2. Material Accounting policies
(i) Property, Plant and Equipment
Property, Plant & Equipment (PPE) comprises of Tangible assets and Capital Work in progress.
PPE are stated at cost, net of tax/duty credit availed, if any, after reducing accumulated depreciation
and accumulated impairment losses, if any; until the date of the Balance Sheet. The cost of PPE
comprises of its purchase price or its construction cost (net of applicable tax credit, if any), any cost
directly attributable to bring the asset to the location and condition necessary for it to be capable
of operating in the manner intended by the management. Direct costs are capitalized until the
asset is ready for use and includes borrowing cost capitalised in accordance with the Company’s
accounting policy.
Capital work in progress includes the cost of PPE that are not yet ready for the intended use.
An item of PPE is de-recognised 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 PPE is determined as the difference between the sales proceeds and the carrying
amount of the asset and is recognised in the Standalone Statement of Profit and Loss.
As per internal technical evaluation carried out by the management, the management of the
company believes that its Property, Plant & Equipment are of such nature that separate components
are not distinctly identifiable having different useful life. And therefore, Component level accounting
and reporting is not practically feasible for the company.
Depreciation of these PPE commences when the assets are ready for their intended use.
Depreciation is provided on the cost of Property, Plant and Equipment (other than Freehold land)
less their estimated residual value, using the straight-line method over the useful life of PPE as
stated in the Schedule II to the Companies Act, 2013 or based on internal technical evaluation.The
management believes that the useful lives as assessed best represent the period over which
management expects to use these assets.
The estimated useful lives, residual values and depreciation method are reviewed on an annual
basis and if necessary, changes in estimates are accounted for prospectively.
Depreciation on additions/deletions to PPE during the year is provided for on a pro-rata basis with
reference to the date of additions/deletions.
The low value assets costing Rs. 25,000/- or less are fully depreciated (net of residual value) in
the year of purchase.
Depreciation on subsequent expenditure on PPE arising on account of capital improvement or
other factors is provided for prospectively over the remaining useful life.
Leasehold improvements are amortized over the period of the lease.
Freehold land is not depreciated.
(ii) Intangible Assets
Intangible assets with finite useful life acquired separately, are recognized only if it is probable
that future economic benefits that are attributable to the assets will flow to the enterprise and the
cost of assets can be measured reliably. The intangible assets are recorded at cost and are
carried at cost less accumulated amortization and accumulated impairment losses, if any.
Intangible assets are amortized over the estimated period of benefit, not exceeding ten years.
Intangible asset is derecognized on disposal, or when no future economic benefits are expected
from use or disposal. Gains or losses arising from derecognition of an intangible asset are
determined as the difference between the net disposal proceeds and the carrying amount of the
asset and recognized in the Standalone Statement of Profit and Loss when the asset is
derecognised.
(iii) Impairment of non-financial assets
The Company reviews at each reporting period whether there is any indication that an asset may
be impaired. If any such indication exists, the company estimates the recoverable amount of the
asset. If such recoverable amount of the asset or the recoverable amount of the cash generating
unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to
its recoverable amount. The reduction is treated as an impairment loss and is recognized in the
Standalone Statement of Profit & Loss. If at the reporting period, there is an indication that there is
change in the previously assessed impairment loss, the recoverable amount is reassessed and
the asset is reflected at the lower of its recoverable amount and the carrying amount that is
determined, net of depreciation, had no impairment loss been recognized for the asset in prior
years.
Recoverable amount is the higher of fair value less costs of disposal and value in use. 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 for which the estimates of future cash flows have not been adjusted.
An assessment is made at the end of each reporting period to see if there are any indications that
impairment losses recognized earlier may no longer exist or may have come down. The impairment
loss is reversed, if there has been a change in the estimates which has the effect of increasing the
asset’s recoverable amount since the previous impairment loss was recognised. If it is so, the
carrying amount of the asset is increased to the lower of its recoverable amount and the carrying
amount that has been determined, net of depreciation, had no impairment loss been recognized
for the asset in prior years. After a reversal, the depreciation charge is adjusted in future periods
to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis
over its remaining useful life. Reversals of Impairment loss are recognized in the Standalone
Statement of Profit and Loss.
