1 SIGNIFICANT ACCOUNTING POLICIES:
1.1 Corporate information
Eastcoast Steel Limited (‘the Company’) is a public limited company incorporated
in India under the provisions of the Companies Act, 1956 and its shares are listed
on Bombay Stock Exchange. The registered office of the Company is situated
at Flat No. A-123, Royal Den Apartments, No.16, Arul Theson Street, Palaniraja
Udayar Nager, Lawspet, Pondicherry - 605008 , which is also the principal place
of business. These financial statements were approved and adopted by Board of
Directors in meeting dated 30 June 2021.
1.2 Basis of preparation and presentation:
These Financial Statements of the Company have been prepared to comply with
the Indian Accounting Standards (‘Ind-AS’) as notified by Ministry of Corporate
Affairs pursuant to section 133 of the Companies Act, 2013 (hereinafter referred to
as ‘the Act’), read with the Companies (Indian Accounting Standards) Rules, 2015,
as amended and other provisions of the Act.
The financial statements have been prepared on a historical cost convention and
accrual basis, except for certain financial assets and liabilities measured at fair
value and plan assets towards defined benefit plans, which are measured at fair
value.
The financial statements of the Company are for the year ended 31 March 2024
and are prepared in Indian Rupees being the functional currency.
1.3 Current 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:
(i) expected to be realised or intended to be sold or consumed in normal
operating cycle,
(ii) held primarily for the purpose of trading,
(iii) expected to be realised within twelve months after the reporting period,
(iv) cash or cash equivalent unless restricted from being exchanged or used to
settle a liability for at least twelve months after the reporting period, or
(v) carrying current portion of non current financial assets.
All other assets are classified as non-current.
A liability is current when:
(i) it is expected to be settled in normal operating cycle ;
(ii) it is held primarily for the purpose of trading ;
(iii) it is due to be settled within twelve months after the reporting period,
(iv) there is no unconditional right to defer the settlement of the liability for at least
twelve months after the reporting period, or
(v) It includes current portion of non current financial liabilities.
All other liabilities are classified as non-current.
1.4 Operating cycle
All assets and liabilities have been classified as current and non-current as per the
company’s normal operating cycle and other criteria set out above which are in
accordance with the schedule III to the Act. Based on the nature of services and time
between the acquisition of assets for providing of services and their realisation in
cash and cash equivalents, the Company has ascertained its operating cycle as 12
months for the purpose of current / non-current classification of assets and liabilities.
1.5 Property Plant and Equipment:
Freehold land is carried at cost. All other items of property, plant and equipment
are stated at cost less depreciation and impairment, if any. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised 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 derecognised 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.
Depreciation is provided in the manner prescribed in Part C of Schedule II to the
Companies Act, 2013, over their useful life and management believe that useful
life of assets are same as those prescribed in Part C of Schedule II to the Act.
Useful life considered for calculation of depreciation for various assets class are as
follows-
Asset Class Useful Life
Furniture and Fixtures 10 years
Office Equipment 5 years
Computers 3 years
Vehicles 8 years
The property, plant and equipment residual values, useful lives and method of
depreciation are reviewed, and adjusted if appropriate, at the end of each reporting
period.
Gains and losses arising from derecognition of a property, plant and equipment are
measured as the difference between the net disposal proceeds and the carrying
amount of the assets and are recognised in the Statement of Profit and Loss, when
the asset is derecognised.
An property, plant and equipment carrying amount is written down immediately to
its recoverable amount if the asset’s carrying amount is greater than its estimated
recoverable amount.
1.6 Investments and other financial assets:
Initial recognition
In the case of financial assets, not recorded at fair value through profit or loss
(FVTPL), financial assets are recognised initially at fair value plus transaction
costs that are directly attributable to the acquisition of the financial asset.
Purchases or sales of financial assets that require delivery of assets within a time
frame established by regulation or convention in the market place (regular way
trades) are recognised on the trade date, i.e., the date that the Company commits
to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in
following categories
(a) Financial Assets at amortised cost
Financial assets are subsequently measured at amortised cost if these
financial assets are held within a business model with an objective to hold
these assets in order to collect contractual cash flows and 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.
Interest income from these financial assets is included in finance income
using the effective interest rate (“EIR”) method. Impairment gains or losses
arising on these assets are recognised in the Statement of Profit and Loss.
(b) Financial Assets measured at fair value
Financial assets are measured at fair value through other comprehensive
income (FVOCI) if these financial assets are held within a business model
with an objective to hold these assets in order to collect contractual cash flows
or to sell these financial assets and 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. Movements in the carrying
amount are taken through OCI, except for the recognition of impairment gains
or losses, interest revenue and foreign exchange gains and losses which are
recognised in the Statement of Profit and Loss.
Financial assets that do not meet the criteria for amortised cost or FVOCI are
measured at fair value through profit or loss.
Impairment of Financial Assets
In accordance with Ind-AS 109, the Company applies the expected credit loss
(“”ECL””) model for measurement and recognition of impairment loss on financial
assets and credit risk exposures.
