III. SUMMARY OF MATERIAL ACCOUNTING
POLICIES:
A. Property, plant & equipment
a) The cost of an item of property, plant and equipment is
recognized as an asset only if it is probable that future
economic benefits associated with the item will flow to the
entity and the cost of the item can be measured reliably.
b) An item of property, plant and equipment that qualifies
as an asset is measured on initial recognition at cost.
Following initial recognition, items of property, plant
and equipment are carried at its cost less accumulated
depreciation and accumulated impairment loss.
The company identifies and determines cost of each part
of an item of property, plant and equipment separately, if
the part has a cost which is significant to the total cost of
that item of property, plant and equipment and has useful
life that is materially different from that of the remaining
item.
c) Property, plant and equipment are stated at cost net of tax
/ duty credit availed, less accumulated depreciation and
accumulated impairment loss, if any.
d) The initial cost of an asset comprises its purchase
price or construction cost (including import duties and
non-refundable taxes), any costs directly attributable
to bringing the asset into the location and condition
necessary for it to be capable of operating in the manner
intended by management, the initial estimate of any
decommissioning obligation (if any) and the applicable
borrowing cost till the asset is ready for its intended use.
e) Subsequent expenditure is capitalised only if it is probable
that the future economic benefits associated with the
expenditure will flow to the Company.
f) Items such as spare parts, stand-by equipment and
servicing equipment that meet the definition of property
plant and equipment are capitalized as property, plant
and equipment. In other cases, the spare parts are
inventorised on procurement and charged to Statement
of Profit & Loss on issue/consumption.
g) When significant parts of property, plant and equipment
are required to be replaced at intervals, the company
derecognises the replaced part and recognises the new
part with its own associated useful life and it is depreciated
accordingly. All other repair and maintenance cost are
recognised in the Statement of Profit and Loss as and
when incurred.
h) An item of property, plant and equipment is derecognised
upon disposal or when no future economic benefits are
expected from its use. Any gain or loss arising on de¬
recognition of the asset (calculated as the difference
between the net disposal proceeds if any and the carrying
amount of the asset) is included in the Statement of Profit
and Loss when the asset is derecognised.
i) The company has elected to consider the carrying value
of all its property, plant and equipment appearing in
the financial statements prepared in accordance with
Accounting Standards notified under the section 133 of
the Companies Act 2013, revised together with Rule 7 of
the Companies (Accounts) and used the same as deemed
cost in the opening Ind AS Balance Sheet prepared on 1st
April, 2015.
B. Capital Work In Progress and Capital Advances
Cost of assets not ready for intended use as on the
balance sheet date, is shown as capital work in progress.
C. Depreciation
a) Depreciation on property, plant and equipment is
provided on the straight line basis, over the useful lives
of assets (after retaining the residual value of up to 5%).
Residual values of the assets are held at 5% except that
of Furniture and fixtures and Office equipment at Re. 1
as estimated by the Chartered Engineer & Valuer. The
useful lives determined are in line with the useful lives as
prescribed in the Schedule II of the Act except in case of
following assets which are depreciated over their useful
life as determined by a Chartered Engineer and Valuer.
b) The residual values and useful lives of property, plant and
equipment are reviewed at each financial year end and
changes, if any, are accounted in the period in which the
estimates are revised and in any future periods affected.
c) Items of property, plant and equipment costing not more
than ' 5,000 each are depreciated at 100 percent in the
year in which they are capitalised.
d) The Company depreciates components of the main asset
that are significant in value and have different useful lives
as compared to the main asset separately.
e) The spare parts are depreciated over the estimated useful
life based on internal technical assessment.
f) Expenditure on major repairs and overhauls which
qualify for recognition in the item of Property, Plant and
Equipment and which result in additional useful life is
depreciated over the extended useful life of the asset as
determined by technical evaluation.
g) Depreciation is charged on additions / deletions on
pro-rata monthly basis including the month of addition /
deletion.
