2.3 Summary of material accounting policies

(a) Current versus non-current classification

The Company presents assets and liabilities in

the Balance Sheet based on current/ non-current

classification.

An asset is treated as current when:

• It is expected to be realised or intended to
be sold or consumed in the normal operating
cycle;

• It is held primarily for the purpose of trading;

• It is expected to be realised within twelve
months after the reporting period; or

• It is a cash or cash equivalent unless
restricted from being exchanged or used to
settle a liability for at least twelve months
after the reporting period.

The Company classifies all other assets 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.

The Company classifies all other liabilities as
non-current.

Deferred tax assets and liabilities are classified as
non-current assets and liabilities respectively.

The operating cycle is the time between the
acquisition of assets for processing and their
realisation in cash and cash equivalents.
The Company has identified twelve months as its
operating cycle for the purpose of current and
non-current classification of assets and liabilities.

(b) Revenue recognition

Revenue from contracts with customers is
recognised when control of the goods or services
are transferred to the customer i.e. when the
customer is able to direct the use of the transferred
goods or rendering of services and obtains
substantially all of the remaining benefits at an
amount that reflects the consideration entitled in
exchange for those goods or services. The policy
of recognizing the revenue is determined by the
five-stage model specified in Ind AS 115 "Revenue
from contracts with customers”.

Sale of Goods:

Revenue is recognised upon transfer of control of
promised goods to customers for an amount that
reflects the consideration which the Company expects
to receive in exchange for those goods. Revenue from
the sale of goods is recognised at the point in time when
control is transferred to the customer which is usually
on dispatch/ delivery of goods, based on contracts with
the customers. Revenue is measured based on the
transaction price, which is the consideration, adjusted
for volume discounts, price concessions, incentives,
and returns, if any, as specified in the contracts with
the customers. Revenue excludes taxes collected from

customers on behalf of the government. Accruals
for discounts/incentives and returns are estimated
(using the most likely method) based on accumulated
experience and underlying schemes and agreements
with customers. Due to the short nature of credit period
given to customers, there is no financing component in
the contract.

Sale of Services:

Sale of services are recognised on satisfaction of
performance obligation towards rendering of such
services.

Interest Income:

Interest Income from a financial asset is recognised
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, by reference to the principal outstanding and at
the effective interest rate applicable.

Dividend Income:

Dividend income from investments in shares is
recognised when the owner's right to receive the
payment is established.

(c) Property, plant and equipment

An item of property, plant and equipment ('PPE')
is recognised as an asset if it is probable that
the future economic benefits associated with the
item will flow to the Company and its cost can be
measured reliably. These recognition principles
are applied to the costs incurred initially to acquire
an item of PPE, to the pre-operative and trial run
costs incurred (net of sales), if any and also to the
costs incurred subsequently to add to, replace part
of, or service it and subsequently carried at cost
less accumulated depreciation and accumulated
impairment losses, if any.

The cost of PPE includes interest on borrowings
directly attributable to the acquisition, construction
or production of a qualifying asset. A qualifying

asset is an asset that necessarily takes a
substantial period of time to be made ready for its
intended use or sale. Borrowing costs and other
directly attributable cost are added to the cost
of those assets until such time as the assets are
substantially ready for their intended use, which
generally coincides with the commissioning date
of those assets.

The present value of the expected cost for the
decommissioning of an asset after its use is
included in the cost of the respective asset if
the recognition criteria for a provision is met.
Machinery spares that meet the definition of PPE
are capitalised and depreciated over the useful life
of the principal item of an asset. All other repair and
maintenance costs, including regular servicing,
are recognised in the standalone Statement of
Profit and Loss as incurred. When a replacement
occurs, the carrying value of the replaced part is
de-recognised. Where an item of property, plant
and equipment comprises major components
having different useful lives, these components
are accounted for as separate items.

An item of property, plant and equipment is
derecognized upon disposal or when no future
benefits are expected from its use or disposal.
Gains and losses on 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 within other income/expenses in the
statement of profit and loss.