(iv) Investment in Subsidiary
The Company records the Investment in equity instrument of Subsidiary at cost less accumulated
impairment losses, if any. 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
investment in subsidiary, the difference between net disposal proceeds and the carrying amounts
are recognised in the standalone statement of profit and loss.
Investment in Associate
The Company records the investments in associates at cost less impairment loss, if any.
On disposal of investment in associate, the difference between net disposal proceeds and the
carrying amounts (including corresponding value of dilution in deemed investment) are recognized
in the Statement of Profit and Loss.
(v) Share-based payments
The grant date fair value of options granted to employees is recognised as an employee expense,
with a corresponding increase in equity, on a straight -line basis, over the vesting period, based
on the Company’s estimate of equity instruments that will eventually vest. At the end of each
reporting period, the Company revises its estimate of the number of equity instruments expected
to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss
such that the cumulative expense reflects the revised estimate, with a corresponding adjustment
to the equity-settled employee benefits reserves.
(vi) Inventories
Inventories are valued at lower of cost and net realisable value after providing for impairment and
other losses, where considered necessary. The basis of determining the value of each class of
inventory is as follows:
(vii) Revenue and Income recognition:
(a) Revenue from Contracts with Customers
Revenues from sale of goods or services are recognised upon transfer of control of the
goods or services to the customer in an amount that reflects the consideration which the
company expects to receive in exchange for those goods or services.
Revenue is measured at the transaction price of the consideration received or receivable
duly adjusted for variable consideration and customer’s right to return the goods and the
same represents amounts receivable for goods and services provided in the normal course
of business. Revenue also excludes taxes collected from customers. Any retrospective revision
in prices is accounted for in the year of such revision.
Revenue is recognised at a point in time on accrual basis as per the terms of the contract,
when there is no uncertainty as to measurement or collectability of consideration. When
there is uncertainty as to measurement or ultimate collectability, revenue recognition is
postponed until such uncertainty is resolved.
When sales discount and rebate arrangements result in variable consideration, appropriate
estimates are made and estimated variable consideration is recognised as a deduction from
revenue at the point of sale (to the extent that it is highly probable that a significant reversal
in the amount of cumulative revenue recognised will not be required). The Company typically
uses the expected value method for estimating variable consideration, reflecting that such
contracts have similar characteristics and a range of possible outcomes.
The contract asset or a contract liability is recognised when either party to a contract has
performed, depending on the relationship between the entity’s performance and the
customer’s payment. When the company has a present unconditional rights to consideration,
it is recognised separately as a receivable.
(b) Interest Income
Interest on investments is booked on a time proportion basis taking into account the amounts
invested and the rate of interest.
(c ) Dividend Income
Dividend income is recognized when the right to receive the same is established.
(d) Export Incentives
Export incentives (Duty Drawback Scheme benefits) are accrued in the year when the right
to receive the same is established in respect of exports made and are accounted to the
extent there is no significant uncertainty about the measurability and ultimate realization/
utilization of such benefits/ duty credit.
(e) other Income
Other income is recognized on accrual basis except when realization of such income is
uncertain.
(viii) Foreign Exchange Transactions
Transactions in currencies other than the Company’s functional currency (foreign currencies) are
recognized at the spot exchange rates prevailing at the dates of the transactions. At the end of
each reporting period, monetary items denominated in foreign currencies are translated using
closing exchange rate prevailing on the last day of the reporting period.
Non-monetary items which are carried in terms of historical cost denominated in a foreign currency
are reported using the exchange rate at the date of transaction.
Exchange differences on monetary items are recognized in the Standalone Statement of Profit
and Loss in the period in which they arise.
(ix) Leases
As a lessee
The Company’s lease assets primarily consist of lease for land. 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:
- the contract involves the use of an identified asset;
- the Company has substantially all of the economic benefits from use of the asset through the
period of the lease and
- the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognises a 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 and corresponding Right-of-use Asset. For these short-term
and low value leases, the Company recognises the lease payments as an operating expense on
a straight-line basis over the term of the lease.
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 and adjusted for any remeasurement
of the lease liability.
Right-of-use Assets are depreciated on a straight-line basis over the shorter of the lease term and
useful life of the underlying asset.
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.
