2 Significant Accounting Policies
2.1 Basis of preparation of financial statements:
These financial statements have been prepared in
accordance with Indian Accounting Standards (Ind
AS), under the historical cost convention on accrual
basis except for certain financial instruments which
are measured at fair values. The Ind AS are prescribed
under Section 133 of the Companies Act, 2013 read
with Rule 3 of the Companies (Indian Accounting
Standards) Rules, 2015 and relevant amendment
rules issued thereafter.
Accounting policies have been consistently applied
except where a newly issued accounting standard is
initially adopted or a revision to an existing accounting
standard requires a change in the accounting policy
hitherto in use.
2.2 Use of Estimates and judgments:
The preparation of financial statements in conformity
with Ind AS requires management to make
judgments, estimates and assumptions that affect
the applications of the accounting policies and the
reported amounts of assets and liabilities, disclosure
of contingent assets & liabilities at the date of the
financial statements and the reported amounts of
revenue and expenses during the year. The estimates
and assumptions used in the accompanying financial
statements are based upon management’s evaluation
of the relevant facts and circumstances. Actual results
may differ from the estimates and assumptions used
in preparing the accompanying financial statements.
2.3 Property, Plant and Equipment:
Property, plant and equipment are stated at cost
of acquisition or construction less accumulated
depreciation and impairment, if any. Cost is inclusive
of inward freight, duties and taxes and incidental
expenses related to acquisition which is not
recoverable. All upgradation / enhancements are
charged off as revenue expenditure unless they bring
similar significant additional benefits.
An item of property, plant and equipment is
derecognized upon disposal or when no future
economic benefits are expected to arise from the
continued use of asset. Any gain or loss arising on
the disposal or retirement of an item of property,
plant and equipment is determined as the difference
between the sales proceeds and the carrying amount
of the asset and is recognised in Statement of
Profit and Loss.
Depreciation on property, plant & equipment is
calculated on Written Down Method in accordance
with the provisions of Schedule II of the Companies
Act, 2013 keeping 5% of cost as residual value. The
useful life of property, plant & equipment as defined in
Part C of schedule II of the Companies Act, 2013 has
been taken for all property, plant & equipment except
for Office Equipments, Printer and Lab Equipments.
In case of purchase / sale of assets during the year,
depreciation has been charged on pro rata basis
from / up to date of commercial production / sale.
Depreciation is not provided on Capital Work in
Progress until the assets are ready for its intended use.
The management believes that the useful lives as
given below best represent the period over which
the management expects to use these assets. Hence,
the useful lives for these assets is different from the
useful lives as prescribed under Part C of schedule II
of the Companies Act, 2013:
Office Equipments 15 and 10 Years
Printer 6 Years
Lab Equipments 15 Years
Intangible Assets:
Intangible assets are stated at cost less accumulated
amortization and net of impairments, if any. Intangible
assets are amortized over their estimated useful lives
on straight-line basis. An intangible asset is recognized
if it is probable that the expected future economic
benefits that are attributable to the asset will flow to
the Company and its cost can be measured reliably.
2.4 Inventories:
The inventories are valued at lower of cost or net
realizable value. The cost of inventories is determined
based on weighted average cost method as permitted
by Indian Accounting Standard 2 - Inventories.
The basis of determining cost for various categories
of inventories is as follows:-
• Spares, consumables and accessories are valued
on Weighted Average basis.
• Raw material are valued on
Weighted Average basis.
• Work-in-progress are valued at cost of
production (cost of materials and overhead up to
the completed stage of production)
• Inventories of Finished goods are valued on
Weighted Average basis or net realizable value
whichever is less.
• Goods in transit are recorded at its purchase price.
2.5 Foreign Currency Transaction:
The functional and presentation currency of the
Company is Indian Rupee. Transactions in foreign
currency are accounted for at the exchange rate
prevailing on the transaction date. Current assets
and current liabilities denominated in foreign currency
are translated at the exchange rate prevalent at the
date of the balance sheet. Gains /losses arising on
settlement as also on translation of monetary items
are recognized in the Statement of Profit and Loss.
2.6 Taxes on Income:
Taxes on income comprises of current taxes and
deferred taxes. Current tax in the Statement of Profit
and Loss is provided as the amount of tax payable
in respect of taxable income for the period using
tax rates and tax laws enacted during the period,
together with any adjustment to tax payable in
respect of previous years. