3. MATERIAL ACCOUNTING POLICIES
3.1 Revenue Recognition
The Company recognizes revenue, whenever control
over distinct goods or services is transferred to the
customer; i.e. when the customer is able to direct
the use of the transferred goods or services and
obtains substantially all of the remaining benefits,
provided a contract with enforceable rights and
obligations exists and amongst others collectability
of consideration is probable taking into account
customer's creditworthiness.
Revenue is the transaction price the Company
expects to be entitled to. In determining the
transaction price, the Company considers effects of
variable consideration, the existence of significant
financing contracts, noncash consideration
and consideration payable to the customer, if
any. The Company considers whether there are
other promises in the contract that are separate
performance obligations to which the transaction
price needs to be allocated (e.g. warranties etc.).
Variable Consideration
If the consideration in a contract includes a variable
amount, the company estimates the amount of
consideration to which it will be entitled to in
exchange for transferring goods to the customer.
The variable consideration is estimated at contract
inception and constrained until it is highly probable
that a significant reversal of revenue will not occur
once associated uncertainties are resolved. Some
contracts with the customers provide them with
a right to return and volume rebates. The right to
return and volume rebates gives rise to variable
consideration.
The amount of variable consideration is calculated
by either using the expected value or the most
likely amount depending on which is expected to
better predict the amount of variable consideration.
Consideration is also adjusted for the time value of
money if the period between the transfer of goods
or services and the receipt of payment exceeds
twelve months and there is a significant financing
benefit either to the customer or the Company. If a
contract contains more than one distinct good or
service, the transaction price is allocated to each
performance obligation based on relative stand¬
alone selling prices. If stand-alone selling prices are
not observable, the Company reasonably estimates
those.
Revenue is recognized for each performance
obligation either at a point in time or over time.
Sale of goods: Revenues are recognized at a point
in time when control of the goods passes to the
buyer, usually upon either at the time of dispatch or
delivery. Revenue from sale of goods is net of taxes
and recovery of charges collected from customers
like transport, packing etc.
Contract balances:
Trade Receivables:
A receivable represents the Company's right to an
amount of consideration that is unconditional (i.e.
only a passage of time is required before payment of
the consideration is due).
Contract liabilities:
A contract liability is the obligation to transfer
goods or services to a customer for which the
company has received consideration (or an amount
of consideration is due) from the customer. If a
customer pays consideration before the company
transfer goods and services to the customer, a
contract liability is recognised when the payment
is made or the payment is due, whichever is earlier.
Contract liabilities are recognised as revenue when
the company performs under the contract.
Interest Income
Interest income is recognised using the effective
interest rate, which is the rate that exactly discounts
the estimated future cash payments or receipts
through the expected life of the financial instrument
or a shorter period, where appropriate, to the net
carrying amount of the financial asset.
Dividend Income
Revenue is recognised when the right to receive the
payment is established by the reporting date.
Other Claims / Receipts
Insurance claims and other receipts including export
incentives, where quantum of accruals cannot
be ascertained with reasonable certainty, these
receipts are accounted on receipt basis.
Commission Income
When the Company Acts in the capacity of an
agent rather than as the principal in a transaction
the revenue recognised is the net amount of the
commission earned by the Company.
3.2 Property, Plant and Equipment
Property, Plant and Equipment are stated at cost net of
accumulated depreciation and accumulated impairment
losses, if any. Cost comprises purchase price including
import duties and other non-refundable duties and taxes,
borrowing cost if capitalization criteria are met and other
directly attributable cost for bringing the Assets to its
present location and condition.
The cost of replacing part of an item of Property, Plant
and Equipment is recognised in the carrying amount of
the item only when it is probable that future economic
benefits embodied within the part will flow to the
Company and the cost of the item/part can be measured
reliably. All other repairs and maintenance are charged
to the Statement of Profit and Loss during the period in
which they are incurred.
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.
Gains or losses arising on retirement or disposal of
Property, Plant and Equipment are recognised in the
Statement of Profit and Loss.