(x) Employees Benefits
Post Employment Benefit
(i) Defined Contribution Plan
The company’s contribution to defined contribution plan paid/payable for the year is charged
to the Standalone Statement of Profit and loss.
(ii) Defined Benefit Plan
The liabilities towards defined benefit schemes are determined using the Projected Unit
Credit method. Actuarial valuation under the Projected Unit Credit method are carried out at
the balance sheet date. Remeasurement gains/losses arising from experience adjustments
and changes in actuarial assumptions are recognised in the period in which they occur in
Other Comprehensive Income (OCI). These gains/losses which are recognised in OCI are
reflected in retained earnings and are not reclassified to Profit or Loss. Past service cost is
recognized immediately to the extent that the benefits are already vested and otherwise it is
amortized on straight-line basis over the remaining average period until the benefits become
vested.
The retirement benefit obligation recognised in the balance sheet represents the present
value of the defined benefit obligation as reduced by plan assets. The plan assets are
measured at fair value.
(iii) Short Term Employee Benefits
Short-term employee benefits expected to be paid in exchange for the services rendered by
employees are recognized undiscounted during the period employee renders services.
These benefits include salaries, wages, bonus, performance incentives, etc.
(iv) Other Long Term Employee Benefits
Compensated absences which are not expected to occur within twelve months after the end
of the period in which the employee renders the related services are recognized as an
actuarially determined liability at present value of the defined benefit obligation at the balance
sheet date, using Projected Unit Credit method.
(xi) Borrowing Costs
Borrowing costs are interest and ancillary costs incurred in connection with the arrangement of
borrowings.
General and specific borrowing costs attributable to acquisition and construction of qualifying
assets is added to the cost of the assets upto the date the asset is ready for its intended use. A
qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its
intended use Capitalisation of borrowing costs is suspended and charged to the Standalone
Statement of Profit and Loss during extended periods when active development activity on the
qualifying assets is interrupted. All other borrowing costs are recognised in the Standalone
Statement of Profit and Loss in the period in which they are incurred.
(xii) Statement of Cash Flows
Standalone Statement of Cash flows are reported using the indirect method, whereby profit before
tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past
or future operating cash receipts or payments and item of income or expenses associated with
investing or financing cash flows. The cash flows are segregated into operating, investing and
financing activities.
(xiii) Income Taxes
Income tax expense represents the sum of the current tax and deferred tax.
(i) Current Tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from
‘profit before tax’ as reported in the Standalone Statement of Profit and Loss because of
items of income or expense that are taxable or deductible in other years and items that are
never taxable or deductible. The Company’s current tax is calculated using tax rates and
laws that have been enacted or substantively enacted by the end of the reporting period.
(ii) Deferred Tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets
and liabilities in the Standalone Financial Statements and the corresponding tax bases used
in the computation of taxable profit. Deferred tax liabilities are generally recognized for all
taxable temporary differences. Deferred tax assets are generally recognized for all deductible
temporary differences to the extent that it is probable that taxable profits will be available
against which those deductible temporary differences can be utilized.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period
and reduced to the extent that it is no longer probable that sufficient taxable profits will be
available to allow all or part of the deferred tax asset to be utilized.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in
the period in which the liability is settled or the asset realized, based on tax rates (and tax
laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that
would follow from the manner in which the Company expects, at the end of the reporting
period, to recover or settle the carrying amount of its assets and liabilities.
The Company offsets tax assets and liabilities, where it has a legally enforceable right to set
off the recognized amounts and where it intends either to settle on a net basis, or to realize
the asset and settle the liability simultaneously.
(iii) Current and Deferred Tax Expense for the Year
Current and deferred tax expense is recognized in the Standalone Statement of Profit and
Loss, except when they relate to items that are recognized in other comprehensive income
or directly in equity, in which case, the current and deferred tax are also recognized in other
comprehensive income or directly in equity respectively.
(xiv) Financial Instruments
Financial assets and Financial liabilities are recognised when the Company becomes a party to
the contractual provisions of the instruments.
Initial Recognition:
Financial assets and Financial 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 of the financial assets or financial liabilities, as appropriate, on initial
recognition. Transaction costs directly attributable to the acquisition of financial assets or financial
liabilities at fair value through profit or loss are recognised in the Standalone Statement of Profit
and Loss. However, trade receivables which is a financial asset that do not contain a significant
financing component are measured at transaction price.