PPE acquired and put to use for projects are
capitalised and depreciation thereon is included
in the project cost till the project is ready for
commissioning. Depreciation on PPE (except
leasehold improvements) is calculated using
the straight-line method to allocate their cost,
net of their residual values, over their estimated
useful lives. However, leasehold improvements
are depreciated on a straight-line method over
the shorter of their respective useful lives or the
tenure of the lease arrangement. Freehold land is

Capital work in progress (CWIP)

Projects under commissioning and other CWIP
are carried at cost, comprising direct cost, related
incidental expenses and attributable borrowing cost.
Subsequent expenditures relating to property, plant
and equipment are capitalised only when it is probable
that future economic benefit associated with these will
flow to the Company and the cost of the item can be
measured reliably. Advances given to acquire property,
plant and equipment are recorded as non-current assets
and subsequently transferred to CWIP on acquisition of
related assets.

(d) Intangible assets

Intangible assets are initially recognized at cost.
Following initial recognition, intangible assets
with finite useful life are carried at cost less any
accumulated amortization and accumulated
impairment losses. Internally generated
intangibles, excluding capitalized development
costs, are not capitalized and the related
expenditure is reflected in the standalone

Statement of Profit and Loss in the period in which
the expenditure is incurred.

The amortization period and the amortization
method for an intangible asset with a finite useful
life is reviewed at least at the end of each reporting
period. Gains or losses arising from de-recognition
of an intangible asset are measured as the
difference between the net disposal proceeds
and the carrying amount of the asset and are
recognized in the standalone Statement of Profit
and Loss when the asset is derecognized.

(e) Borrowing costs

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, are capitalised as
a 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.
Investment income earned on the temporary
investment of specific borrowings is deducted
from the borrowing costs eligible for capitalisation.

(f) Investment property

Investment properties are land and buildings that
are held for long term lease rental yields and/ or
for capital appreciation. Investment properties are
initially recognised at cost including transaction
costs. Subsequently investment properties
comprising buildings are carried at cost less
accumulated depreciation and accumulated
impairment losses, if any. Subsequent expenditure
is capitalised to the asset's carrying amount only
when it is probable that future economic benefits
associated with expenditure will flow to the
Company and the cost of the item can be measured
reliably. All other repairs and maintenance costs
are expensed when incurred.

Depreciation on buildings is provided over the
estimated useful lives as specified in note (c)
above. The residual values estimated useful lives
and depreciation method of investment properties
are reviewed, and adjusted on prospective basis
as appropriate, at each reporting date. The effects
of any revision are included in the standalone
Statement of Profit and Loss when the changes
arise.

An investment property is de-recognised when
either the investment property has been disposed
of or do not meet the criteria of investment
property i.e. 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 standalone Statement of Profit and Loss in
the period of de-recognition.

Transfers to (or from) investment property are
made only when there is a change in use. If the
significant ancillary income is generated from
services provided along with the rental income
and/or the company creates any assets or
facilitates activities that generate service income,
such investment property shall be reclassified as
property, plant, and equipment. If the ancillary
and/or service income remains insignificant, the
asset shall continue to remain as investment
property. The classification may also change if the
management decides to sell the property.

Transfers between investment property,
owner-occupied property and inventories do
not change the carrying amount of the property
transferred and they do not change the cost of that
property for measurement or disclosure purposes.

(g) Non-current assets held for sale

Non-current assets are classified as held for sale if
their carrying amount will be recovered principally
through a sale transaction rather than through
continuing use and a sale is considered highly
probable. Non-current assets classified as held for
sale are measured at lower of their carrying amount
and fair value less cost to sell. Non-current assets
classified as held for sale are not depreciated or
amortised from the date when they are classified
as held for sale. Non-current assets classified
as held for sale are presented separately from
the other assets and liabilities in the standalone
balance sheet.

