1.3 Summary of Significant Accounting Policies
a) Property, Plant and Equipment
Measurement at recognition:
An item of property, plant and equipment that qualifies as an asset is measured on initial recognition
at cost. Following initial recognition, items of property, plant and equipment are carried at its cost less
accumulated depreciation and accumulated impairment losses if any.
The Company identifies and determines cost of each part of an item of property, plant and equipment
separately, if the part has a cost which is significant to the total cost of that item of property, plant and
equipment and has useful life that is materially different from that of the remaining item.
The cost of an item of property, plant and equipment comprises of its purchase price including non
refundable purchase taxes or levies, directly attributable cost of bringing the asset to its working
condition for its intended use. Any trade discounts and rebates are deducted in arriving at the purchase
price. Costs in nature of repairs and maintenance are recognized in the Statement of Profit and Loss as
and when incurred.
Depreciation
Depreciation on item of property, plant and equipment is provided on written down value method
based on useful life of the assets as prescribed in Schedule II to the Companies Act; 2013.Depreciation
on addition to property, plant and equipment is provided on pro-rata basis from the date the asset is
put to use. Depreciation on sale/deduction from the property, plant and equipment is provided for
upto the date of sale/deduction as the case may be. The depreciation is provided as per the useful life
of items of property, plant and equipment as prescribed in Schedule II to the Companies Act, 2013. The
useful life of items of property, plant and equipment is mentioned below;
The carrying amount of an item of property, plant and equipment is derecognized on disposal or when
no future economic benefits are expected from its use or disposal. The gain or loss arising from the
derecognition of an item of property, plant and equipment is measured as the difference between the
net disposal proceeds and the carrying amount of the item and is recognized in the Statement of Profit
and Loss when the item is derecognized.
b) Impairment of Assets:
At each balance sheet date, the Company reviews the carrying value of tangible assets for any possible
impairment. An impairment loss is recognized when the carrying amount of an asset exceeds its
recoverable amount. The recoverable amount is higher of the asset's net selling price or estimated
future cash flows.
c) Revenue Recognition:
1) Income from Shares & Securities trading is recognized as income or loss on the date of actual trade.
2) Income arising from derivative contracts is recognized on expiry or settlement of the respective
contracts and the squared up contracts.
3) In respect of option contracts outstanding as at the Balance Sheet date, the contracts are fair valued
in accordance with Ind AS 109 - Financial Instruments. The premium paid or received in respect of
such contracts is adjusted against the resultant unrealized gain or loss determined on fair valuation,
and the net amount is disclosed under financial assets or financial liabilities, as applicable.
4) In respect of futures contracts outstanding as at the Balance Sheet date, the contracts are fair valued
in accordance with Ind AS 109 - Financial Instruments. The net mark-to-market margin paid or
received in respect of such contracts is carried forward separately and disclosed under financial
assets or financial liabilities, as applicable. The unrealized gain or loss arising on fair valuation of
such outstanding contracts is separately recognized and disclosed under financial assets or financial
liabilities, as applicable.
5) The dividend income is accounted for when the right to receive the payment is established whereas,
interest income and other income is accounted on accrual basis.
d) Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial
liability or equity instrument of another entity.
Financial Assets
Initial recognition and measurement:
The Company recognizes a financial asset in its Balance Sheet when it becomes party to the contractual
provisions of the instrument. All financial assets are recognized initially at fair value, plus in the case
of financial assets not recorded at fair value through profit or loss (FVTPL), transaction costs that are
attributable to the acquisition of the financial asset.
Where the fair value of a financial asset at initial recognition is different from its transaction price,
the difference between the fair value and the transaction price is recognized as a gain or loss in the
Statement of Profit and Loss at initial recognition if the fair value is determined through a quoted market
price in an active market for an identical asset (i.e. level 1 input) or through a valuation technique that
uses data from observable markets (i.e. level 2 input).
In case the fair value is not determined using a level 1 or level 2 input as mentioned above, the difference
between the fair value and transaction price is deferred appropriately and recognized as a gain or loss
in the Statement of Profit and Loss only to the extent that such gain or loss arises due to a change in
factor that market participants take into account when pricing the financial asset.
