2. MATERIAL ACCOUNTING POLICIES2.1 Basis of preparation & presentation:
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 requirements of Division II of Schedule III to the
Companies Act, 2013 (Act), (Ind AS compliant Schedule III),
as applicable to the financial statements.
These financial statements have been prepared on a
historical cost basis except for certain financial assets and
liabilities measured at fair value (refer accounting policy
regarding financial instruments) and consistent with
previous year. The financial statements are presented in INR,
and all values are rounded to the nearest millions, except
when otherwise indicated.
2.2 Current versus non-current classification
The Company presents assets and liabilities in the balance
sheet based on current/ non-current classification.
All assets and liabilities have been classified as current or
non-current as per the Company's normal operating cycle
and other criteria set out in IAS 1, "Presentation of financial
statements".
Deferred tax assets and liabilities are classified as non-current
assets and liabilities. Based on the nature of products and the
time between the acquisition of assets for processing and
their realization in cash and cash equivalents, the Company
has ascertained its operating cycle as 12 months for the
purpose of current or non- current classification of assets
and liabilities.
2.3 Use of judgements, estimates and assumptions:
The preparation of the financial statements in conformity
with Ind AS requires the management to make judgements,
estimates and assumptions which affects the reported
amounts of assets and liabilities and disclosures relating to
contingent liabilities as at the date of the financial statements
and the reported amounts of income and expenditure for
the periods presented. The management believes that the
estimates used in preparation of the financial statements are
prudent and reasonable.
Future results could differ from these estimates. Estimates and
underlying assumptions are reviewed on an ongoing basis.
The effects of changes in accounting estimates are reflected
in the financial statements in the period in which results
are known and, if material, are disclosed in the financial
statements.
Significant areas of estimation of uncertainty and critical
judgments in applying accounting policies that have the
most significant effect on the amounts recognized in the
financial statements are:
• Fair value measurement of financial instruments (Refer
Note 2.17)
• Revenue recognition and related cost estimation; (refer
note 2.12)
• Provision for inventory obsolescence (Refer Note 2.10)
• Provision for expected credit losses of trade receivables
(Refer Note 2.18)
• Share based Payments (Refer Note 2.15)
2.4 Foreign currency translation
Functional and presentation currency
The Financial statements are presented in Indian rupees,
which is the functional and presentation currency of
the Company.
Transactions and balances
In preparing the financial statements of the Company,
transactions in currencies other than the entity's functional
currency (foreign currencies) are recognized at the rates
of exchange prevailing at the dates of the transactions.
Foreign currency denominated monetary assets and
liabilities are translated at the exchange rate prevailing on
the balance sheet date. Exchange gains and losses arising on
settlement or translation are recognized in the statement of
profit and loss.
Non-monetary assets and non-monetary liabilities
denominated in a foreign currency and measured at fair value
are translated at the exchange rate prevalent at the date
when the fair value was determined. Non-monetary items
that are measured in terms of historical cost in a foreign
currency are not retranslated.
Transaction gains or losses realized upon settlement of
foreign currency transactions are included in determining
net profit for the period in which the transaction is settled.
2.5 Property, plant and equipment
Property, plant and equipment are initially recognized
at cost. The initial cost of property, plant and equipment
comprises its purchase price, including non-refundable
duties and taxes net of any trade discounts and rebates.
The cost of property, plant and equipment includes interest
on borrowings (borrowing cost) directly attributable to
acquisition, construction or production of qualifying assets.
Subsequent to initial recognition, property, plant and
equipment are stated at cost less accumulated depreciation
(other than freehold land, which is stated at cost) and
accumulated impairment losses, if any. Capital work in
progress is stated at cost, net of accumulated impairment
loss, if any.
The Company depreciates property, plant and equipment
over their estimated useful lives using the straight-line
method as per the useful life prescribed in Schedule II to the
Act except in respect of the following categories of assets, in
whose case the life of the assets has been assessed, based on
technical advice, taking into account the nature of the asset,
the estimated usage of the asset, the operating conditions
of the asset, past history of replacement, anticipated
technological changes, manufacturers warranties and
maintenance support.
Notes:
1. Buildings constructed over leasehold land are
depreciated over the remaining lease term of land
or life as specified under Schedule II of the Act,
whichever is lower.
2. The Company, based on the technical assessment
made by technical experts and management estimate,
depreciates certain items of Plant & Machinery,
Computers & Servers and Tools & Equipment over
estimated useful lives which are different from
the useful life prescribed in Schedule II to the Act.
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.
Any gain or loss arising on the disposal or retirement of an
item of property, plant and equipment is determined as the
difference between the sales proceeds and the carrying
amount of the asset and is recognized in the statement of
profit and loss.
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.
