3. MATERIAL ACCOUNTING POLICIES
The Company has consistently applied the
following accounting policies to all periods
presented in the financial statements.
a. Property, plant and equipment
I. Recognition and measurement
On transition to Ind AS, the Company had
elected to continue with the carrying value of
all its property, plant and equipment
recognized as at 1 April 2016 measured as per
the previous GAAP and use that carrying
value as the deemed cost of the property, plant
and equipment.
Freehold land is carried at cost. All other 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, after
deducting trade discount and rebates, and
including import duties, non-refundable
purchase taxes, any directly attributable cost
of bringing the asset to the location and
condition necessary for it to be capable of
operating in the manner intended by the
management.
The cost of a self-constructed item of
property, plant and equipment comprises the
cost of materials, direct labour and any
directly attributable cost of bringing the asset
to the location and condition necessary for it
to be capable of operating in the manner
intended by the management.
Borrowing costs that are directly attributable
to the acquisition, construction or production
of a qualifying asset are included in cost to the
extent they relate to the period till such assets
are ready for its intended use.
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. The cost of replacing part of an
item of property, plant and equipment or
major inspections performed, are recognized
in the carrying amount of the item if it is
probable that the future economic benefits
embodied within the part will flow to the
Company and its cost can be measured
reliably. The costs of all other repairs and
maintenance are recognized in the Statement
of Profit & Loss as incurred.
Capital work-in-progress includes cost of
property, plant and equipment under
installation / under construction as at the
balance sheet date.
An item of property, plant and equipment is
derecognized when no future economic
benefits are expected to arise from the
continued use of the asset or upon disposal.
Any gain or loss on disposal is recognized in
statement of profit & loss.
II. Depreciation
Depreciation is calculated on cost of items of
property, plant and equipment less their estimated
residual values, recognized in the statement of
profit and loss. Depreciation on property, plant and
equipment is provided on Written Down Value
Method (WDV) at the rate and in the manner based
on the useful life of the assets as estimated by the
management which coincide with the useful life
specified under Schedule II of the Companies Act,
2013, which are as follows:
• Building including factory building- 30-60 years
• General plant and machinery- 15 years
• Plant and Machinery-Vessel/
Storage tank- 20 years
• Furniture and Fittings- 10 years
• Motor Vehicles- 8-10 years
• Office Equipment- 5 years
• Computers and data processing units- 3-6 years
• Wind Mill- 22 years
• *Solar Plant- 15-25 years
* Includes Solar Plants for which a useful life of 25
years has been considered is on the basis of the
agreement with third party regarding sale of
electricity generated from this plant.
Depreciation methods, useful lives and residual
values are reviewed at each financial year end and
changes, if any, are accounted for prospectively.
Depreciation on additions to or on disposal of
assets is calculated on pro-rata basis i.e. from
(upto) the date on which the property, plant and
equipment is available for use (disposed off).
Assets having cost upto ' 5000/- have been fully
depreciated in the year of acquisition by leaving
Re.1 as a nominal value for its identity in fixed
assets register.
b. Intangible assets
On transition to Ind AS, company has elected to
continue with the carrying value of all of its
intangible assets recognized as at 1 April 2016,
measured as per the previous GAAP, and use that
carrying value as the deemed cost of such
intangible assets.
Intangible assets are measured at cost less any
accumulated amortization and impairment losses,
if any.
Cost of an item of intangible asset comprises its
purchase price, after deducting trade discount and
rebates, and including import duties, non¬
refundable purchase taxes, any directly
attributable cost of bringing the asset to the
location and condition necessary for it to be
capable of operating in the manner intended by the
management.
Subsequent costs are included in the asset's
carrying amount or recognized as a separate asset,
as appropriate, only when it is probable that future
economic benefits associated with the item will
flow to the Company and the cost of the item can
be measured reliably.
Amortization is recognized on a straight line basis
over their estimated useful lives. The estimated
useful life and amortization method are reviewed
at the end of each reporting period, with the effect
of any changes in estimate being accounted for on
a prospective basis.
