1C. MATERIAL ACCOUNTING POLICY
INFORMATION
(i) 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 realized or intended to be sold or
consumed in normal operating cycle; or
• Held primarily for the purpose of trading; or
• Expected to be realized within twelve months after the
reporting period; or
• Cash or cash equivalents unless restricted from being
exchanged or used to settle a liability for at least
twelve months after the reporting period.
All other assets are classified as non-current.
A liability is treated as current when:
• It is expected to be settled in normal operating cycle; or
• It is held primarily for the purpose of trading; or
• 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.
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as non¬
current assets and liabilities.
The operating cycle is the time between the acquisition of
assets for processing and their realization in cash and cash
equivalents. The Company has identified twelve months as
its operating cycle.
(ii) Functional and Presentation Currency
The standalone financial statements are presented in
Indian Rupee (?) which is the functional currency of the
Company. All amounts are rounded to two decimal places
to the nearest millions, unless otherwise stated.
(iii) Foreign exchange transactions and
translations
The Company's standalone financial statements are
presented in (?) which is functional currency of the
Company. The Company determines the functional
currency and items included in the standalone financial
statements are measured using that functional currency.
Transactions and balances
Transactions in foreign currencies are initially recorded
by the Company at their respective functional currency
spot rates at the date the transaction first qualifies for
recognition.
Monetary assets and liabilities denominated in foreign
currencies are translated at the functional currency
spot rates of exchange at the reporting date. Exchange
difference arising on settlement on translation of monetary
items are recognized in P&L.
Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated using the
exchange rates at the dates of the initial transactions.
(iv) Fair value measurements and hierarchy
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 best economic 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 the fair value, maximizing
the use of relevant observable inputs and minimizing the
use of unobservable inputs.
All assets and liabilities for which fair value is measured
or disclosed in the standalone 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 - inputs are quoted (unadjusted) market prices
in active markets for identical assets or liabilities that
the entity can access at the measurement date;
• Level 2 - valuation techniques for which the lowest level
input that is significant to the fair value measurement
is directly or indirectly observable; and
• 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
standalone 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.
This note summarises accounting policy for fair value. Other
fair value related disclosures are given in the relevant notes.
• Disclosures for valuation methods, significant
estimates and assumptions (refer note 34);
• Quantitative disclosures of fair value measurement
hierarchy (refer note 34);
• Financial instruments (including those carried at
amortised cost) (refer note 34).
(v) Revenue Recognition
Revenue is recognized upon transfer of control of promised
products or services to customers in an amount that reflects
the consideration the Company expects to receive in
exchange for those products or services.
Sale of goods
The Company recognizes revenue from sale of goods
measured upon satisfaction of performance obligation
which is at a point in time when control of the goods is
transferred to the customer, generally on delivery of the
goods. Depending on the terms of the contract, which
differs from contract to contract, the goods are sold on a
reasonable credit term. As per the terms of the contract,
consideration that is variable, according to Ind AS 115, is
estimated at contract inception and updated thereafter at
each reporting date or until crystallisation of the amount.
Revenue is measured based on the transaction price,
which is the consideration, adjusted for volume discounts,
rebates, scheme allowances, 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.
Volume rebates
The Company applies the most likely amount method
or the expected value method to estimate the variable
consideration in the contract. The selected method that best
predicts the amount of variable consideration is primarily
driven by the number of volume thresholds contained in the
contract. The most likely amount is used for those contracts
with a single volume threshold, while the expected value
method is used for those with more than one volume
threshold. The Company then applies the requirements on
constraining estimates in order to determine the amount
of variable consideration that can be included in the
transaction price and recognised as revenue. A refund
liability is recognised for the expected future rebates (i.e.,
the amount not included in the transaction price).
Right of return
For contracts permitting the customer to return an item,
revenue is recognized to the extent that it is highly probable
that a significant reversal in the amount of cumulative
revenue recognized will not occur. Thus, the amount of
revenue recognized is adjusted for expected returns, which
are estimated based on the previous history of sales return.
In these circumstances, a refund liability and a right to
receive returned goods (and corresponding adjustment
to cost of sales) are recognized. The entity measures right
to receive returned goods at the carrying amount of the
inventory sold less any expected costs to recover goods.
Export incentives
Export benefits available under prevalent schemes are
accrued in the year in which the goods are exported and
there is no uncertainty in receiving the same.
The benefit accrued under the Duty Drawback scheme and
other schemes as per the Export and Import Policy in respect
of exports made under the said Schemes is included under
the head "Revenue from Operations" as 'Export Incentive'.
Interest income
Interest income from a financial asset is recognized 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, which is the rate that
exactly discounts estimated future cash receipts through
the expected life of the financial asset to that asset's net
carrying amount on initial recognition.
Dividend Income
Income is recognized when the Company's right to receive
the payment is established, which is generally when
shareholders approve the dividend.
(vi) Government grants/subsidies
Government grants/subsidies are recognised where there
is reasonable assurance that the grant will be received
and all attached conditions will be complied with. Grants
related to income are recognised in the Statement of
Profit and Loss on a systematic basis over the periods in
which the related costs, for which they are intended to
compensate, are recognised as expenses. Grants related
to assets are presented by deducting the grant from the
carrying amount of the related asset.