D. Leases
The Company assesses whether a contract contains
a lease, at the inception of the contract. A Contract is
or contains a lease if the contract conveys the right to
control the use of an identified asset for a period of time in
exchange for consideration. To assess whether a contract
conveys the right to control the use of an identified
asset, the Company assesses whether (i) the contract
involves the use of identified asset; (ii) the Company has
substantially all of economic benefits from the use of asset
through a period of lease and (iii) the Company has the
right to direct the use of the asset.
The Company as Lessee
The Company recognises the right-of-use asset and lease
liability at the commencement of date. The right of use
asset is initially measured at cost, which comprises the
initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date,
plus any initial direct costs incurred and estimate of costs
to dismantle and remove underlying asset or to restore
the site on which it is located less any lease incentives
received.
Certain lease arrangements include the option to extend
or terminate the lease before the end of the lease term.
The right-of-use asset and lease liabilities include these
options when it is reasonably certain that option will be
exercised.
The right-of-use asset is subsequently depreciated using
the straight line method from commencement date to the
earlier of the end of useful life of the right-of-use asset
or the end of the lease term. In addition, the right-of-use
asset is periodically reduced by impairment losses, if any
and adjusted for certain re-measurements of the lease
liability.
The lease liability is initially measured at the present
value of the lease payments that are not paid at the
commencement date, discounted using the interest
rate implicit in the lease or, if that rate cannot be readily
determined, company's incremental borrowing rate.
Generally, the company uses its incremental borrowing
rate as the discount rate.
The lease liability is subsequently measured at amortised
cost using the effective interest method. It is remeasured
when there is a change in future lease payments arising
from a change in an index or rate, if there is a change
in the company's estimate of the amount expected to be
payable under a residual value guarantee, or if company
changes its assessment of whether it will exercise a
purchase, extension or termination option.
When the lease liability is remeasured in this way, a
corresponding adjustment is made to the carrying amount
of the right-of-use asset, or is recorded in profit or loss if
the carrying amount of the right-of-use asset has been
reduced to zero.
Lease payments have been considered as financing
activities in the Statement of Cash Flow.
Short-term leases and leases of low-value assets
The company has elected not to recognise right-of-use
assets and lease liabilities for short term leases that have
a lease term of 12 months. The company recognises
the lease payments associated with these leases as an
expense on a straight-line basis over the lease term.
E. Investment Property
Investment properties are properties that are held to earn
rentals and/or for capital appreciation (including property
under construction for such purposes) and not occupied
by the Company for its own use.
Investment properties are initially recognised at
cost.
Though the Company measures investment property
using cost based measurement, the fair value of
investment property is disclosed in the notes. Fair values
are determined based on an annual evaluation performed
by an accredited external independent valuer applying
a valuation model recommended by the International
Valuation Standards Committee.
Investment properties are derecognised when either they
have been disposed of or when the investment property is
permanently withdrawn from use and no future economic
benefit is expected from its disposal.
The difference between the net disposal proceeds and
the carrying amount of the asset is recognised in the
statement of profit and loss in the period of de-recognition.
F. Non-Current Assets Held For Sale
The Company classifies non-current assets held for sale if
their carrying amounts will be recovered principally through
a sale (rather than through continuing use of assets) and
actions required to complete such sale indicate that it is
unlikely that significant changes to the plan to sell will be
withdrawn. Also, such assets are classified as held for
sale only if the management expects that the sale is highly
probable and is expected to complete the sale within one
year from the date of classification.
Non-current assets classified as held for sale are
measured at lower of their carrying amount and fair value
less costs to sell.
G. Inventories
Raw-materials, work-in-process, finished goods, packing
materials, stores, spares, components, consumables
and stock-in-trade are carried at lower of cost and net
realizable value. However, materials and other items
held for use in production of inventories are not written
down below cost if the finished goods in which they will
be incorporated are expected to be sold at or above cost.
The comparison of cost and net realizable value is made
on item-to- item basis.
Cost of inventories comprises all costs of purchases,
duties, taxes (other than those subsequently recoverable
from tax authorities) and all the other costs incurred in
the normal course of business in bringing inventories to
their present location, including appropriate overheads
apportioned on a reasonable and consistent basis and is
determined on the following basis:
a) Raw materials and finished goods on weighted
average basis.
b) Work in process at raw material cost plus cost of
conversion.
c) Stores and spares on weighted average basis.