Classification and Subsequent Measurement: Financial Assets
The Company classifies financial assets as subsequently measured at amortised cost, fair value
through other comprehensive income (“FVTOCI”) or fair value through profit or loss (“FVTPL”) on
the basis of following:
Ý the entity’s business model for managing the financial assets; and
Ý the contractual cash flow characteristics of the financial assets.
Amortised Cost:
A financial asset shall be classified and measured at amortised cost, if both of the following
conditions are met:
Ý the financial asset is held within a business model whose objective is to hold financial assets
in order to collect contractual cash flows, and
Ý 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.
Fair Value through OCI:
A financial asset shall be classified and measured at FVTOCI, if both of the following conditions
are met:
Ý the financial asset is held within a business model whose objective is achieved by both
collecting contractual cash flows and selling financial assets, and
Ý 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.
Fair Value through Profit or Loss:
A financial asset shall be classified and measured at FVTPL unless it is measured at amortised
cost or at FVTOCI.
All recognised financial assets are subsequently measured in their entirety at either amortised
cost or fair value, depending on the classification of the financial assets.
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 under current market conditions.
The Company categories assets and liabilities measured at fair value into one of three levels
depending on the ability to observe inputs employed in their measurement which are described
as follows:
(i) Level 1: Quoted Prices (unadjusted) in active markets for identical assets or liabilities
(ii) Level 2: inputs are observable, either directly or indirectly, other than quoted prices included
within level 1 for the asset or liability.
(iii) Level 3: inputs are unobservable for the asset or liability reflecting significant modifications
to observable related market data or Company’s assumptions about pricing by market
participants.
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. contract with customers and it is
being satisfied at a point in time.
Impairment of financial assets:
In accordance with Ind AS 109, the Company applies Expected Credit Loss (ECL) model for
measurement and recognition of impairment loss on the following financial assets and credit risk
exposure:
Financial Assets are measured at amortised cost e.g., deposits, trade receivables and bank
balance
Simplified Approach
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.
General Approach
For recognition of impairment loss on other financial assets and risk exposure, 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-months ECL is used to provide for
impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in a
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-months ECL.
Lifetime ECL are the expected credit losses resulting from all possible default events over the
expected life of a financial instrument. The 12-months ECL is a portion of the lifetime ECL which
results from default events that are possible within 12 months after the reporting date.
As a practical expedient, the Company uses a provision matrix to determine impairment loss
allowance on portfolio of its trade receivables. The provision matrix is based on its historically
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. On that basis, the Company estimates
provision on trade receivables at the reporting date.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as
expense (or income) in the Standalone Statement of Profit and Loss.
Derecognition of financial assets:
The Company derecognises a financial asset when the contractual right to receive the cash flows
from the asset expire, or when it transfers the financial asset and substantially all the risks and
rewards of ownership of the asset to another party. If the Company neither transfers nor retains
substantially all the risks and rewards of ownership and continues to control the transferred asset,
the Company recognises its retained interest in the asset and an associated liability for amounts
it may have to pay. If the Company retains substantially all the risks and rewards of ownership of
a transferred financial asset, the Company continues to recognise the financial asset and also
recognises a collateralised borrowing for the proceeds received.
On derecognition of a financial asset in its entirety, the difference between the asset’s carrying
amount and the sum of the consideration received and receivable and the cumulative gain or loss
that had been recognised in other comprehensive income and accumulated in equity is recognised
in profit or loss if such gain or loss would have otherwise been recognised in profit or loss on
disposal of that financial asset.
On derecognition of a financial asset other than in its entirety (e.g. when the Company retains an
option to repurchase part of a transferred asset), the Company allocates the previous carrying
amount of the financial asset between the part it continues to recognise under continuing
involvement, and the part it no longer recognises on the basis of the relative fair values of those
parts on the date of the transfer. The difference between the carrying amount allocated to the part
that is no longer recognised and the sum of the consideration received for the part no longer
recognised and any cumulative gain or loss allocated to it that had been recognised in other
comprehensive income is recognised in profit or loss if such gain or loss would have otherwise
been recognised in profit or loss on disposal of that financial asset. A cumulative gain or loss that
had been recognised in other comprehensive income is allocated between the part that continues
to be recognised and the part that is no longer recognised on the basis of the relative fair values
of those parts.