(vii) Taxes
Current income tax
Current income tax assets and liabilities are measured at
the amount expected to be recovered from or paid to the
taxation authorities. Current income tax is measured at
the amount expected to be paid to the tax authorities in
accordance with the Income-Tax Act, 1961 enacted in India.
The tax rates and tax laws used to compute the amount
are those that are enacted or substantially enacted, at the
reporting date.
Current income tax relating to items recognised outside
profit or loss is recognised outside profit or loss (either in
other comprehensive income or in equity). Current tax items
are recognised in correlation to the underlying transaction
either in OCI or directly in equity. The management
periodically evaluates positions taken in tax returns with
respect to situations in which applicable tax regulation is
subject to interpretation and establishes provisions where
appropriate.
Deferred tax
Deferred tax is recognized on temporary differences
between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes at the
reporting date.
Deferred tax liabilities are recognized for all taxable
temporary differences, except:
• When the deferred tax liability arises from the initial
recognition of goodwill or an asset or liability in a
transaction that (i) is not a business combination
(ii) at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss and (iii) at
the time of the transaction, does not give rise to equal
taxable and deductible temporary differences.
In respect of taxable temporary differences associated with
investments in subsidiary, deferred tax is not recognised
when the timing of the reversal of the temporary differences
can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible
temporary differences, the carry forward of unused tax
credits and any unused tax losses. Deferred tax assets are
recognised 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 utilised, except:
• When the deferred tax asset relating to the
deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that
is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor
taxable profit or loss.
In respect of deductible temporary differences associated
with investments in subsidiary, deferred tax assets are
recognised only to the extent that it is probable that the
temporary differences will reverse in the foreseeable future
and taxable profit will be available against which the
temporary differences can be utilised.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply in the year when the asset
is realized 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 profit or loss (either in other
comprehensive income or in equity). Deferred tax items
are recognised in correlation to the underlying transaction
either in OCI or directly in equity.
Deferred tax assets and deferred tax liabilities are offset, if
a legally enforceable right exists to set off current tax assets
against current tax liabilities and the deferred taxes relate
to the same taxable entity and the same taxation authority.
(viii) Property, plant and equipment (including
Capital Work-in-Progress)
The cost of an item of property, plant and equipment is
recognized as an asset if, and only if 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.
Property, plant and equipment are stated at cost of
acquisition or construction less accumulated depreciation
and accumulated impairment, if any. The cost comprises
the purchase price, borrowing costs (if capitalisation criteria
are met) and other cost directly attributable to bringing the
asset to its working condition for the intended use.
Borrowing cost relating to acquisition/construction of
Property, Plant and Equipments which take substantial
period of time to get ready for its intended use are also
included to the extent they relate to the period till such
assets are ready to be put to use.
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. The carrying
amount of any component accounted for as a separate
asset is de-recognized when replaced. All other repairs and
maintenance are charged to the Statement of Profit and
Loss, during the reporting period in which they are incurred.
An item of property, plant and equipment is de-recognized
upon disposal or when no future economic benefits are
expected from the use. Any profit or loss on such de¬
recognition of the asset is calculated as difference between
net disposal proceeds and the carrying amount of property,
plant and equipment and recognized in the Statement of
Profit and Loss.
The estimated useful lives and residual values are reviewed
annually and the effect of any changes in estimate is
accounted for on a prospective basis. The management's
estimate of useful lives is in accordance with Schedule II to
the Companies Act, 2013.
Capital work in progress is stated at cost, net of accumulated
impairment loss, if any. Capital Work-in-Progress represents
Property, plant and equipment that are not ready for their
intended use as at the reporting date.
(ix) Other Intangible assets
Intangible assets are recognised when it is probable that
the future economic benefits that are attributable to the
asset will flow to the Company and the cost of the asset can
be measured reliably. Intangible assets acquired separately
are measured on initial recognition at cost. Following initial
recognition, other intangible assets are carried at cost less
accumulated amortization and accumulated impairment
loss, if any. Subsequent expenditures are capitalized only
when they increase the future economic benefits embodied
in the specific asset to which they relate.
Intangible assets are not ready for the intended use on
the Balance Sheet date are disclosed as "Intangible assets
under development".
Intangible assets with definite useful lives are amortized on
a straight-line basis so as to reflect the pattern in which
the asset's economic benefits are consumed and assessed
for impairment whenever there is an indication that the
intangible asset may be impaired.
• Intangible assets pertaining to product registrations
and licenses are amortized over their estimated life on
straight-line method over period of 5 years.
• Other Intangible assets pertaining to software are
amortized over their estimated life on straight-line
method over period of 10 years and Trademarks are
amortized over their estimated life on straight-line
method over period of 5 years.
Intangible assets are de-recognised upon disposal or
when no future economic benefits are expected from its
use. Gains or losses arising from de-recognition of an other
intangible asset are measured as the difference between
the net disposal proceeds and the carrying amount of the
asset and are recognized in the Statement of Profit and
Loss when the asset is de-recognized.