Customs duty on raw materials / finished goods lying in
bonded warehouse is provided for at the applicable rates.
Obsolete, slow moving, surplus and defective stocks are
identified and where necessary, provision is made for
such stocks.
H. Revenue Recognition
Revenue is recognized when it's probable that economic
benefits associated with a transaction will flow to the
Company in the ordinary course of its activities and the
amount of revenue can be measured reliably. Revenue is
measured at the fair value of the consideration received
or receivable, net of returns, trade discounts and volume
rebates allowed by the company.
Revenue is recognized upon transfer of control of
promised products and services to customers in an
amount that reflects the consideration expected to be
received in exchange for those products or services.
Revenue includes only the gross inflows of economic
benefits received and receivable by the company, on its
own account. Amounts collected on behalf of third parties
such as Goods & Service Tax (GST) are excluded from
revenue.
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, the company retains neither
continuing managerial involvement to the degree usually
associated with ownership nor effective control over the
goods sold, revenue and the associated costs can be
estimated reliably and it is probable that economic benefits
associated with the transaction will flow to the company.
Sale value of goods is measured at the fair value of the
consideration received or receivable, net of returns and
applicable trade discounts or rebates. It excludes Goods
& Service Tax (GST)
Sale of scrap / wastages, salvages and sweepings are
accounted for on delivery / realisation.
Sale of Services
Revenue from sale of services is recognized when the
stage of completion can be measured reliably. Stage
of completion is measured by the services performed
till balance sheet date as percentage of total services
contracted.
Other claims are booked when there is a reasonable
certainty of recovery. Claims are reviewed on a periodic
basis and if recovery becomes uncertain, provision is
made in the accounts.
Interest Income
Interest income is accrued on time basis, by reference to
the principal outstanding and at the effective interest rate
applicable.
I. Employee Benefits
Short term employee benefits
All employee benefits payable wholly within twelve
months of rendering the service are classified as short
term employee benefits and they are recognized as an
expense at an undiscounted amount in the Statement
of Profit & Loss for the year/period in which the related
services are rendered.
Post employment Benefits:
The Company's post-employment benefit consists of
provident fund, gratuity and superannuation fund. The
Company also provides for leave encashment which is in
the nature of long term benefit.
• Defined Contribution Plans:
Defined Contribution plans are Employee State Insurance
Scheme and government administered Pension Fund
Scheme for all applicable employees and Superannuation
Fund Scheme for eligible employees.
The Superannuation Fund is a Defined Contribution
Scheme managed by LIC and SBI Life Insurance Company
and contributions made to these funds are charged to the
Statement of Profit and Loss.
Recognition and Measurement of Defined
Contribution Plans:
The company recognizes contribution payable to a
defined contribution plan as an expense in Statement of
profit and Loss when employee renders services to the
Company during the reporting period. If the contributions
payable for services received from employees before the
reporting date exceeds the contributions already paid, the
deficit payable is recognized as liability after deducting the
contribution already paid. If the contribution already paid
exceeds the contribution due for services received before
reporting date, the excess is recognized as an asset to
the extent that prepayment will lead to, for example, a
reduction in future payments or cash refund.
• Defined Benefit Plans:
i. Provident Fund scheme:
The company makes specified monthly contributions
towards Employee Provident Fund scheme to a separate
trust administered by the company. The minimum interest
payable by the trust to the beneficiaries is being notified
by the government every year. The company has an
obligation to make good the shortfall, if any, between the
return on investments of the trust and the notified interest
rate.
ii. Gratuity Scheme:
The Company operates defined benefit plan for Gratuity.
The company contributes to a separate entity (a fund),
towards meeting the Gratuity obligation. The Company
has created an Employees Group Gratuity Fund which
has taken a Group Gratuity Assurance Scheme with the
Life Insurance Corporation of India.
Recognition and measurement of defined benefit
plans:
The cost of providing such defined benefit is determined
using the projected unit credit method of actuarial
valuation made at the end of the year. The defined benefit
obligations recognized in the balance sheet represent
the present value of the defined benefit obligations as
reduced by the fair value of pan assets, if applicable. Any
defined benefit asset (negative defined benefit obligations
resulting from this calculation) is recognized representing
the present value of available refunds and reductions in
future contributions to the plan.