(h) Foreign currency transactions and balances

The functional currency of the Company (i.e.
the currency of the primary economic environment
in which the Company operates) is the Indian
Rupee (Rs.). On initial recognition, all foreign
currency transactions are recorded at exchange
rates prevailing on the date of the transaction.
Monetary assets and liabilities, denominated in a

foreign currency, are translated at the exchange
rate prevailing on the Balance Sheet date and the
resultant exchange gains or losses are recognised
in the standalone Statement of Profit and Loss.
Non-monetary items, which are measured in
terms of historical cost denominated in a foreign
currency, are reported using the exchange rate at
the date of the transaction.

(i) 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: Initial recognition and

measurement

All financial assets are recognised initially at fair
value (except for trade receivables not containing
a significant financing component are initially
measured at transaction price) plus, 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.
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 that the Company commits to
purchase or sell the asset.

Subsequent measurement

For purposes of subsequent measurement,
financial assets are classified in four categories:

• Debt instruments at amortised cost

• Debt instruments at fair value through other
comprehensive income (FVOCI)

• Debt instruments, derivatives and equity
instruments at fair value through profit or
loss (FVPL)

• Equity instruments measured at fair value
through other comprehensive income (FVOCI)

Debt instruments at amortised cost

A 'debt instrument' is measured at the amortised 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 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 other income
in the standalone Statement of Profit and Loss.
The losses arising from impairment are recognised
in the standalone Statement of Profit and Loss.
This category generally applies to trade and other
receivables.

Debt instrument at FVOCI

A 'debt instrument' is classified as at the FVOCI if both

of the following criteria are met:

a) The objective of the business model is achieved
both by collecting contractual cash flows and
selling the financial assets; and

b) The asset's contractual cash flows represent
SPPI. Debt instruments included within the FVOCI
category are measured initially as well as at each
reporting date at fair value. Fair value movements
are recognised in the other comprehensive income
(OCI). On derecognition of the asset, cumulative
gain or loss previously recognized in OCI is
reclassified to the standalone Statement of Profit

and Loss. Interest earned whilst holding FVTOCI
debt instrument is reported as interest income
using the EIR method.

Debt instrument at FVPL

FVPL is a residual category for debt instruments.
Any debt instrument, which does not meet the criteria
for categorisation as at amortised cost or as FVOCI, is
classified as at FVPL. In addition, the Company may
elect to designate a debt instrument, which otherwise
meets amortised cost or FVOCI criteria, as at FVPL.
However, such election is allowed only if doing so
reduces or eliminates a measurement or recognition
inconsistency (referred to as 'accounting mismatch').
Debt instruments included within the FVPL category are
measured at fair value with all changes recognised in
the standalone Statement of Profit and Loss.

Equity investments

All equity investments in scope of Ind AS 109 are
measured at fair value. Equity instruments which
are held for trading and contingent consideration
recognised by an acquirer in a business combination
to which Ind AS 103 applies are classified as at FVPL.
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 the
Company decides to classify an equity instrument as at
FVOCI, then all fair value changes on the instrument,
excluding dividends, are recognised in the OCI.

There is no recycling of the amounts from OCI to the
standalone 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 FVPL category are measured at fair
value with all changes recognised in the standalone
Statement of Profit and Loss.

Investments in subsidiaries and associates

Investments in subsidiaries and associates are carried
at cost less impairment as per Ind AS 27 Consolidated
and Separate Financial Statements.

Where an indication of impairment exists, the carrying
amount of the investment is assessed and written down
immediately to its recoverable amount. On disposal of
investments in subsidiaries, the difference between
net disposal proceeds and the carrying amounts are
recognized in the standalone Statement of Profit and
Loss.

Impairment of financial assets

The Company recognizes loss allowance using the
expected credit loss (ECL) model for the financial
assets which are not fair valued through profit or loss.
Loss allowance for trade receivables with no significant
financing component is measured at an amount equal
to lifetime ECL. For all financial assets with contractual
cash flows other than trade receivable, ECLs are
measured at an amount equal to the 12-month ECL,
unless there has been a significant increase in credit
risk from initial recognition in which case those are
measured at lifetime ECL. The amount of ECLs (or
reversal) that is required to adjust the loss allowance
at the reporting date to the amount that is required
to be recognised as an impairment gain or loss in the
standalone 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 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-through' 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
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.