Classification and Subsequent Measurement:
Financial liabilities:
Financial liabilities are classified as either financial liabilities at FVTPL or ‘other financial liabilities’.
Financial Liabilities at FVTPL:
Financial liabilities are classified as at FVTPL when the financial liability is held for trading or are
designated upon initial recognition as FVTPL.
Gains or Losses on liabilities held for trading are recognised in the Standalone Statement of Profit
and Loss.
Other Financial Liabilities at amortised cost:
Other financial liabilities (including borrowings and trade and other payables) are subsequently
measured at amortised cost using the effective interest method.
The effective interest method is a method of calculating the amortised cost of a financial liability
and of allocating interest expense over the relevant period. The effective interest rate is the rate
that exactly discounts estimated future cash payments (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 financial liability, or (where appropriate) a shorter
period, to the net carrying amount on initial recognition.
Financial liabilities and equity instruments:
Ý Classification as debt or equity:
Debt and equity instruments issued by the Company are classified as either financial liabilities
or as equity in accordance with the substance of the contractual arrangements and the
definitions of a financial liability and an equity instrument.
Ý Equity instruments:
An equity instrument is any contract that evidences a residual interest in the assets of an
entity after deducting all of its liabilities.
Equity instruments issued by a Company are recognised at the proceeds received.
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Derecognition of financial liabilities:
The Company derecognises a financial liability when its contractual obligations are discharged
or cancelled or expired. The Company also derecognises a financial liability when its terms are
modified and the cash flows under the modified terms are substantially different.
Offsetting:
Financial assets and financial liabilities are offset and the net amount is reported in the Standalone
Balance Sheet where there is a legally enforceable right to offset the recognised amounts and
there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.
(xv) Derivative Financial Instruments
The Company holds derivative financial instruments such as foreign exchange forward contracts
to manage its exposure to foreign currency exchange rate risks.
Derivatives are initially recognised at fair value at the date the contracts are entered into.
Subsequent to initial recognition, these contracts are measured at fair value at the end of each
reporting period and changes are recognised in Standalone Statement of Profit and Loss.
(xvi) Segment Reporting
The Company identifies primary segments based on the dominant source, nature of risks and
returns and the internal organisation and management structure. The operating segments are
the segments for which separate financial information is available and for which operating profit
/ loss amounts are evaluated regularly by the Chief Operating Decision Making Body (CODM) in
deciding how to allocate resources and in assessing performance.
The accounting policies adopted for segment reporting are in line with the accounting policies
of the Company.
(xvii) Earnings Per Share
Basic earnings per share is computed by dividing the profit / (loss) after tax with the weighted
average number of equity shares outstanding during the year. Diluted earnings per share is
computed by dividing the profit / (loss) after tax as adjusted for dividend, interest and other
charges to expense or income (net of any attributable taxes) relating to the dilutive potential
equity shares, with the aggregate of weighted average number of equity shares considered for
deriving basic earnings per share and the weighted average number of equity shares which
could have been issued on the conversion of all dilutive potential equity shares.
(xviii) Dividend
Provision is made in the accounts for the amount of any final dividend declared on the date of its
approval by the shareholders. Interim dividends, if any, are recorded as a liability on the date of
its declaration by the company’s board of directors.
(xix) Research and Development
Research costs are charged to the statement of profit and loss in the year in which they are
incurred.
Product development costs incurred on new products are recognised as intangible assets,
when feasibility has been established, the Company has committed technical, financial and
other resources to complete the development and it is probable that asset will generate probable
future economic benefits. The costs capitalised include the cost of materials, direct labour and
directly attributable overhead expenditure incurred up to the date the asset is available for use.
Interest cost incurred is capitalised up to the date the asset is ready for its intended use, based
on borrowings incurred specifically for financing the asset or the weighted average rate of all
other borrowings if no specific borrowings have been incurred for the asset. Product development
expenditure is measured at cost less accumulated amortisation and impairment, if any.
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