Note 38 - Other accounting policies
a. (i) Property, Plant & Equipment:
Historical cost includes expenditure that is directly
attributable to the acquisition of Property, Plant &
Equipment (PPE).
On transition to Ind AS, the Company has elected to
continue with the carrying value of all its property,
plant and equipment recognized as at 1st April 2015
measured as per the previous GAAP and use that
carrying value as the deemed cost of the property,
plant and equipment.
Costs associated with repairs and maintenance
of PPE are charged to profit or loss during the
reporting period in which they are incurred.
Gains and losses on disposal are determined by
comparing proceeds with carrying amount. These
are included in profit or loss within other income/
other expenses.
An asset's carrying amount will be written down
to its recoverable amount if the asset's carrying
amount is greater than its estimated recoverable
amount.
(ii) Impairment of assets:
Assets are tested for impairment whenever
events or changes in circumstances indicate that
the carrying amount may not be recoverable. An
impairment loss is recognised for the amount
by which the asset's carrying amount exceeds its
recoverable amount. The recoverable amount is the
higher of an asset's fair value less costs of disposal
and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels
for which there are separately identifiable cash
inflows which are largely independent of the cash
inflows from other assets or groups of assets (cash¬
generating units). Non- financial assets that suffered
an impairment are reviewed for possible reversal of
the impairment at the end of each reporting period.
b. Intangible Assets:
(i) Computer software
Computer software is stated at historical cost less
amortization. Historical cost of computer software
includes expenditure that is directly attributable
to the acquisition of the computer software. Costs
associated with maintaining computer software are
recognized as an expense as incurred.
On transition to Ind AS, the Company had elected to
continue with the carrying value of all of intangible
assets recognized as at 1st April 2015 measured as
per the previous GAAP and use that carrying value
as the deemed cost of intangible assets.
(ii) Research and development
Research and development expenses are fully
charged to expense in the period in which they
are incurred. The company considers that the
uncertainties inherent in development of new
products would preclude capitalization of such
cost. Development costs previously recognized as
an expense are not recognized as an asset in a
subsequent period.
(iii) Amortization methods and periods
The Company amortizes software over a period of 3
years.
c. Financial assets:
(i) Classification:
For investments in equity instruments that are
not held for trading, classification will depends on
whether the Company has made an irrevocable
election at the time of initial recognition to account
for the equity investment at fair value through other
comprehensive income.
(ii) Recognition
Purchase and sale of financial assets are recognized
on trade date, the date on which Company commit
to purchase or sale the financial assets
(iii) Derecognition of financial assets
A financial asset is derecognized only when
• the Company has transferred the rights to
receive cash flow from the financial asset or
• retains the contractual rights to receive the
cash flows of the financial assets but assumes
a contractual obligation to pay cash flows to
one or more recipients.
Where the entity has transferred an asset, the
Company evaluates whether it has transferred
substantially all risks and rewards of ownership
of the financial asset. In such cases, the financial
asset is derecognized. Where the entity has not
transferred substantially all risks and rewards of
ownership of the financial asset the same is not
derecognized.
Where the entity has neither transferred a financial
asset nor retains substantially all risks and rewards
of ownership of the financial asset, the financial
asset is derecognized. Where the Company retains
control of the financial asset, the asset is continued
to be recognized to the extent of continuing
involvement in the financial asset.
d. Cash and cash equivalents:
For the purpose of presentation in the statement of
cash flows, cash and cash equivalents includes cash
on hand, deposits held at call with financial institutions,
other short-term, highly liquid investments with original
maturities of three months or less that are readily
convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value, and
bank overdrafts. Bank overdrafts are shown within
borrowings in current liabilities in the balance sheet.
e. Current and Deferred taxes:
The current tax expense or credit for the period is the
tax payable on the current period's taxable income
based on the applicable income tax rate adjusted by
changes in deferred tax assets and liabilities attributable
to temporary differences.
The current income tax charge is calculated based on
the tax laws enacted or substantively enacted at the
end of the reporting period. Management periodically
evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject
to interpretation. It establishes provisions, where
appropriate, based on amounts expected to be paid to
the tax authorities.