Property, Plant and Equipment which are not ready
for intended use as on the date of Balance sheet are
disclosed as "Capital Work-in-progress".
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.
The Assets which are held for Sale shall be reclassified
to Current Assets only if its carrying amount will be
recovered principally through a sale transaction (within
one year) rather than through continuing use.
Depreciation and amortization:-
Depreciation is provided on a pro-rata basis on the
straight line method based on estimated useful life
prescribed in Part - C under Schedule II to the Companies
Act, 2013.
Useful life of Plant and Machinery has been considered 25
years as against 15 years as prescribed in Schedule II of
the Companies Act, 2013 which is based on the prevailing
practices of the comparable industries and our past
experience for last 30 years.
3.3 Intangible Assets :
Separately purchased intangible assets are initially
measured at cost. Subsequently, intangible assets are
carried at cost less any accumulated amortisation and
accumulated impairment losses, if any. The useful lives
of intangible assets are assessed as either finite or
indefinite. Finite-life intangible assets are amortised on
a straight-line basis over the period of their expected
useful lives. Estimated useful lives by major class of
finite-life intangible assets are as follows :-
are being disposed off or no future economic benefit
is expected from its use or disposal, the difference net
disposal proceeds and the carrying amount of Assets
is recognised in the statement of Profit and Loss in the
period of derecognition.
3.4 Non Current Assets held for Sale
Non-current assets or disposal groups comprising assets
and liabilities are classified as 'held for sale' when all of
the following criteria are met : (i) decision has been made
to sell. (ii) the assets are available for immediate sale in
its present condition (iii) the assets are being actively
marketed and (iv) sale has been agreed or is expected to
be concluded within 12 months of the Balance Sheet date.
Subsequently, such non-current assets and disposal
groups classified as held for sale are measured at the
lower of its carrying value and fair value less costs to sell.
Non-current assets held for sale are not depreciated or
amortised.
3.5 Investment Property
Investment Property comprises Free-Hold Lands that
are held for Capital Appreciation as it has been held for a
currently undetermined future use and are recognised at
cost.
An Investment Property are derecognised either when
they are disposed off or when they are permanently
withdrawn from use and no future economic benefit
is expected. The difference between the net disposal
proceeds and the carrying amount of the asset is
recognised in statement of profit and loss in the period of
derecognition.
3.6 Lease
The Company as a lessee
The Company's lease asset classes primarily consist of
leases for buildings, machineries and warehouses. The
Company assesses whether a contract contains a lease,
at inception of a 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 an identified asset
(ii) the Company has substantially all of the economic
benefits from use of the asset through the period of
the lease and
(iii) the Company has the right to direct the use of the
asset.
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.
Certain lease arrangements includes the options to
extend or terminate the lease before the end of the lease
term. ROU assets and lease liabilities includes these
options when it is reasonably certain that they will be
exercised.
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.
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.
For the purpose of impairment testing, the recoverable
amount (i.e. the higher of the fair value less cost to sell
and the value-in-use) is determined on an individual asset
basis unless the asset does not generate cash flows that
are largely independent of those from other assets. In
such cases, the recoverable amount is determined for the
Cash Generating Unit (CGU) to which the asset belongs.
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 these leases. Lease liabilities are remeasured
with a corresponding adjustment to the related right
of use asset if the Company changes its assessment
if whether it will exercise an extension or a termination
option.
Lease liability and ROU asset have been separately
presented in the Balance Sheet and lease payments have
been classified as financing cash flows.
3.7 Impairment of non-financial assets
As at each balance sheet date, the Company assesses
whether there is an indication that an asset may be
impaired and also whether there is an indication of
reversal of impairment loss recognised in the previous
periods. If any indication exists, or when annual
impairment testing for an asset is required, if any, the
Company determines the recoverable amount and
impairment loss is recognised when the carrying amount
of an asset exceeds its recoverable amount.
Recoverable amount is determined:-
a) In the case of an individual asset, at the higher of the
fair value less cost to sell and the value in use ; and
b) In the case of cash generating unit (a group of asset
that generates identified, independent cash flow), at
the higher of the cash generating unit's fair value less
cost to sell and the value in use.
