2.1 Significant Accounting Policies
A. Financial instruments
Financial assets and liabilities are recognised when the Company becomes a party to the contractual
provisions of the instrument. Financial assets and liabilities are initially measured at fair value. Transaction
costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other
than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from
the fair value measured on initial recognition of financial asset or financial liability.
Cash & Cash Equivalents
The Company considers all highly liquid financial instruments, which are readily convertible into known
amounts of cash that are subject to an insignificant risk of change in value and having original maturities of
three months or less from the date of purchase, to be cash equivalents. Cash and cash equivalents consist
of balances with banks which are unrestricted for withdrawal and usage.
Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost if these financial assets are held within a
business whose objective is to hold these assets to collect contractual cash flows and the contractual terms
of the financial assets give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
Financial assets at fair value through other comprehensive income
Financial assets are measured at fair value through other comprehensive income if these financial assets
are held within a business whose objective is achieved by both collecting contractual cash flows on
specified dates that are solely payments of principal and interest on the principal amount outstanding and
selling financial assets.
Financial assets at fair value through profit or loss
Financial assets are measured at fair value through profit or loss unless they are measured at amortised
cost or at fair value through other comprehensive income on initial recognition.
The transaction costs directly attributable to the acquisition of financial assets and liabilities at fair value
through profit or loss are immediately recognised in statement of profit and loss.
The Company has made an election to present subsequent changes in the fair value of equity investments
as other income in the statement of profit and loss.
Financial liabilities
Financial liabilities are measured at amortised cost using the effective interest method.
Equity instruments
An equity instrument is a contract that evidences residual interest in the assets of the Company after
deducting all of its liabilities. Equity instruments recognised by the Company are recognised at the proceeds
received net off direct issue cost.
Derecognisation of financial instruments
The Company derecognises a financial asset when the contractual rights to the cash flows from the asset
expire or when it transfers the financial asset and substantially all the risk and rewards of ownership of the
asset to another party. On derecognition of a financial asset, the difference between assets carrying amount
and the sum of consideration received or receivable or the cumulative gain or loss that had been recognised
in the statement of profit and loss.
The Company derecognises financial liabilities when and only when the Company's obligations are
discharged, cancelled or have expired. The difference between the carrying amount of the financial liability
derecognised and the consideration paid and payable is recognised in the statement of profit and loss.
Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the 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.
D) Impairment
' Financial assets (other than at fair value)
The Company assesses at each date of balance sheet whether a financial asset or a group of financial
assets is impaired. Ind AS 109 requires expected credit losses to be measured through a loss allowance. In
determining the allowances for doubtful trade receivables, the Company has computed the expected credit
loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account
historical credit loss experience and is adjusted for forward looking information. The expected credit loss
allowance is based on the ageing of the receivables that are due and rates used in the provision matrix. For
all other financial assets, expected credit losses are measured at an amount equal to the 12-months
expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the
financial asset has increased significantly since initial recognition.
Non-financial assets
Tangible and intangible assets
Property, plant and equipment and intangible assets with finite life are evaluated for recoverability whenever
there is any indication that their carrying amounts may not be recoverable. If any such indication exists, the
recoverable amount (i.e. 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.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying
amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognised in the
statement of profit and loss.
E. Property, Plant And Equipment / Depreciation
(i) Recognition And Measurement
Items of property, plant and equipment are measured at cost, less accumulated depreciation, and
accumulated impairment losses, if any.
Cost of an item of property, plant and equipment comprises its purchase price, including import duties and
non- refundable purchase taxes, after deducting trade discounts and rebates, any directly attributable cost
of bringing the item to its working condition for its intended use and estimated costs of dismantling and
removing the item and restoring the site on which it is located.
The cost of a self-constructed item of property, plant and equipment comprises the cost of materials and
direct labour, and other costs directly attributable to bringing the item to working condition for its intended
use, and estimated costs of dismantling and removing the item and restoring the site on which it is located.
If significant parts of an item of property, plant and equipment have different useful lives, then they are
accounted for as separate items (major components) of property, plant and equipment.
Any gain or loss on disposal of an item of property, plant and equipment is recognised in statement of profit
or loss.
Capital work-in-progress:-Projects under which Property, plant and equipment are not yet ready for their
intended use are carried at cost, comprising direct cost, related incidental expenses and attributable
interest.
(ii) Subsequent expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with
the expenditure will flow to the Company.
(iii) Expenditure during construction period
Expenditure/Income during construction period (including financing cost related to borrowed funds for
construction or acquisition of qualifying PPE) is included under capital work-in-progress, and the same is
allocated to the respective PPE on the completion of their construction. Advances given towards acquisition
or construction of PPE outstanding at each reporting date are disclosed as capital advances under “other
non-current assets”.
(iv) Depreciation
Depreciation is provided on the straight-line method as per the useful life prescribed in Schedule II to the
2013 Act except in respect of following categories of assets in whose case the life of certain assets has been
assessed based on technical advice taking into account the nature of the asset, the estimated usage of the
asset, the operating condition of the asset, past history of replacement, maintenance support etc.
The Company reviews the residual value, useful lives and depreciation method annually and, if current
estimates differ from previous estimates, the change is accounted for as a change in accounting estimate on
a prospective basis.
The estimated useful lives, residual values and depreciation method are reviewed at the end of each
reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Assets
costing Rs.5,000 and below are depreciated over a period of one year.
Land is not depreciated.
An item of property, plant and equipment is derecognized upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or
retirement of an item of property, plant and equipment is determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognised in profit or loss.
Land : Ind AS 101 allows entity to elect to measure Property, Plant and Equipment on the transition date at
its fair value or previous GAAP carrying value (book value) as deemed cost. The company has elected to
measure land at fair value and use these fair value as deemed cost on the date of transition. As a result, the
value of land has increased Rs. 10298562.00
F. Intangible assets
(i) Recognition and measurement
Intangible assets including those acquired by the Company are initially measured at cost. Such intangible
assets are subsequently measured at cost less accumulated amortisation and any accumulated
impairment losses.
(ii) Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the
specific asset to which it relates. All other expenditures are recognised standalone statement in profit or
loss as incurred.
(iii) Amortisation
Amortisation is calculated to write off the cost of intangible assets less their estimated residual values over
the estimated useful lives using the straight-line method, and is included in depreciation and amortisation in
statement of profit and loss.
The estimated useful lives are as follows:
G. Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of raw materials are
computed basis the moving average cost, and includes expenditure incurred in acquiring the inventories,
production or conversion costs and other costs incurred in bringing them to their present location and
condition. In the case of finished products and work-in-progress, costs includes an appropriate share of
fixed production overheads based on normal operating capacity.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated
selling expenses.
The net realisable value of work-in-progress is determined with reference to the selling price of related
finished goods. Raw materials, components and other supplies held for use in production of finished goods
are not written down below cost except in cases where material prices have declined and it is estimated that
the cost of the finished products will exceed their net realizable value.
The comparison of cost and net realisable value is made on an item-by-item basis.
H Employee benefits
i) Short term employee benefits :
Employee Benefits such as salaries, allowances, and non-monetary benefits which fall due for payment
within a period of twelve months after rendering of services are charged as expense to the profit and loss
account in the period in which the service is rendered.
ii) Post- employment benefits :
No provision has been made towards retirement benefits as in the opinion of the board; none of the
employees are eligible for the same.
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