Deferred tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets
and liabilities and when the deferred tax balances relate
to the same taxation authority. Current tax assets and
tax liabilities are offset where the entity has a legally
enforceable right to offset and intends either to settle on
a net basis, or to realize the asset and settle the liability
simultaneously.
Current and deferred tax is recognized in profit or loss,
except to the extent that it relates to items recognized in
other comprehensive income or directly in equity. In this
case, the tax is also recognized in other comprehensive
income or directly in equity, respectively.
Deferred income tax is provided in full, using the liability
method, on temporary differences arising between the
tax bases of assets and liabilities and their carrying
amounts in the financial statements. Deferred tax assets
are recognized for all deductible temporary differences
only if it is probable that future taxable amounts will
be available to utilize those temporary differences and
losses.
For operations carried out in Special Economic Zones
which are entitled to tax holiday under the Income tax
Act, 1961, no deferred tax is recognised in respect of
temporary differences which reverse during the tax
holiday period, to the extent of Company's gross taxable
income that is allowed as the deduction during the tax
holiday period. Deferred tax in respect of temporary
differences which reverse after the tax holiday period
is recognised in the year in which temporary difference
originate. Also refer note 13.
Deferred income tax is determined using tax rates (and
laws) that have been enacted or substantively enacted
by the end of the reporting period and are expected
to apply when the related deferred income tax asset is
realized, or the deferred income tax liability is settled.
Deferred tax liabilities are not recognized for temporary
differences between the carrying amount and tax bases
of investments in subsidiaries where the Company is able
to control the timing of the reversal of the temporary
differences and it is probable that the differences will
not reverse in the foreseeable future.
f. Inventories:
Cost of raw materials and stores comprise of cost
of purchases. Cost of work-in-progress and finished
goods comprises cost of direct materials, direct labour
and an appropriate proportion of variable and fixed
overhead expenses, the latter being allocated on the
basis of normal operating capacity. Cost of inventories
also include all other cost incurred in bringing the
inventories to their present location and condition.
Costs of purchased inventory are determined after
deducting rebates and discounts. 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 sale. Items held
for use in the production of inventory are not written
below cost if the finished product in which these will be
incorporated are expected to be sold at or above the
cost.
g. Contributed equity:
Equity shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options
are shown in equity as a deduction, net of tax, from the
proceeds.
h. Employee benefits:
(i) Short-term obligations
Liabilities for wages and salaries, bonus, ex-gratia
etc. that are expected to be settled wholly within
12 months after the end of the period in which
the employees render the related service are
recognized in respect of employees' services up to
the end of the reporting period and are measured
at the amounts expected to be paid when the
liabilities are settled. The liabilities are presented as
current employee benefit obligations in the balance
sheet.
(ii) Other Long-term employee benefit obligations
The liabilities for compensated absences are not
expected to be settled wholly within 12 months
after the end of the period in which the employees
render the related service. They are therefore
measured as the present value of expected future
payments to be made in respect of services
provided by employees up to the end of the
reporting period using the projected unit credit
method. The benefits are discounted using the
market yields at the end of the reporting period
that have terms approximating to the terms of the
related obligations. Remeasurements as a result
of the experience adjustments and changes in
actuarial assumptions are recognized in profit or
loss.
The liability for compensated absence obligation is
presented as current liabilities in the balance sheet
if the entity does not have an unconditional right
to defer settlement for at least twelve months after
the reporting period, regardless of when the actual
settlement is expected to occur, otherwise as non¬
current liabilities.
(iii) Post-employment obligations
The Company operates the following post¬
employment schemes:
(a) Defined benefit plans-Gratuity obligations
The liability or assets recognized in the balance
sheet in respect of defined benefit gratuity
plans is the present value of the defined
benefit obligations at the end of the reporting
period less the fair value of plan assets.
The defined benefit obligation is calculated
annually by actuaries using the projected unit
credit method.
The present value of the defined benefit
obligation denominated in INR is determined
by discounting the estimated future cash
outflows by reference to market yields at the
end of the reporting period on government
bonds that have terms approximating to the
terms of the related obligation. The benefits
which are denominated in currency other
than INR, the cash flows are discounted using
market yields determined by reference to high-
quality corporate bonds that are denominated
in the current in which the benefits will be
paid, and that have terms approximating to
the terms of the related obligation.