Internally generated intangibles, excluding capitalised
development costs, are not capitalised and the related
expenditure is reflected in statement of profit or loss in the
period in which the expenditure is incurred.
Revenue expenditure pertaining to research is charged
to the Statement of Profit and Loss. Development costs
of products are also charged to the Statement of Profit
and Loss unless a product's technical feasibility has been
established, in which case such expenditure is capitalized.
(x) Borrowing Cost
Borrowing costs 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 (qualifying asset) are capitalised as 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 arising on translation of monetary
items denominated in foreign currencies.
(xi) Leases
The Company assesses at contract inception whether
a contract is, or contains, a lease. That is, if the contract
conveys the right to control the use of an identified asset for
a period of time in exchange for consideration.
Company as a Lessee
The Company applies a single recognition and
measurement approach for all leases, except for short¬
term leases and leases of low-value assets. The Company
recognises lease liabilities to make lease payments and
right-of-use assets representing the right to use the
underlying assets.
Right-of-Use Assets
The Company recognises right-of-use assets ("RoU Assets")
at the commencement date of the lease (i.e., the date the
underlying asset is available for use). Right-of-use assets are
measured at cost, less any accumulated depreciation and
impairment losses, and adjusted for any remeasurement
of lease liabilities. The cost of right-of-use assets includes
the amount of lease liabilities recognised, initial direct
costs incurred, and lease payments made at or before the
commencement date less any lease incentives received.
Right-of-use assets are depreciated on a straight-line basis
over the shorter of the lease term and the estimated useful
lives of the assets.
If ownership of the leased asset is transferred to the
Company at the end of the lease term or the cost
reflects the exercise of a purchase option, depreciation is
calculated using the estimated useful life of the asset. The
right-of-use assets are also subject to impairment. Refer to
the accounting policies in section (xiii) Impairment of non¬
financial assets.
Lease Liabilities
At the commencement date of the lease, the Company
recognises lease liabilities measured at the present value of
lease payments to be made over the lease term. The lease
payments include fixed payments (including in substance
fixed payments) less any lease incentives receivable,
variable lease payments that depend on an index or a
rate, and amounts expected to be paid under residual
value guarantees. The lease payments also include the
exercise price of a purchase option reasonably certain to
be exercised by the Company and payments of penalties
for terminating the lease, if the lease term reflects the
Company exercising the option to terminate. Variable
lease payments that do not depend on an index or a rate
are recognised as expenses (unless they are incurred to
produce inventories) in the period in which the event or
condition that triggers the payment occurs.
In calculating the present value of lease payments, the
Company uses its incremental borrowing rate at the
lease commencement date in case the interest rate
implicit in the lease is not readily determinable. After the
commencement date, the amount of lease liabilities is
increased to reflect the accretion of interest and reduced
for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change in the
lease payments (e.g., changes to future payments resulting
from a change in an index or rate used to determine such
lease payments) or a change in the assessment of an
option to purchase the underlying asset.
Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition
exemption to its short-term leases (i.e., those leases that have
a lease term of 12 months or less from the commencement
date and do not contain a purchase option). It also applies
the lease of low-value assets recognition exemption that
are considered to be low value. Lease payments on short¬
term leases and leases of low-value assets are recognised
as expense on a straight-line basis over the lease term.
(xii) Inventories
Inventories consist of raw materials, packing materials,
stores and spares, work-in-progress, stock-in-trade and
finished goods. Inventories are valued at lower of cost
and net realizable value (NRV). Net realizable 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 sales. Raw materials and packing
materials held for use in the production of inventories are
not written down below cost if the finished goods in which
they will be incorporated are expected to be sold at or
above cost.
The provision for obsolete and slow-moving inventory is
after considering factors like estimated balance shelf life,
germination level, discontinuance, estimated future use to
reflect the recoverable value of the inventory.
Cost is determined on First in First Out (FIFO) basis.
Cost of raw materials and packing materials includes
cost of purchases and other costs incurred in bringing the
inventories to their present location and condition.
Cost of work-in-progress and finished goods includes
direct materials, labour and proportion of manufacturing
overheads based on the normal operating capacity,
wherever applicable. The cost of finished goods includes
other costs incurred in bringing the inventories to their
present location and condition.
Cost of traded goods includes cost of purchase and other
costs incurred in bringing the inventories to their present
location and condition.
(xiii) 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 asset's
recoverable amount. An asset's recoverable amount is
higher of an asset or cash-generating unit's (CGUs) fair
value, less costs of disposal and its value in use. Recoverable
amount is determined for an individual asset, unless the
asset does not generate cash inflows that are largely
independent of those from other assets or group of assets.
When the carrying amount of an asset or CGU exceeds its
recoverable amount, the asset is considered impaired and
is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows
are discounted to their 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. In
determining fair value less costs of disposal, recent market
transactions are taken into account. If no such transactions
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.
Impairment losses including impairment on inventories, are
recognised in the statement of profit and loss.
An assessment is made at each reporting date to determine
whether there is an indication that previously recognised
impairment losses no longer exist or have decreased. If
such indication exists, the Company estimates the asset's
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 asset's 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
statement of profit and loss.
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