2.6 Intangible assets
Intangible assets are stated at cost less accumulated
amortization and accumulated impairment. Intangible assets
are amortized over their estimated useful life on a straight-line
basis as follows:
Gains or losses arising from de-recognition of an intangible
asset, measured as the difference between the net disposal
proceeds and the carrying amount of the asset, are
recognized in statement of profit and loss when the asset
is de-recognized.
2.7 Leases
Company as lessee
The Company assesses at contract inception whether a
contract is or contains a lease. That is, if the contract conveys
the right to control the use of an identified asset for a period
of time in exchange for consideration.
At the date of commencement of the lease, the Company
recognizes a right-of-use asset ("ROU") and a corresponding
lease liability for all lease arrangements in which it is a lessee,
except for leases with a term of twelve months or less
(short-term leases) and low value leases. For these short-term
and low value leases, the Company recognizes the lease
payments as an operating expense on a straight-line basis
over the term of the lease.
i) Right-of-use assets
The right-of-use assets are initially recognized at cost,
which comprises the initial amount of the lease liability
adjusted for any lease payments made at or prior to the
commencement date of the lease plus any initial direct
costs less any lease incentives. They are subsequently
measured at cost less accumulated depreciation and
impairment losses and adjusted for any remeasurement
of lease liabilities.
Right-of-use assets are depreciated from the
commencement date on a straight-line basis over
the shorter of the lease term and useful life of the
underlying asset. Right of use assets are evaluated
for recoverability whenever events or changes in
circumstances indicate that their carrying amounts
may not be recoverable. The right-of-use assets are
also subject to impairment.
ii) Lease liabilities
The lease liability is initially measured at amortized
cost at the present value of the future lease payments.
The lease payments are discounted using the interest
rate implicit in the lease or, if not readily determinable,
using the incremental borrowing rates in the country
of domicile of the leases. After the commencement
date, the amount of lease liabilities is increased to
reflect the accretion of interest and reduced for the
lease payments made or a change in the assessment
of extension or termination options. Lease liabilities
are remeasured with a corresponding adjustment to
the related right of use asset if there is a modification,
a change in the lease term, a change in the lease
payments (e.g., changes to future payments resulting
from a change in an index or rate used to determine
such lease payments). Lease liability and ROU asset
have been separately presented in the Balance Sheet
and lease payments have been classified as financing
cash flows.
2.8 Income taxes:
The income tax expense or credit for the period is the tax
payable or tax receivable on the taxable income based on
the applicable income tax rate in India adjusted by changes
in deferred tax assets and liabilities attributable to temporary
differences and to unused tax losses.
Current and deferred tax is recognized in statement of
profit and loss, except to the extent that it relates to items
recognized in other comprehensive income or directly
in equity. In this case, the tax is also recognized in other
comprehensive income or directly in equity, respectively.
The current tax and deferred tax are calculated on the
basis of the tax rates and tax laws enacted or substantively
enacted at the end of the reporting period in India.
Deferred tax is provided using the balance sheet method,
on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the
financial statements. However, deferred tax liabilities are
not recognized if they arise from the initial recognition of
goodwill. Deferred tax is also not accounted for if it arises
from initial recognition of an asset or liability in a transaction
other than a business combination that at the time of the
transaction affects neither accounting profit nor taxable
profit/loss and does not give rise to equal taxable and
deductible temporary differences.
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.
2.9 Inventories:
Inventories are valued at the lower of cost and net
realizable value.
Inventories consist of raw materials, stores and spares, work
in progress and finished goods. The cost of all categories
of inventories is based on the weighted average method.
Cost includes expenditures incurred in acquiring the
inventories, production or conversion costs and other costs
incurred in bringing them to their existing location and
condition. In the case of finished goods and work in progress,
cost includes an appropriate share of overheads based on
normal operating capacity. Stores and spares consist of
packing materials, engineering spares (such as machinery
spare parts) and consumables (such as lubricants and oils),
which are used in operating machines or consumed as
indirect materials in the manufacturing process.
Net realizable value represents the estimated selling price
for inventories less all estimated costs of completion and
costs necessary to make the sale.
The factors that the Company considers in determining the
provision for slow moving, excess or obsolete inventory
items includes production plan, orders in hand, forecast
inventory usage, committed and expected orders, alternative
usage. The Company considers all these factors and adjusts
the inventory provision to reflect its actual experience on a
periodic basis.
2.10 Cash and cash equivalents:
Cash comprises cash on hand, in bank and demand deposits
with banks. The Company considers all highly liquid financial
instruments, which are readily convertible into cash and have
original maturities of three months or less from the date of
purchase, to be cash equivalents. Such cash equivalents are
subject to insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash
equivalents consist of cash on hand, in bank and demand
deposits with banks, as defined above, net of outstanding
bank overdrafts as they are considered an integral part of
the Company's cash management.
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