1.2 Summary of Significant Accounting Policies
A. Basisofpreparationoffinancialstatements
The financial statements of the Company have been prepared in accordance with the generally accepted accounting principles in India (Indian GAAP). The
Company has prepared these financial statements to comply in all material respects with the accounting standards notified under section 133 of the
Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014 (as amended) and Companies (Accounts Standards) Rules,
2016. The financial statements have been prepared on an accrual basis and under the historical cost convention.
The accounting policies adopted in the preparation of financial statements are consistent with those of previous year.
B. Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires the management of the Company
to make estimates and assumptions that affect the reported balances of assets, liabilities and disclosures relating to the contingent liabilities as
at the date of the financial statements and reported amounts of income and expenses during the period. Difference between the actual result and
estimates are recognized in the period in which the results are known / materialized. Significant estimates used by management in the
preparation of these financial statements includes estimates of the economic useful lives of property, plant and equipment.
C. Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be easily measured.
a) In case of revenue from contracts with customers, revenue is recognised as per the terms of contract.
b) In case of
revenue from trading of products, revenue is recognized when all the risk and rewards are transferred to customers and invoice is raised.
Revenue earned in excess ofbillings done during the year are classified as unbilled revenue while billing in excess of revenue earned is classified
as unearned revenue.
Interest is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.
D. Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation. Cost of an asset comprises of its purchase price and direct cost
attributable to bringing the asset to its present condition for its intended use and borrowing cost on qualifying assets.
Leasehold improvements are depreciated on a straight line basis over the period of lease.
Advances paid towards acquisition of property, plant and equipment, outstanding at each balance sheet date are disclosed as capital advances.
F. Foreign currency transactions
Transactions denominated in foreign currencies are recorded at the exchange rates closely prevailing on the date
of the transaction. At the year-end, all the monetary assets and liabilities denominated in foreign currencies are
restated into rupee equivalents at the year-end exchange rates. Non-monetary items which are carried in terms of
historical cost denominated in a foreign currency are reported using the exchange rate at the date of the
transaction. All exchange differences arising on such restatements are reflected in the Statement of Profit and
Loss.
G. Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders
by the weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to
equity shareholders and the weighted average number of shares outstanding during the period are adjusted for
the effects of all dilutive potential equity shares.
FI. Employee benefits
(i) The Company contributes to the statutory provident fund of the Regional Provident Fund Commissioner, in
accordance with the Employees' Provident Fund and Miscellaneous Provision Act, 1952. The plan is a defined
contribution plan and contribution paid or payable is recognized as an expense in the period in which services
are rendered by the employee.
(ii) Gratuity is a post employment benefit and is a defined benefit plan. The liability recognized in the Balance Sheet
represents the present value of the defined benefit obligation at the Balance Sheet date less the fair value of plan
assets (if any), together with adjustments for unrecognized past service costs. The Company’s obligation in
respect of the plan is provided for based on actuarial valuation carried out as at the Balance Sheet date by an
independent actuary using the projected unit credit method. Actuarial gain or loss arising from experience
adjustments and changes in actuarial assumptions are credited or charged to the Statement of Profit and Loss in
the year in which such gain or loss arise.
(iii All short term employee benefits are recorded as expenses. Short term employee benefits including salaries, non
monetary benefits (such as medical care).
I. Tax expense
Tax expense comprises current tax and deferred tax at the applicable enacted or substantively enacted rates.
Current tax represents the amount of income tax payable in respect of the taxable income for the reporting
period. Tax liability has been computed being higher of Minimum Alternate Tax (MAT) and tax under normal
provisions of Income-tax Act. MAT credit are being recognized that there is convincing evidence that the
Company will pay normal tax. The excess tax paid under MAT provisions being over and above regular tax
liability can be carried forward for a period of ten years from the year of recognition and is available for set off
against future tax liabilities computed under regular tax provisions. Deferred tax represents the effect of timing
difference between taxable income and accounting income for the reporting period that originates in one period
and is capable of reversal in one or more subsequent periods. Deferred tax assets in respect of unabsorbed
depreciation and carry forward of losses are recognized only to the extent that there is virtual certainty that
sufficient taxable income will be available to realize these assets. All other deferred tax assets are recognized only
to the extent that there is reasonable certainty that sufficient future taxable income will be available to realize
these assets.
3. Cash and cash equivalents
Cash and cash equivalents include cash in hand, demand deposits with banks, other short term highly liquid
investments with original maturity of three months or less.
K. Impairment
At each Balance Sheet date, the Company reviews the carrying amounts of its assets to determine whether there is
any indication of impairment based on internal or external factors. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of impairment loss. Recoverable amount is the
higher of an asset’s net selling price and value in use. In assessing value in use, the estimated future cash flows
expected from the continuing use of the asset and from its disposal are discounted to their present value using a
pre-tax discount rate that reflects the current market assessments of time value of money and the risks specific to
the asset. Reversal of impairment loss is recognized immediately as income in the Statement of Profit and Loss.
L. Leases
Leases where the Company assumes substantially all the risks and rewards of ownership are classified as finance
leases. Finance leases are capitalized at the lower of the fair value of the leased assets at inception and the present
value of minimum lease payments. Lease payments are apportioned between the finance charge and the outstanding
liability. The finance charge is allocated to periods during the lease term at a constant periodic rate of interest on the
remaining balance of the liability.
Leases where the lessor retains substantially all the risks and rewards of ownership are classified as operating
leases. Lease rentals in respect of assets taken under operating leases are charged to statement of profit and loss
on a straight line basis over the lease term unless other systematic basis is more representative of the time
pattern of the benefit.
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