Financial liabilities

Financial liabilities are classified and measured
at amortised cost or FVPL. A financial liability
is classified as at FVPL if it is classified as
held-for-trading, or it is a derivative or it is
designated as such on initial recognition.
Financial liabilities at FVPL are measured at fair
value and net gains and losses, including any
interest expense, are recognised in Statement
of Profit and Loss. Other financial liabilities are
subsequently measured at amortised cost using
the effective interest method. Interest expense
and foreign exchange gains and losses are
recognised in standalone Statement of Profit and
Loss. Any gain or loss on derecognition is also
recognized in standalone Statement of Profit and
Loss.

Borrowings

Borrowings are initially recognised at fair
value, net of transaction costs incurred.
Borrowings are subsequently measured at
amortised cost. Any difference between the
proceeds (net of transaction costs) and the
redemption amount is recognised in profit or loss
over the period of the borrowings using the effective
interest method. Fees paid on the establishment
of loan facilities are recognised as transaction
costs of the loan to the extent that it is probable
that some or all of the facility will be drawn down.

In this case, the fee is deferred until the drawdown
occurs. To the extent there is no evidence that it
is probable that some or all of the facility will be
drawn down, the fee is capitalised as a prepayment
for liquidity services and amortised over the period
of the facility to which it relates.

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 standalone Statement of Profit and Loss.

Derivative financial instruments

The Company uses various types of derivative
financial instruments to hedge its currency
and interest risk etc. 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.

Offsetting

Financial assets and financial liabilities are offset
and the net amount presented in the standalone
Balance Sheet when, and only when, the Company
currently has a legally enforceable right to set off
the amounts and it intends either to settle them
on a net basis or to realise the asset and settle the
liability simultaneously.

Financial guarantee contracts

Financial guarantee contracts are recognised
as a financial liability at the time of issuance of
guarantee. The liability is initially measured at fair

value and is subsequently measured at the higher
of the amount of loss allowance determined, or the
amount initially recognised less, the cumulative
amount of income recognised.

Fair value of financial instruments

In determining the fair value of its financial
instruments, the Company uses a variety of
methods and assumptions that are based on
market conditions and risks existing at each
reporting date. The methods used to determine
fair value include discounted cash flow analysis,
available quoted market prices and dealer quotes.
All methods of assessing fair value result in
general approximation of value.

(j) Leases

A contract is, or contains, a lease if the contract
conveys the right to control the use of an identified
asset for a define period of time in exchange for
consideration. To assess whether a contract
conveys the right to control the use of an identified
assets, the Company assesses whether: (i) the
contact 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.

As a lessee, the Company recognises a right
of use asset and a lease liability at the lease
commencement 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 an estimate of costs to dismantle
and remove the underlying asset or to restore the
underlying asset or the site on which it is located,
less any lease incentives received. The right of
use asset is subsequently depreciated using the
straight-line method from the commencement
date to the earlier of the end of the useful life of
the right of use asset or the end of the lease term.

The estimated useful lives of right of use assets are
determined on the same basis as those of property
and equipment. In addition, the right of use asset is
periodically reduced by impairment losses, if any,
and adjusted for certain remeasurements 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, the Company's
incremental borrowing rate. For leases with
reasonably similar characteristics, the Company,
on a lease by lease basis, may adopt either
the incremental borrowing rate specific to the
lease or the incremental borrowing rate for the
portfolio as a whole. Lease payments included in
the measurement of the lease liability comprise
the fixed payments, including in-substance fixed
payments and lease payments in an optional
renewal period if the Company is reasonably
certain to exercise an extension option.

The lease liability is measured at amortised cost
using the effective interest method. 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 or less and leases
of low-value assets. The Company recognises the
lease payments associated with these leases as
an expense on a straight-line basis over the lease
term. The Company has applied a single discount
rate to a portfolio of leases of similar assets in
similar economic environment with a similar end
date.

The determination of whether an arrangement is
(or contains) a lease is based on the substance
of the arrangement at the inception of the
lease. The arrangement is, or contains, a lease
if fulfilment of the arrangement is dependent
on the use of a specific asset or assets and the
arrangement conveys a right to use the asset or
assets, even if that right is not explicitly specified
in an arrangement.