In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre¬
tax discounting rate that reflect the current market
assessment of the time value of the money and the risk
specific to the asset. In determining fair value less cost
of disposal, recent market transaction is taken into
account. If no such transaction can be identified, an
appropriate valuation model is used. These calculations
are corroborated by valuation multiples, quoted share
prices for publicly traded companies or other available
fair value indicators.
3.8 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.
A) Financial Assets
Initial Recognition and measurement of Financial
Assets
All financial assets are recognised initially at fair
value plus or minus, in the case of financial assets
not recorded at fair value through profit or loss,
transaction costs that are attributable to the
acquisition of the financial asset.
Financial assets are classified, at initial recognition,
in the same manner as described in subsequent
measurement.
Purchases or sales of financial assets that require
delivery of assets within a time frame established by
regulation or convention in the market place (regular
way trades) are recognised on the trade date, i.e. the
date the Company commits to purchase or sell the
asset
Subsequent measurement
For purposes of subsequent measurement, financial
assets are classified in four categories:
(a) Financial assets at amortised cost
(b) Financial assets at fair value through other
comprehensive income (FVTOCI)
(c) Financial assets at fair value through profit or
loss (FVTPL)
(d) Equity instruments measured at fair value
through other comprehensive income (FVTOCI)
(a) Financial assets at amortised cost
A financial asset that meets the following two
conditions is measured at amortised cost (net of
any write down for impairment) unless the asset
is designated at fair value through profit or loss
under the fair value option.
i) Business model test : The objective of the
Company's business model is to hold the
financial asset to collect the contractual
cash flows (rather than to sell the instrument
prior to its contractual maturity to realize its
fair value changes).
ii) Cash flow characteristics test : 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.
After initial measurement, such financial assets
are subsequently measured at amortised cost
using the effective interest rate (EIR) method.
Amortised 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 amortisation is included in finance
income in the profit or loss. The losses arising
from impairment are recognised in the profit or
loss.
Effective Interest Rate (EIR) method is a method
of calculating the amortised cost of a debt
instrument and of allocating interest income
over the relevant period. The effective rate is
the rate that exactly discounts estimated future
cash receipts (including all fees and points
paid or received that form an integral part of
the effective interest rate, transaction costs
and other premiums or discounts ) through the
expected life of the debt instrument or where
appropriate, a shorter period to the net carrying
amount on initial recognition
(b) Financial assets at fair value through other
comprehensive income (FVTOCI)
A financial asset that meets the following two
conditions is measured at fair value through
other comprehensive income unless the asset
is designated at fair value through profit or loss
under the fair value option.
i) Business model test : The financial asset
is held within a business model whose
objective is achieved by both collecting
contractual cash flows and selling financial
assets.
ii) Cash flow characteristics test : 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.
(c) Financial assets at fair value through profit or
loss (FVTPL)
FVTPL is a residual category for financial assets.
Any financial asset, 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 financial asset, 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') that would otherwise
arise from measuring financial assets and
financial liabilities or recognising the gains or
losses on them on different bases.
Financial assets included within the FVTPL
category are measured at fair value with all
changes recognized in the statement of profit
and loss.
(d) Equity instruments measured at fair value
through other comprehensive income (FVTOCI)
Equity instruments which are held for trading
are classified as at FVTPL. For all other
equity instruments, the Company may make
an irrevocable election to present in other
comprehensive income subsequent changes
in the fair value. The Company makes such
election on an instrument by instrument basis.
The classification is made on initial recognition
and is irrevocable.
If an equity investment is not held for trading,
an irrecoverable election is made at initial
recognition to measure it at fair value through
other comprehensive income with only dividend
income recognised in the statement of profit
and loss.
If the Company decides to classify an equity
instrument as at FVTOCI, then all fair value
changes on the instrument, excluding dividends,
are recognized in the OCI. There is no recycling
of the amounts from other comprehensive
income to statement of profit and loss, even
on sale of investment. However, the Company
may transfer the cumulative gain or loss within
equity.
