2 Summary of Significant Accounting Policies
A. Basis of preparation of financial statements
The financial statements of the Company have been prepared in accordance with the generally accepted
accounting principles in India (Indian GAAP). The Company has prepared these financial statements to
comply in all material respects with the accounting standards notified under section 133 of the Companies
Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014 (as amended) and
Companies (Accounts Standards) Rules, 2016. The financial statements have been prepared on an
accrual basis and under the historical cost convention.
The accounting policies adopted in the preparation of financial statements are consistent with those of
previous year.
B. Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles
requires the management of the Company to make estimates and assumptions that affect the reported
balances of assets, liabilities and disclosures relating to the contingent liabilities as at the date of the
financial statements and reported amounts of income and expenses during the period. Difference between
the actual result and estimates are recognized in the period in which the results are known / materialized.
Significant estimates used by management in the preparation of these financial statements includes
estimates of the economic useful lives of property, plant and equipment.
C. Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company
and the revenue can be easily measured.
Sale of Goods
Revenue is recognized when the significant risks and rewards of ownership are transferred to the
buyer, there is no continuing management involvement with the goods, the amount of revenue can be
measured reliably, recovery of the consideration is probable and the associated costs and possible return
of goods can be estimated reliably. Revenue from the sale of goods is measured at the fair value of the
consideration received or receivable, net of returns, value added tax, GST and applicable trade discounts
and allowances, but inclusive of excise duty. Revenue includes shipping and handling costs billed to the
customer.
Export entitlements
Export entitlements from government authorities are recognized in the statement of profit and loss when
the right to receive credit as per the terms of the scheme is established in respect of the exports made by
the Company, and where there is no significant uncertainty regarding the ultimate collection of the relevant
export proceeds.
Other Income
Interest is recognized on a time proportion basis taking into account the amount outstanding and the rate
applicable.
D. Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation. Cost of an asset comprises
of its purchase price and direct cost attributable to bringing the asset to its present condition for its intended
use and borrowing cost on qualifying assets.
Leasehold improvements are depreciated on a straight line basis over the period of lease.
Advances paid towards acquisition of property, plant and equipment, outstanding at each balance sheet
date are disclosed as capital advances.
The Management estimates the useful lives of the assets as per the indicative useful life prescribed in
Schedule II to the Companies Act, 2013.
E. Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or production of an asset are
capitalized as part of the cost of that asset till the date of capitalization of qualifying asset. Other borrowing
costs are recognized as an expense in the period in which they are incurred.
F. Foreign currency transactions
Transactions denominated in foreign currencies are recorded at the exchange rates closely prevailing on
the date of the transaction. At the year-end, all the monetary assets and liabilities denominated in foreign
currencies are restated into rupee equivalents at the year-end exchange rates. 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 the transaction. All exchange differences arising on such restatements are reflected in
the Statement of Profit and Loss.
G. Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity
shareholders by the weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable
to equity shareholders and the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
H. Employee benefits
(i) The Company contributes to the statutory provident fund of the Regional Provident Fund Commissioner,
in accordance with the Employees’ Provident Fund and Miscellaneous Provision Act, 1952. The plan
is a defined contribution plan and contribution paid or payable is recognized as an expense in the
period in which services are rendered by the employee.
(ii) Gratuity is a post employment benefit and is a defined benefit plan. The liability recognized in the
Balance Sheet represents the present value of the defined benefit obligation at the Balance Sheet
date less the fair value of plan assets (if any), together with adjustments for unrecognized past
service costs. The Company’s obligation in respect of the plan is provided for based on actuarial
valuation carried out as at the Balance Sheet date by an independent actuary using the projected unit
credit method. Actuarial gain or loss arising from experience adjustments and changes in actuarial
assumptions are credited or charged to the Statement of Profit and Loss in the year in which such
gain or loss arise.
(iii) All short term employee benefits are recorded as expenses. Short term employee benefits including
salaries, non monetary benefits (such as medical care).
I. Tax expense
Tax expense comprises current tax and deferred tax at the applicable enacted or substantively enacted
rates. Current tax represents the amount of income tax payable in respect of the taxable income for the
reporting period. Tax liability has been computed being higher of Minimum Alternate Tax (MAT) and tax
under normal provisions of Income-tax Act. MAT credit are being recognized that there is convincing
evidence that the Company will pay normal tax. The excess tax paid under MAT provisions being over
and above regular tax liability can be carried forward for a period of ten years from the year of recognition
and is available for set off against future tax liabilities computed under regular tax provisions. Deferred tax
represents the effect of timing difference between taxable income and accounting income for the reporting
period that originates in one period and is capable of reversal in one or more subsequent periods. Deferred
tax assets in respect of unabsorbed depreciation and carry forward of losses are recognized only to the
extent that there is virtual certainty that sufficient taxable income will be available to realize these assets.
All other deferred tax assets are recognized only to the extent that there is reasonable certainty that
sufficient future taxable income will be available to realize these assets.
J. Cash and cash equivalents
Cash and cash equivalents include cash in hand, demand deposits with banks, other short term highly
liquid investments with original maturity of three months or less.
K. Impairment
At each Balance Sheet date, the Company reviews the carrying amounts of its assets to determine
whether there is any indication of impairment based on internal or external factors. If any such indication
exists, the recoverable amount of the asset is estimated in order to determine the extent of impairment
loss. Recoverable amount is the higher of an asset’s net selling price and value in use. In assessing
value in use, the estimated future cash flows expected from the continuing use of the asset and from its
disposal are discounted to their present value using a pre-tax discount rate that reflects the current market
assessments of time value of money and the risks specific to the asset. Reversal of impairment loss is
recognized immediately as income in the Statement of Profit and Loss.
L. Leases
Leases where the Company assumes substantially all the risks and rewards of ownership are classified
as finance leases. Finance leases are capitalized at the lower of the fair value of the leased assets at
inception and the present value of minimum lease payments. Lease payments are apportioned between
the finance charge and the outstanding liability. The finance charge is allocated to periods during the lease
term at a constant periodic rate of interest on the remaining balance of the liability.
Leases where the lessor retains substantially all the risks and rewards of ownership are classified
as operating leases. Lease rentals in respect of assets taken under operating leases are charged to
statement of profit and loss on a straight line basis over the lease term unless other systematic basis is
more representative of the time pattern of the benefit.
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