The net interest cost is calculated by applying
the discount rate to the net balance of the
defined benefit obligation and the fair value of
plan assets. This cost is included in employee
benefit expense in the statement of profit and
loss.
Remeasurement gains and losses arising
from experience adjustments and change in
actuarial assumptions are recognized in the
period in which they occur, directly in other
comprehensive income. They are included in
retained earnings in the statement of changes
in equity and under other equity in the balance
sheet.
Changes in the present value of the defined
benefit obligation resulting from plan
amendments or curtailments are recognized
immediately in profit or loss as past service
cost.
In respect of funded post-employment
defined benefit plans, amounts due for
payment within 12 months to the fund may
be treated as 'current'. Regarding unfunded
post-employment benefit plans, settlement
obligations which are due within 12 months
in respect of employees who have resigned or
expected to resign or are due for retirement
within the next 12 months is 'current'. The
remaining amount attributable to other
employees, who are likely to continue in the
services for more than a year, is classified as
"non-current".
Company uses the work of an actuary in
determining the current and non-current
liability for unfunded post employee benefit
obligations.
(b) Defined contribution plans
The Company pays provident fund
contributions to publicly administered
funds as per local regulations. The Company
has no further payment obligations once
the contributions have been paid. The
contributions are accounted for as defined
contribution plans and the contributions are
recognized as employee benefit expense
when they are due.
Termination benefits in the nature of voluntary
retirement benefits are recognized in the
Statement of Profit and Loss as and when
incurred.
i. Borrowings:
Borrowings are initially recognized at fair value, net of
transaction cost incurred. Borrowings are subsequently
measured at amortized cost. Any difference between the
proceeds (net of transaction costs) and the redemption
amount is recognized in profit or loss over the period
of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are
recognized 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
draw down occurs. To the extent there is no evidence
that it is probable that some or all the facility will be
drawn down, the fee is capitalized as a prepayment for
liquidity services and amortized over the period of the
facility to which it relates.
Borrowings are removed from the balance sheet when
the obligation specified in the contract is discharged,
cancelled or expired. The difference between the
carrying amount of a financial liability that has been
extinguished or transferred to another party and the
consideration paid, including any non-cash assets
transferred or liabilities assumed, is recognised in profit
or loss as other gains/(losses).
Borrowings are classified as current liabilities unless the
company has an unconditional right to defer settlement
of the liability for at least 12 months after the reporting
period. Where there is a breach of a material provision
of a long-term loan arrangement on or before the end
of the reporting period with the effect that the liability
becomes payable on demand on the reporting date,
the entity does not classify the liability as current, if the
lender agreed, after the reporting period and before
the approval of financial statements for issue, not to
demand payment as consequence of the breach.
j. Trade and Other Payables:
These amounts represent liabilities for goods and
services provided to the Company prior to the end
of financial year which are unpaid. Trade and other
payables are presented as current liabilities unless
payment is not due within 12 months after the reporting
period. They are recognized initially at their fair value
and subsequently measured at amortized cost using
the effective interest method. The credit period typically
ranges between 60 to 90 days and are recognized
initially at the transaction price as they do not contain
significant financing components.
k. Revenue:
Taxes collected from customers relating to product sales
and remitted to government authorities are excluded
from revenues.
Government Grant in the form of export entitlements
from government authorities are recognized in the
statement of profit and loss as a income, when there
is reasonable certainity that the entity will comply with
the conditions attaching to them and the grants will be
received.
l. Foreign currency translation:
Transactions and balances
Foreign currency transactions are translated into the
functional currency using the exchange rates at the dates
of the transactions at the inception. Foreign exchange
gains and losses resulting from the settlement of such
transactions and from the translation of monetary
assets and liabilities denominated in foreign currencies
at year end exchange rates are generally recognized in
statement of profit and loss. A monetary item for which
settlement is neither planned nor likely to occur in the
foreseeable future is considered as a part of the entity's
net investment in that foreign operation.