The estimated useful lives are as follows:
Computer Software 10 years
Trademark/Knowhow/Registrations 10 years
An intangible asset is derecognized when no
future economic benefits are expected to arise
from the continued use of the asset or upon
disposal. Any gain or loss on disposal is
recognized in statement of profit & loss.
c. Investment Property
Investment Property is property held either to earn
rental income or capital appreciation or for both,
but not for sale in the ordinary course of business,
use in production or supply of goods or services or
for administration purposes.
I. Recognition and measurement
Investment properties are measured initially at
cost, including transaction costs. Subsequent to
initial recognition, investment properties are
stated at cost less accumulated depreciation and
accumulated impairment loss, if any.
II. Depreciation
The Company depreciates building
component of investment property over 60
years from the date of original purchase.
III. De-recognition
Investment properties are derecognized either
when they have been disposed of or when they
are permanently withdrawn from use and no
future economic benefit is expected from
their 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.
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 by
independent valuer who holds a recognised
and relevant professional qualification and
has recent experience in the location and
category of investment being valued
d. Impairment of non-financial assets
At each reporting date, the Company reviews the
carrying amounts of its non-financial assets (other
than inventories and deferred tax assets) to
determine whether there is any indication of
impairment. If any such indication exists, then the
asset's recoverable amount is estimated.
For impairment testing, assets that do not generate
independent cash flows are grouped together into
the smallest group of assets that generates cash
inflows from continuing use that are largely
independent of the cash inflows of other assets or
Cash Generating Units ('CGUs').
The recoverable amount of an asset or CGU is the
greater of its value in use and its fair value less
costs to sell. Value in use is based on the estimated
future cash flows, discounted totheir present value
using a pre-tax discount rate that reflects current
market assessments of the time value of money
and the risks specific to the asset or CGU.
An impairment loss is recognized if the carrying
amount of an asset or CGU exceeds its estimated
recoverable amount. Impairment losses are
recognized in the statement of profit and loss.
In respect of assets for which impairment loss has
been recognized in prior periods, the company
reviews at each reporting date whether there is any
indication that the loss has decreased or no longer
exists. An impairment loss is reversed if there has
been a change in the estimates used to determine
the recoverable amount. Such a reversal is made
only to the extent that the asset's carrying amount
does not exceed the carrying amount that would
have been determined, net of depreciation or
amortization, if no impairment loss had been
recognized. After impairment, depreciation or
amortization is provided on the revised carrying
amount of the assets over its remaining useful life.
e. Financial instruments
I. Initial recognition
The Company recognizes financial assets and
financial liabilities when it becomes a party to
the contractual provisions of the instrument.
All financial assets and liabilities are initially
recognized at fair value plus transaction costs
directly attributable to its acquisition. The
transaction costs incurred for the purchase of
financial assets held at fair value through
profit and loss are expensed in the statement
of profit and loss immediately.
II. Subsequent measurement
1) Financial assets carried at amortized
cost
A financial asset is subsequently
measured at amortized cost if it is held
within a business model whose objective
contractual cash flows and 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.
When the financial asset is derecognized or
impaired, the gain or loss is recognized in the
statement of profit and loss.
2) Financial assets at fair value through
other comprehensive income
A financial asset is subsequently measured at
fair value through other comprehensive
income if it is held within a business model
whose objective is achieved by both
collecting contractual cash flows and selling
financial assets and 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. Movements in the carrying
amount are taken through OCI, except for the
recognition of impairment gains or losses,
interest revenue and foreign exchange gains
and losses which are recognized in statement
of profit and loss. When the financial asset is
derecognized, the cumulative gain or loss
previously recognized in OCI is reclassified
from equity to the statement of profit and loss.
Equity instruments are subsequently
measured at fair value. On initial recognition
of an equity investment that is not held for
trading, the Company may irrevocably elect
to present subsequent changes in the
investment's fair value in OCI (designated as
FVOCI - equity investment). This election is
made on an investment by investment basis.
Fair value gains and losses recognized in OCI
are not reclassified to the statement of profit
and loss.
3) Financial assets at fair value through
profit and loss
A financial asset which is not classified in any
of the above categories are subsequently fair
valued through profit and loss.
4) Financial liabilities
Financial liabilities are subsequently
carried at amortized cost using the
effective interest method. For trade and
other payables maturing within one year
from the Balance Sheet date, the carrying
amounts is approximate to the fair value
due to the short maturity of these
instruments.