Actuarial gains and losses are recognised in other
comprehensive income for gratuity and recognised in the
Statement of Profit & Loss for leave encashment.
Re-measurements, comprising of actuarial gains and
losses, the effect of the asset ceiling, excluding amounts
included in net interest on the net defined benefit liability
and the return on plan assets (excluding amounts
included in net interest on the net defined benefit liability),
are recognised immediately in the balance sheet with a
corresponding debit or credit to retained earnings through
OCI in the period in which they occur. Re-measurements
are not reclassified to Statement of profit or loss in
subsequent periods.
Past service costs are recognised in Statement of profit or
loss on the earlier of:
• The date of the plan amendment or curtailment, and
• The date that the Company recognises related
restructuring costs
Net interest is calculated by applying the discount rate
to the net defined benefit liability or asset. The Company
recognises the following changes in the net defined
benefit obligation as an expense in the statement of profit
and loss:
• Service costs comprising current service costs, past-
service costs, gains and losses on curtailments and
non-routine settlements; and
• Net interest expense or income
J. Borrowing costs
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 in
relation to borrowings denominated in foreign currency to
the extent regarded as an adjustment to the borrowing
costs.
Exchange differences are regarded as an adjustment to
borrowing costs for an amount equivalent to the extent to
which an exchange loss does not exceed the difference
between the cost of borrowing in functional currency when
compared to the cost of borrowing in a foreign currency
and the amount of gain in relation to any settlement or
translation of a borrowing, to the extent of any unrealised
loss in respect of the same borrowing, previously
recognised as an adjustment to such borrowing cost.
Borrowing costs that are attributable to the acquisition
or construction of qualifying assets (i.e. an asset that
necessarily takes a substantial period of time to get ready
for its intended use) are capitalized as a part of the cost
of such assets till the month in which the asset is ready
for use. All other borrowing costs are charged to the
Statement of Profit & Loss.
K. Segment Accounting
The Chief Operational Decision Maker (CODM) monitor
the operating results of the business Segments separately
for the purpose of making decisions about resource
allocation and performance assessment. Segment
performance is evaluated based on profit or loss and is
measured consistently with profit or loss in the financial
statements.
The Operating segments have been identified on the
basis of the nature of products / services.
Segment revenue includes sales and other income directly
identifiable with / allocable to the segment including inter¬
segment revenue.
Expenses that are directly identifiable with / allocable to
segments are considered for determining the segment
result. Expenses which relate to the Company as a
whole and not allocable to segments are included under
unallowable expenditure.
Income which relates to the Company as a whole and not
allocable to segments is included in un-allocable income.
Segment result includes margins on inter-segment and
sales which are reduced in arriving at the profit before tax
of the Company.
Segment assets and liabilities include those directly
identifiable with the respective segments. Un-allocable
assets and liabilities represent the assets and liabilities
that relate to the Company as a whole and not allocable
to any segment.
Inter-Segment transfer pricing
Segment revenue resulting from transactions with other
business segments is accounted for at actual cost
incurred for producing the goods or at market prices
of the products transferred as the case may be and as
agreed to by the respective segments.
L. Foreign Currency Transactions
Monetary items:
Initial Recognition
On initial recognition, transactions in foreign currencies
are entered into by the Company are recorded in the
functional currency (i.e. Indian Rupees), by applying to
the foreign currency amount, the spot exchange rate
between the functional currency and foreign currency at
the same date of transaction.
Measurement of foreign currency items at reporting
date
Foreign currency monetary items of the company are
translated at the closing rates.
Exchange differences arising on settlement or translation
of monetary items are recognised in Statement of
Profit & Loss either as profit or loss on foreign currency
transaction and translation or as borrowing costs to the
extent regarded as an adjustment to borrowing costs.
Non - Monetary items:
Non-monetary items that are measured in terms of
historical cost are recorded at the exchange rates at the
dates of the initial transactions.
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