Equity instruments included within the FVTPL
category are measured at fair value with all
changes recognized in the statement of profit
and loss.
Derecognition
A financial asset (or, where applicable, a part
of a financial asset or part of a group of similar
financial assets) is primarily derecognised
(i.e. removed from the Company's financial
statement) 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-through' arrangement; and either:
(i) the Company has transferred substantially
all the risks and rewards of the asset, or
(ii) 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
recognise the transferred asset to the extent
of the Company's continuing involvement. In
that case, the Company also recognises 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.
Continuing involvement that takes the form
of a guarantee over the transferred asset is
measured at the lower of the original carrying
amount of the asset and the maximum amount
of consideration that the Company could be
required to repay.
Write Off
An entity shall directly reduce the gross carrying
amount of a Financial Asset when the entity
has no reasonable expectation of recovering
a financial asset in its entity or for a portion
thereof.
Investment in joint ventures and subsidiaries:
The Company has accounted for its investment
in joint ventures and subsidiaries at cost.
Impairment of financial assets
The Company applies expected credit losses
(ECL) model for measurement and recognition
of impairment loss on the following financial
assets:
(a) Financial assets measured at amortised
cost
(b) Financial assets measured at fair value
through other comprehensive income
(FVTOCI)
Expected Credit Losses are measured through
either 12 month ECL or lifetime ECL and it is
assessed as following:
For recognition of impairment loss on financial
assets, the Company determines that 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 the 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
entity reverts to recognising impairment loss
allowance based on 12-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.
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 recognises impairment
loss allowance based on lifetime ECLs at each
reporting date, right from its initial recognition.
The Company follows a provision matrix to
determine impairment loss allowance on the
portfolio of trade receivables. The provision
matrix is based on its historical observed
default rates over the expected life of the trade
receivables and is adjusted for forward looking
estimates. At every reporting date, the historical
observed default rates are updated and changes
in the forward looking estimates are analysed.
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.
B) Financial liabilities
All financial liabilities are recognised 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 loans and
borrowings, trade and other payables and derivative
financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on
their classification, as described below:
(a) 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. This category also includes derivative
financial instruments entered into by the Company
that are not designated as hedging instruments
in hedge relationships as defined by Ind AS 109.
Separated embedded derivatives are also classified
as held for trading unless they are designated as
effective hedging instruments.
Gains or losses on liabilities held for trading are
recognised 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.
(b) Loans and borrowings
After initial recognition, interest-bearing loans
and borrowings are subsequently measured at
amortised cost using the effective interest rate
(EIR) method. Gains and losses are recognised in
statement of profit and loss when the liabilities
are derecognised as well as through the EIR
amortisation process.
Amortised 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 amortisation is included as finance
costs in the statement of profit and loss.
(c) Financial Guarantee Contracts
Financial guarantee contracts issued by the
Company are those contracts that require a
payment to be made to reimburse the holder
for a loss it incurs because the specified debtor
fails to make a payment when due in accordance
with the terms of a debt instrument. Financial
guarantee contracts are recognised initially as
a liability at fair value, adjusted for transaction
costs that are directly attributable to the
issuance of the guarantee. Subsequently, the
liability is measured at the higher of the amount
of loss allowance determined as per impairment
requirements of Ind AS 109 and the amount
recognised less cumulative amortisation.
Derecognition
A financial liability is derecognised 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
recognised in the statement of profit and loss.
Offsetting of financial instruments
Financial assets and financial liabilities are
offset and the net amount is reported in the
balance sheet if there is a currently enforceable
legal right to offset the recognised amounts and
there is an intention to settle on a net basis,
to realize the assets and settle the liabilities
simultaneously.
Derivative financial instruments and hedge
accounting
The Company enters into derivative contracts
such as forward currency contract, option
contract and cross currency and interest rate
swaps to hedge foreign currency risks and
interest rate risks. Such derivative financial
instruments are initially recognised at fair value
on the date on which a derivative contract is
entered into and are subsequently re-measured
at fair value. Derivatives are carried as financial
assets when the fair value is positive and
as financial liabilities when the fair value is
negative.
