presentation for various financial instruments is
described below:
• Financial assets measured as at amortized cost. ECL is presented as an allowance,
i.e., as an integral part of the measurement of those assets in the balance sheet.
The allowance reduces the net carrying amount. Until the asset meets write-off
criteria, the Company does not reduce impairment allowance from the gross
carrying amount.
• Debt instruments measured at FVTOCI: Since financial assets are already
reflected at fair value, impairment allowance is not further reduced from its
value. Rather, ECL amount is presented as 'accumulated impairment amount' in
the OCI. For assessing increase in credit risk and impairment loss, the Company
combines financial instruments on the basis of shared credit risk characteristics
with the objective of facilitating an analysis that is designed to enable significant
increases in credit risk to be identified on a timely basis.
Financial liabilities - recognition and measurement:
Financial liabilities are classified, at initial recognition, as financial liabilities at fair
value through profit or loss, loans and borrowings, payables, or as derivatives
designated as hedging instruments in an effective hedge, as appropriate. All financial
liabilities are recognized initially at fair value and, in the case of loans and
borrowings and payables, net of directly attributable transaction costs. The
Company's financial liabilities include trade and other payables, loans and
borrowings including bank overdrafts and derivative financial instruments.
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 at fair
value through profit or loss include financial liabilities held for trading and
financial liabilities designated upon initial recognition as at fair value through
profit or loss. Financial liabilities are classified as held for trading if they are
incurred for the purpose of repurchasing in the near term.
Gains or losses on liabilities held for trading are recognized in the Statement of Profit
and Loss.
Financial liabilities designated upon initial recognition at fair value through profit or
loss are designated as such at the initial date of recognition, and only if the criteria in
Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses
attributable to changes in own credit risk are recognized in OCI. These gains/losses
are not subsequently transferred to Statement of Profit and Loss. However, the
Company may transfer the cumulative gain or loss within equity. All other changes in
fair value of such liability are recognized in the Statement of Profit and Loss.
• Financial Liabilities at amortized cost (Loans and borrowings)
After initial recognition, interest-bearing loans and borrowings are subsequently
measured at amortized cost using the EIR method. Gains and losses are recognized
in profit or loss when the liabilities are derecognized as well as through the EIR
amortization process.
Amortized cost is calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of the EIR. The EIR
amortization is included as finance costs in the Statement of Profit and Loss.
Financial liabilities - derecognition
A financial liability is derecognized when the obligation under the liability is
discharged or cancelled or expires. When an existing financial liability is replaced
by another from the same lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or modification is
treated as the derecognition of the original liability and the recognition of a new
liability. The difference in the respective carrying amounts is recognized in the
Statement of Profit and Loss.
g) Inventories:
Inventories are valued at the lower of cost and net realizable value, less any
provision for obsolescence. Costs incurred in bringing each product to its present
location and condition are accounted.
Net realizable value is determined based on estimated selling price, less further
costs expected to be incurred to completion and disposal.
h) Taxation
Current tax
The income tax expense or credit for the period is the tax payable on the current
period's taxable income based on the applicable income tax rate for each jurisdiction
adjusted by changes in deferred tax assets and liabilities attributable to temporary
differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or
substantively enacted at the end of the reporting period in the countries where the
company and its subsidiary operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with respect to situations in
which applicable tax regulation is subject to interpretation. It establishes provisions,
where appropriate, on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary
differences arising between the tax bases of assets and liabilities and their carrying
amounts in the financial statements. Deferred income tax is determined using tax
rates (and laws) that have been enacted or substantially enacted by the end of the
reporting period and are expected to apply when the related deferred income tax
asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognized for all deductible temporary differences and
unused tax losses only if it is probable that future taxable amounts will be available to
utilize those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to
offset current tax assets and liabilities and when the deferred tax balances relate to the
same taxation authority. Current tax assets and tax liabilities are offset where the
entity has a legally enforceable right to offset and intends either to settle on a net
basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it
relates to items recognised in other comprehensive income or directly in equity. In
this case, the tax is also recognised in other comprehensive income or directly in
equity, respectively.
Minimum Alternative Tax:
Minimum alternative tax paid in accordance with the tax laws, which gives future
economic benefits in the form of adjustment to future income tax liability, is
considered as an asset if there is convincing evidence that the company will pay a
normal income tax. Accordingly, MAT is recognised as an asset in the Statement of
Assets and Liabilities are measured using the tax rates and tax laws that have been
enacted by the future economic benefit associated with it will flow to the company.
i) Retirement and Other Employee benefit schemes:
Short-term employee benefits:
Employee benefits payable wholly within twelve months of receiving employee
services are classified as short-term employee benefits. These benefits include
salaries and wages, performance incentives and compensated absences which are
expected to occur in next twelve months. The undiscounted amount of short-term
employee benefits to be paid in exchange for employee services is recognized as an
expense as the related service is rendered by employees.
Provident Fund and ESI:
The Company offers retirement benefits to its employees, under provident fund
scheme and Employee State Insurance which is a defined benefit plan. The
Company and employees contribute at predetermined rates to 'Cubex Tubings
Limited Employee's Contributory Provident Fund1 ('Trust') and ESI accounted on
accrual basis and the conditions for grant of exemption stipulate that the employer
shall make good the deficiency, if any, between the return guaranteed by the statute
and actual earning of the Trust. The contribution towards provident fund is
recognized as an expense in the Statement of Profit and Loss.
j) Foreign currency translation
i) Functional and presentation currency
Items included in the financial statements of the company are measured using the
currency of its primary economic environment in which the company operates
('the functional currency'). The financial statements are presented in Indian rupees
(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.
k) Earnings per share
i) Basic earnings per share:
Basic earnings per share are calculated by dividing:
a. The profit attributable to owners of the Company;
b. By the weighted average number of equity shares outstanding during the
financial year.
ii) Diluted earnings per share
Diluted earnings per share adjust the figures used in the determination of basic
earnings per share to take into account:
c. The after-income tax effect of interest and other financing costs associated
with dilutive potential equity shares, and
d. The weighted average number of additional equity shares that would have
been outstanding assuming the conversion of all dilutive potential equity
shares.
l) Trade Receivables:
Trade receivables are recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method, less provision for impairment. The
company has not created any provision for impairment during the year.
m) Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash
equivalents includes cash on hand, deposits held at call with financial institutions,
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, and bank overdrafts. Bank overdrafts are
shown within borrowings in current liabilities in the balance sheet.
n) Contributed Equity
Equity shares are classified as equity.
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