The company has entered into sale and leaseback
arrangements for certain equipment. Where these
transactions do not qualify as a sale under Ind AS,
the company continues to recognise the asset in
its books and records a corresponding financial
liability equivalent to the transfer proceeds.

If an entity (the seller-lessee) transfers an asset to
another entity (the buyer-lessor) and leases that
asset back from the buyer-lessor, an entity shall
apply the requirements of Ind AS for determining
whether the transfer of an asset is accounted for
as a sale of that asset.

a) If the transfer of an asset by the lessee
satisfies the requirements of Ind AS to be
accounted for as a sale of the asset:

i) In such case, lessee shall measure
the right-of-use asset arising from
the leaseback at the proportion of the
previous carrying amount of the asset
that relates to the right of use retained
by the seller-lessee and shall recognise
any gain/loss relating to this.

b) If the transfer of an asset by the lessee does
not satisfies the requirements of Ind AS to be
accounted for as a sale of the asset:

i) the lessee shall continue to recognise
the transferred asset and shall
recognise a financial liability equal to
the transfer proceeds. It shall account
for the financial liability applying Ind AS
109.

(k) Inventories

Cost of raw materials, traded goods, packing
materials and stores and spares comprises cost
of purchases and cost of finished goods comprises
direct materials, direct labour and an appropriate
proportion of variable and fixed overhead
expenditure, the latter being allocated on the basis
of normal operating capacity. Cost of inventories
also include all other costs incurred in bringing the
inventories to their present location and condition.
Costs of purchased inventory are determined after
deducting rebates and discounts.

• Raw materials, traded goods, packing materials
and stores and spares are valued at the lower of
cost and net realisable value. Cost is determined
on the basis of moving weighted average method.
The aforesaid items are valued below cost if
the finished products in which they are to be
incorporated are expected to be sold at a loss.

• Finished goods and by-products including those
held for captive consumption are valued at the
lower of cost and net realisable value. Cost is
determined on actual cost basis. Cost of finished
goods includes taxes and duties, as applicable.
Variances, exclusive of abnormally low volume and
operating performance, are adjusted to inventory.
Stock-in-trade is valued at lower of cost and net
realisable value.

• Net realizable value is the estimated selling price
in the ordinary course of business, less estimated
costs of completion and the estimated costs
necessary to make the sale.

(l) Impairment of non-financial assets

The Company assesses at each reporting date,
whether there is an indication that an asset may
be impaired. If any indication exists, or when
annual impairment testing for an asset is required,
the Company estimates the assets' recoverable
amount. An assets' recoverable amount is the
higher of an asset's fair value less costs of disposal
and its value in use. The recoverable amount is
determined for an individual asset unless the
asset does not generate cashflows that are largely
independent of those from other assets or group
of assets. Where the carrying amount of an asset
exceeds its recoverable amount, the asset is
considered impaired and it is written down to its
recoverable amount.

In assessing value in use, the estimated future
cashflows are discounted to their present value

using a pre-tax discount rate that reflects current
market assessment of the time value of money
and the risk specific to the asset. In determining
fair value less cost of disposal, recent market
transactions are taken in account. If no such
transactions can be identified, an appropriate
valuation model is used. These calculations are
corroborated by valuation multiples, quoted share
price for publicly traded entities or other available
fair value indicators. For assets excluding goodwill,
an assessment is made at each reporting date
to determine whether there is an indication that
previously recognised impairment loss no longer
exist or has decreased. If such indication exists,
the Company estimates the assets' or CGU's
recoverable amount. A previously recognised
impairment loss is reversed only if there has been
a change in the assumptions used to determine
the assets' recoverable amount, since the last
impairment loss was recognised. The reversal
is limited so that the carrying amount of the
asset does not exceed its recoverable amount,
nor exceed the carrying amount that would have
been determined, net of depreciation, had no
impairment loss been recognised for the asset in
prior years.

Such reversal is recognised in the standalone
Statement of Profit and Loss.