Any gains or losses arising from changes in the
fair value of derivatives are taken directly to
profit or loss, except for the effective portion of
cash flow hedges, which is recognised in other
comprehensive income and later reclassified
to statement of profit and loss when the hedge
item affects profit or loss.
3.9 Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprises
cash in hand, cash at banks and short-term deposits with
an original maturity of three months or less, which are
subject to an insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash
and cash equivalents consist of cash in hand, cash
at banks and short-term deposits, as defined above,
net of outstanding bank overdrafts, if any, as they are
considered an integral part of the cash management.
3.10' Foreign currency Transactions
The Company's financial statements are presented in
Indian Rupee (?) which is also Company's functional
currency.
Foreign currency transactions are recorded on initial
recognition in the functional currency, using the
exchange rates prevailing on the date of transaction.
At each balance sheet date, foreign currency monetary
items are reported using the closing exchange rate.
Exchange rate differences that arise on settlement of
monetary items or on translating of monetary items at
each balance sheet reporting date at the closing rate are
recognised as income or expense in the period in which
they arise except exchange difference on monetary items
that qualify as a hedging instrument in a cash flow hedge
are recognised initially in OCI to the extent the hedge is
effective.
Non-monetary items which are carried at historical cost
denominated in a foreign currency are reported using the
exchange rates prevailing at the date of the transaction.
Non-monetary items measured at fair value in a foreign
currency are reported using the exchange rates prevailing
at the date when fair value is determined.
When a gain or loss on non-monetary items is recognised
in OCI any exchange component of that gain / loss shall be
recognised in OCI, conversely when a gain or loss on a non¬
monetary item is recognised in Profit / loss any exchange
component of that gain/loss shall be recognised in Profit
/ Loss.
3.11 Fair Value Measurement:
The Company measures financial instruments, such as,
derivatives at fair value at each balance sheet date.
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 at the measurement date.
The fair value measurement is based on the presumption
that the transaction to sell the asset or transfer the
liability takes place either:
(a) In the principal market for the asset or liability, or
(b) In the absence of a principal market, in the most
advantageous market for the asset or liability
The principal or the most advantageous market must be
accessible by the Company.
The fair value of an asset or a liability is measured using
the assumptions that market participants would use
when pricing the asset or liability, assuming that market
participants act in their economic best interest.
A fair value measurement of a non-financial asset takes
into account a market participant's ability to generate
economic benefits by using the asset in its highest and
best use or by selling it to another market participant that
would use the asset in its highest and best use.
The Company uses valuation techniques that are
appropriate in the circumstances and for which sufficient
data are available to measure fair value, maximising the
use of relevant observable inputs and minimising the use
of unobservable inputs.
All assets and liabilities for which fair value is measured
or disclosed in the financial statements are categorised
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
For assets and liabilities that are recognised in the
financial statements on a recurring basis, the Company
determines whether transfers have occurred between
levels in the hierarchy by re-assessing categorisation
(based on the lowest level input that is significant to the
fair value measurement as a whole) at the end of each
reporting period.
For the purpose of fair value disclosures, the Company
has determined classes of assets and liabilities on the
basis of the nature, characteristics and risks of the asset
or liability and the level of the fair value hierarchy as
explained above.
3.12 Inventories
Raw materials : Inventories are valued at cost or net
realisable value whichever is lower. Cost is determined by
using the Weighted average method. Net realisable value
is the estimated selling price in the ordinary course of
business, less the estimated costs of completion and the
estimated costs necessary to make the sale.
Finished Goods and Traded Goods: Inventories are valued
at lower of cost and net realisable value. Finished goods
include cost of conversion and other cost incurred for
bringing the inventories to their present location and
condition and Traded Goods includes purchase prise and
other cost incurred for bringing the inventories to their
present location and condition.
Stores & Spare parts : Store and Spare Parts are valued at
Cost.