The Company follows ‘simplified approach’ for recognition of impairment loss
allowance on trade receivables. Simplified approach does not require the Company
to make changes in credit risk. Rather, it recognises impairment loss allowance
based on lifetime ECL at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure, the
Company determines whether there has been a significant increase in the credit
risk since initial recognition. If credit risk has not increased significantly, 12-month
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-month ECL
ECL is the difference between all contractual cash flows that are due to the Company
in accordance with the contract and all the cash flows that the entity expects to
receive (i.e., all cash shortfalls), discounted at the original EIR. Lifetime ECL are the
expected credit losses resulting from all possible default events over the expected
life of a financial instrument. The 12-month ECL is a portion of the lifetime ECL which
results from default events that are possible within 12 months after the reporting date.
ECL impairment loss allowance (or reversal) recognised during the period is
recorded as expense/ income in the Statement of Profit and Loss.
De-recognition of Financial Assets
The Company de-recognises a financial asset only when the contractual rights
to the cash flows from the asset expire, or it transfers the financial asset and
substantially all risks and rewards of ownership of the asset to another entity.
If the Company neither transfers nor retains substantially all the risks and rewards
of ownership and continues to control the transferred asset, the Company
recognizes its retained interest in the assets 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.
Equity investments
All equity investments in the scope of Ind-AS 109, Financial Instruments, are measured
at fair value. For equity instruments, the Company may make an irrevocable election
to present the subsequent fair value changes in Other Comprehensive Income
(OCI). The Company makes such election on an instrument-by-instrument basis.
The classification is made on initial recognition and is irrevocable.
There is no recycling of the amounts from OCI to profit or loss, even on sale of
investment.
Equity instruments included within the FVTPL (fair value through profit and loss)
category are measured at fair value with all changes in fair value recognized in the
profit or loss.
1.7 Financial Liabilities
Initial Recognition
Financial liabilities are classified, at initial recognition, as financial liabilities at
FVTPL, loans and borrowings and payables as appropriate. All financial liabilities
are recognised initially at fair value and, in the case of loans and borrowings and
payables, net of directly attributable transaction costs.
Subsequent measurement
Financial liabilities at FVTPL
Financial liabilities at FVTPL include financial liabilities held for trading and financial
liabilities designated upon initial recognition as FVTPL. Financial liabilities are
classified as held for trading if they are incurred for the purpose of repurchasing in
the near term. Gains or losses on liabilities held for trading are recognised in the
Statement of Profit and Loss.
Financial liabilities at amortised cost
After initial recognition, interest-bearing loans and borrowings are subsequently
measured at amortised cost using the EIR method. Any difference between the
proceeds (net of transaction costs) and the settlement or redemption of borrowings
is recognised over the term of the borrowings in the Statement of Profit and Loss.
Amortised cost is calculated by taking into account any discount or premium
on acquisition and fees or costs that are an integral part of the EIR. The EIR
amortisation is included as finance costs in the Statement of Profit and Loss.
Where the terms of a financial liability is re-negotiated and the Company issues
equity instruments to a creditor to extinguish all or part of the liability (debt for
equity swap), a gain or loss is recognised in the Statement of Profit and Loss;
measured as a difference between the carrying amount of the financial liability and
the fair value of equity instrument issued.
De-recognition of Financial Liabilities
Financial liabilities are de-recognised when the obligation specified in the contract
is discharged, cancelled or expired. 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 de-recognition of the original liability and recognition of a new liability.
The difference in the respective carrying amounts is recognised in the Statement
of Profit and Loss.
Offsetting financial instruments
Financial assets and financial liabilities are offset and the net amount is reported
in the balance sheet if there is a currently enforceable legal right to offset the
recognised amounts and there is an intention to settle on a net basis, to realise the
assets and settle the liabilities simultaneously.
1.8 Fair value measurement
The Company measures financial assets and financial liability 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:
- In the principal market for the asset or liability, or
- 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 economic best 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 fair value, maximising 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 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 — Quoted (unadjusted) market prices in active markets for identical assets
or liabilities
- Level 2 —Valuation techniques for which the lowest level input that is significant to
the fair value measurement is directly or indirectly observabl
- 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 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.
1.9 Impairment of non-financial assets
Assessment is done at each Balance Sheet date to evaluate whether there is
any indication that a non-financial asset may be impaired. For the purpose of
assessing impairment, the smallest identifiable group of assets that generates
cash inflows from continuing use that are largely independent of the cash inflows
from other assets or groups of assets, is considered as a cash generating unit. If
any such indication exists, an estimate of the recoverable amount of the asset/cash
generating unit is made. Assets whose carrying value exceeds their recoverable
amount are written down to their recoverable amount. Recoverable amount is
higher of an asset’s or cash generating unit’s net selling price and its value in use.
Value in use is the present value of estimated future cash flows expected to arise
from the continuing use of an asset and from its disposal at the end of its useful
life. A previously recognised impairment loss is increased or reversed depending
on changes in circumstances. However, the carrying value after reversal is not
increased beyond the carrying value that would have prevailed by charging usual
depreciation if there was no impairment.
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