5) Investment in subsidiaries
Investment in subsidiaries is carried at
cost less impairment, if any, in the
separate financial statements.
III. Impairment of financial assets
The company assesses on a forward looking
basis the expected credit losses associated
with its assets carried at amortized cost and
FVOCI debt instruments. Except trade
receivables, expected credit losses are
measured at an amount equal to the twelve
month expected credit loss unless there has
been a significant increase in credit risk from
initial recognition, in which case those are
measured at lifetime ECL.
In case of trade receivables, the Company
follows the simplified approach which
requires expected lifetime losses to be
recognized from the initial recognition of the
trade receivables. The Company calculates
the expected credit losses on trade receivables
using a provision matrix on the basis of its
historical credit loss experience.
IV. Derecognition
1) Financial Assets
Company derecognizes a financial asset
when the contractual rights to the cash
flows from the financial asset expire or it
transfers the rights to receive the contractual cash
flows in a transaction in which substantially all of
the risks and rewards of ownership of the financial
asset are transferred or in which the Company
neither transfers nor retains substantially all of the
risks and rewards of ownership and does not retain
control of the financial asset.
If the company enters into transactions whereby it
transfers assets recognized on its balance sheet,
but retains either all or substantially all of the risks
and rewards of the transferred assets, the
transferred assets are not derecognized.
2) Financial Liabilities
The company derecognizes a financial
liability when its contractual obligations are
discharged or cancelled, or expired.
V. Reclassification of Financial Assets and
Financial liabilities
The company determines classification of
financial assets and liabilities on initial
recognition. After initial recognition, no
reclassification is made for financial assets
which are equity instruments and financial
liabilities. For financial assets which are debt
instruments, a reclassification is made only if
there is a change in the business model for
managing those assets. If the company
reclassifies financial assets, it applies
prospectively from the reclassification date
which is the first day of the immediately next
reporting period following the change in
business model. The company does not
restate any previously recognized gains,
losses (including impairment gains or losses)
or interest.
f. Fair Value measurement
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, regardless of whether that
price is directly observable or estimated using
other valuation technique. In estimating the fair
value of an asset or a liability, the Company takes
into account the characteristics of the asset or
liability if market participants would take those
characteristics into account when pricing the asset
or liability at the measurement date.
Fair value for measurement and/ or disclosure
purposes are categorized into Level 1, 2, or 3
based on the degree to which the inputs to the fair
value measurements are observable and the
significance of the inputs to the fair value
measurement in its entirety, which are described
as follows:
Level 1 - This includes financial instruments
measured using quoted prices (Unadjusted) in
active markets for identical assets and liabilities.
Level 2 - The fair value of financial instruments
that are not traded in an active market is
determined using valuation techniques which
maximize the use of observable market data and
rely as little as possible on entity-specific
estimates. If all significant inputs required to fair
value an instrument are observable, the
instrument is included in level 2. Inputs other than
quoted prices included within Level 1that are
observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from
prices).
Level 3 - If one or more of the significant inputs is
not based on observable market data, the
instrument is included in level 3.
g. Inventories
Inventories (including Stock-in-transit) of
Finished Goods, Stock in Trade, Work in progress,
Raw materials, packing materials and Stores &
Spares are stated at lower of cost and net realizable
value. However, materials and other items held for
use in the production of inventories are not written
down below cost if the finished products in which
they will be incorporated are expected to be sold at
or above cost.
Cost includes expenditure incurred in acquiring
the inventories, production or conversion costs,
and other costs incurred in bringing them to their
existing location and condition. 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.
Cost of Raw Materials, Packing Materials, Stores
and Spares, Stock in Trade and other products are
determined on First in first out (FIFO) basis and
are net of GST.
Cost of Work in progress and Finished Goods is
determined on First in first out (FIFO) basis
considering direct material cost and appropriate
portion of manufacturing overheads based on
normal operating capacity.
Obsolete, slow moving and defective inventories
are identified at the time of physical verification of
inventories and wherever necessary, the same are
written off or provision is made for such
inventories. Finished goods and work in progress
are written down if anticipated net realizable
value declines below the carrying amount of the
inventories and such write down to inventories are
recognized in statement of profit & loss. When
reason for such write down ceases to exists, then
write down is reversed through statement of profit
and loss account.
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