Subsequent measurement:
For subsequent measurement, the Company classifies a financial asset in accordance with the below
criteria:
i. The Company’s business model for managing the financial asset and
ii. The contractual cash flow characteristics of the financial asset.
Based on the above criteria, the Company classifies its financial assets into the following categories:
i. Financial assets measured at amortized cost
ii. Financial assets measured at fair value through other comprehensive income (FVTOCI)
iii. Financial assets measured at fair value through profit or loss (FVTPL)
i. Financial assets measured at amortized cost:
A financial asset is measured at the amortized cost if both the following conditions are met:
a) The Company’s business model objective for managing the financial asset is to hold financial
assets in order to collect contractual cash flows, and
b) 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.
This category applies to cash and bank balances, loans and other financial assets of the Company.
Such financial assets are subsequently measured at amortized cost using the effective interest
method.
Under the effective interest method, the future cash receipts are exactly discounted to the initial
recognition value using the effective interest rate. The cumulative amortization using the effective
interest method of the difference between the initial recognition amount and the maturity amount is
added to the initial recognition value (net of principal repayments, if any) of the financial asset over
the relevant period of the financial asset to arrive at the amortized cost at each reporting date. The
corresponding effect of the amortization under effective interest method is recognized as interest
income over the relevant period of the financial asset. The same is included under other income in
the Statement of Profit and Loss.
The amortized cost of a financial asset is also adjusted for loss allowance, if any.
ii. Financial assets measured at FVTOCI:
A financial asset is measured at FVTOCI if both of the following conditions are met:
a) The Company’s business model objective for managing the financial asset is achieved both by
collecting contractual cash flows and selling the financial assets, and
b) 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.
iii. Financial assets measured at FVTPL:
A financial asset is measured at FVTPL unless it is measured at amortized cost or at FVTOCI as
explained above. This is a residual category applied to all other investments of the Company. Such
financial assets are subsequently measured at fair value at each reporting date. Fair value changes
are recognized in the Statement of Profit and Loss.
Derecognition:
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial
assets) is derecognized (i.e. removed from the Company's Balance Sheet) when any of the following
occurs:
i. The contractual rights to cash flows from the financial asset expires;
ii. The Company transfers its contractual rights to receive cash flows of the financial asset and has
substantially transferred all the risks and rewards of ownership of the financial asset;
iii. The Company retains the contractual rights to receive cash flows but assumes a contractual
obligation to pay the cash flows without material delay to one or more recipients under a ‘pass¬
through’ arrangement (thereby substantially transferring all the risks and rewards of ownership of
the financial asset);
iv. The Company neither transfers nor retains substantially all risk and rewards of ownership and
does not retain control over the financial asset.
In cases where Company has neither transferred nor retained substantially all of the risks and rewards
of the financial asset, but retains control of the financial asset, the Company continues to recognize
such financial asset to the extent of its continuing involvement in the financial asset. In that case, the
Company also recognizes an associated liability. The financial asset and the associated liability are
measured on a basis that reflects the rights and obligations that the Company has retained.
On derecognition of a financial asset, (except as mentioned in ii above for financial assets measured at
FVTOCI), the difference between the carrying amount and the consideration received is recognized in
the Statement of Profit and Loss.
Financial Liabilities
Initial recognition and measurement:
The Company recognizes a financial liability in its Balance Sheet when it becomes party to the contractual
provisions of the instrument. All financial liabilities are recognized initially at fair value minus, in the
case of financial liabilities not recorded at fair value through profit or loss (FVTPL), transaction costs
that are attributable to the acquisition of the financial liability.
Where the fair value of a financial liability at initial recognition is different from its transaction price,
the difference between the fair value and the transaction price is recognized as a gain or loss in the
Statement of Profit and Loss at initial recognition if the fair value is determined through a quoted market
price in an active market for an identical asset (i.e. level 1 input) or through a valuation technique that
uses data from observable markets (i.e. level 2 input).