Non-monetary items that are measured at fair value in
a foreign currency are translated using the exchange
rates at the date when the fair value was determined.
Translation differences on assets and liabilities carried
at fair value are reported as part of the fair value gain
or loss. Translation differences on non- monetary assets
and liabilities such as equity instruments held at fair
value through profit or loss are recognized in statement
of profit and loss as part of the fair value gain or loss and
translation differences on non-monetary assets such as
equity investments classified as FVOCI are recognized in
other comprehensive income.
m. Dividends:
Provision is made for the amount of any dividend
declared, being appropriately authorized and no longer
at the discretion of the entity, on or before the end of the
reporting period but not distributed at the end of the
reporting period.
n. Borrowing Costs:
General and specific borrowing costs that are directly
attributable to the acquisition, construction or production
of a qualifying asset are capitalized during the period of
time that is required to complete and prepare the asset
for its intended use or sale. Qualifying assets are assets
that necessarily take a substantial period of time to get
ready for their intended use or sale.
Investment income earned on the temporary investment
of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing cost
eligible for capitalization. Other borrowings costs are
expensed in the period in which they are incurred.
o. Leases:
As a lessee
Leases are recognized as a right-of-use asset and a
corresponding liability at the date at which the leased
asset is available for use by the Company. Contracts
may contain both lease and non-lease components. The
Company allocates the consideration in the contract to
the lease and non-lease components based on their
relative stand-alone prices.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities
include the net present value of the following lease
payments:
• fixed payments (including in-substance fixed
payments), less any lease incentive receivables
• variable lease payment that are based on an index
or a rate, initially measured using the index or rate
as at the commencement date
• amounts expected to be payable by the Company
under residual value guarantees
• the exercise price of a purchase option if the
Company is reasonably certain to exercise that
option, and
• payments of penalties for terminating the lease, if
the lease term reflects the Company exercising that
option.
Lease payments to be made under reasonably certain
extension options are also included in the measurement
of the liability. The lease payments are discounted using
the interest rate implicit in the lease. If that rate cannot be
readily determined, which is generally the case for leases
in the Company, the lessee's incremental borrowing rate
is used, being the rate that the individual lessee would
have to pay to borrow the funds necessary to obtain an
asset of similar value to the right-of-use asset in a similar
economic environment with similar terms, security and
conditions.
To determine the incremental borrowing rate, the
Company:
• where possible, uses recent third-party financing
received by the individual lessee as a starting point,
adjusted to reflect changes in financing conditions
since third party financing was received
• uses a build-up approach that starts with a risk-free
interest rate adjusted for credit risk for leases held
by the Company which does not have recent third
party financing, and
• makes adjustments specific to the lease, e.g. term,
country, currency and security.
Lease payments are allocated between principal and
finance cost. The finance cost is charged to profit or
loss over the lease period so as to produce a constant
periodic rate of interest on the remaining balance of the
liability for each period.
Right-of-use assets are measured at cost comprising the
following:
• the amount of the initial measurement of lease
liability
• any lease payments made at or before the
commencement date less any lease incentives
received
• any initial direct costs, and
• restoration costs.
Right-of-use assets are generally depreciated over the
shorter of the asset's useful life and the lease term on a
straight-line basis. If the Company is reasonably certain
to exercise a purchase option, the right-of-use asset is
depreciated over the underlying asset's useful life.
Short-term leases of equipment and all leases of low-
value assets are recognized as expense over the lease
term on straight-line basis or another systematic basis
if that basis is more representative of the pattern of the
benefit. Short-term leases are leases with a lease term of
12 months or less.
p. Segment Reporting:
Operating segments are reported in a manner
consistent with the internal reporting provided to the
Chief Operating Decision Maker. Managing director
of the Company has been identified as being the chief
operating decision maker.
q. Earnings per share:
i. Basic earnings per share
Basic earnings per share is calculated by dividing:
• The profit attributable to owners of the
Company
• By the weighted average number of equity
shares outstanding during the financial year,
adjusted for bonus elements in equity shares
if any, issued during the year, .
ii. The company does not have potential dilutive
shares.
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