3.13 Employee Benefits
Short Term Employee Benefits
Short term employee benefits are expensed as the
related service is provided. A liability is recognised for
the amount expected to be settled wholly before twelve
months after the year end, if the Company has a present
legal or constructive obligation to pay this amount as a
result of past service provided by the employee and the
obligation can be estimated reliably. It includes Salary,
wages, paid annual leave.
Post Employment Benefits
Defined Contribution Plan
Retirement benefits in the form of contribution to
Provident fund are defined contribution plans. The
contributions are charged to the statement of profit
and loss as and when due monthly and are paid to the
Government administered Provident Fund towards
which the Company has no further obligation beyond its
monthly contribution. Superannuation benefit scheme is
not existing in the Company.
Defined benefit plans:
The Company operates defined benefit plan viz., gratuity.
The costs of providing benefits under this plan are
determined on the basis of actuarial valuation at each
year-end. Actuarial valuation is carried out for the plan
using the projected unit credit method.
Defined benefit costs are comprised of:
a) service cost (including current service cost,
past service cost, as well as gains and losses on
curtailments and settlements);
b) Net interest expense or income; and
c) Re-measurement.
The Company presents the first two components of
defined benefit costs in profit or loss in the line item
'Employee benefits expense'. Curtailment gains and losses
are accounted for as past service costs. Re-measurement
of net defined benefit liability/ asset pertaining to
gratuity comprise actuarial gains/ losses (i.e. changes in
the present value resulting from experience adjustments
and effects of changes in actuarial assumptions) and is
reflected immediately in the balance sheet with a charge
or credit recognised in other comprehensive income
in the period in which they occur. Remeasurement
recognised in other comprehensive income is reflected
immediately in retained earnings and is not reclassified
to profit or loss.
3.14 Borrowing Cost
Borrowing costs that are 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 respective asset. All other borrowing costs are
expensed in the period in which it is incurred.
Borrowing costs include interest expense calculated
using the effective interest rate method as described
in Ind AS 109- Financial Instruments, finance charges in
respect of finance leases are recognised in accordance
with Ind AS 116- Leases and exchange differences arising
from foreign currency borrowings to the extent that they
are regarded as an adjustment to interest costs.
3.15 Income Taxes
Income tax expense represents the sum of the tax
currently payable and deferred tax. It is recognised in
statement of profit and loss except to the extent that it
relates to a business combination, or items recognised
directly in equity or in other comprehensive income.
Current Tax
Current income tax represents the tax currently payable
on the taxable income for the year and any adjustment to
the tax in respect of the previous years. It is measured
using tax rates enacted or substantively enacted at the
reporting date.
Deferred Tax
Deferred tax is provided using the balance sheet
approach on temporary differences at the reporting date
between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes at the
reporting date. Deferred income tax asset are recognized
to the extent that it is probable that taxable profit will
be available against which the deductible temporary
differences, and the carry forward of unused tax credits
and unused tax losses can be utilized.
The carrying amount of deferred tax assets is reviewed
at each reporting date and reduced to the extent that it
is no longer probable that sufficient taxable profit will
be available to allow all or part of the deferred tax asset
to be utilised. Unrecognised deferred tax assets are
reassessed at each reporting date and are recognised to
the extent that it has become probable that future taxable
profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply in the year when the asset
is realised or the liability is settled, based on tax rates (
and tax laws) that have been enacted or substantively
enacted at the reporting date.
Deferred tax relating to items recognised outside profit
or loss is recognised outside the statement of profit and
loss. Deferred tax items are recognised in correlation to
the underlying transaction either in other comprehensive
income or directly in equity.
Deferred tax assets and liabilities are offset only if:
(i) entity has a legally enforceable right to set off current
tax assets against current tax liabilities; and
(ii) deferred tax assets and the deferred tax liabilities
relate to the income taxes levied by the same taxation
authority.
Current and deferred tax is recognised in the statement
of profit and loss, except to the extent that it relates to
items recognised in the Other Comprehensive Income
or directly in equity. In this case, tax is also recognised
in other comprehensive income or directly in equity,
respectively.
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