In case the fair value is not determined using a level 1 or level 2 input as mentioned above, the difference
between the fair value and transaction price is deferred appropriately and recognized as a gain or loss
in the Statement of Profit and Loss only to the extent that such gain or loss arises due to a change in
factor that market participants take into account when pricing the financial liability.
Subsequent measurement:
All financial liabilities of the Company are subsequently measured at amortized cost using the effective
interest method.
Under the effective interest method, the future cash payments are exactly discounted to the initial
recognition value using the effective interest rate. The cumulative amortization using the effective
interest method of the difference between the initial recognition amount and the maturity amount
is added to the initial recognition value (net of principal repayments, if any) of the financial liability
over the relevant period of the financial liability to arrive at the amortized cost at each reporting date.
The corresponding effect of the amortization under effective interest method is recognized as interest
expense over the relevant period of the financial liability. The same is included under finance cost in the
Statement of Profit and Loss.
Derecognition:
A financial liability is derecognized when the obligation under the liability is discharged or cancelled
or expires. When an existing financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability are substantially modified, such an
exchange or modification is treated as the derecognition of the original liability and the recognition of
a new liability. The difference between the carrying amount of the financial liability derecognized and
the consideration paid is recognized in the Statement of Profit and Loss.
e) Fair Value
The Company measures financial instruments at fair value in accordance with the accounting policies
mentioned above. 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:
• In the principal market for the asset or liability
• In absence of principal market, in the most advantageous market for the asset or liability
All assets and liabilities for which fair value is measured or disclosed in the financial statements are
categorized within the fair value hierarchy that categorizes into three levels, described as follows, the
inputs to valuation techniques used to measure value. The fair value hierarchy gives the highest priority
to quoted prices in active markets for identical assets or liabilities (Level 1 inputs) and the lowest
priority to unobservable inputs (Level 3 inputs).
Level 1 — quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 —inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly or indirectly
Level 3 — inputs that are unobservable for the asset or liability
f) Investments in subsidiary
The company has elected to recognize its investment in subsidiary at cost in accordance with the option
available in Ind AS 27 - 'Separate Financial Statements'. The details of such investment are given in
Note 3. The impairment policy on such investment is explained in note1.3(b) above
g) Income Taxes
Tax expense is the aggregate amount included in the determination of profit or loss for the period in
respect of current tax and deferred tax.
Current tax:
Current tax is the amount of income taxes payable in respect of taxable profit for a period. Taxable
profit differs from 'profit before tax' as reported in the 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 under the Income Tax Act, 1961.
Current tax is measured using tax rates that have been enacted by the end of reporting period for the
amounts expected to be recovered from or paid to the taxation authorities.
Deferred tax:
Deferred tax is recognized on temporary differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding tax bases used in the computation of
taxable profit under Income Tax Act, 1961.
Deferred tax liabilities are generally recognized for all taxable temporary differences. However, in case
of temporary differences that arise from initial recognition of assets or liabilities in a transaction that
affect neither the taxable profit nor the accounting profit, deferred tax liabilities are not recognized.
Deferred tax assets are generally recognized for all deductible temporary differences to the extent it is
probable that taxable profits will be available against which those deductible temporary difference can
be utilized. In case of temporary differences that arise from initial recognition of assets or liabilities in
a transaction that affect neither the taxable profit nor the accounting profit, deferred tax assets are not
recognized.
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 the
benefits of part or all of such deferred tax assets to be utilized.
Deferred tax assets and liabilities are measured at the tax rates that have been enacted or substantively
enacted by the Balance Sheet date and are expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.
Presentation of current and deferred tax:
Current and deferred tax are recognized as income or an expense in the Statement of Profit and Loss,
except when they relate to items that are recognized in Other Comprehensive Income, in which case,
the current and deferred tax income/ expense are recognized in Other Comprehensive Income.
The Company offsets current tax assets and current tax 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. In case of deferred tax assets and deferred tax liabilities,
the same are offset if the Company has a legally enforceable right to set off corresponding current tax
assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to
income taxes levied by the same tax authority on the Company.
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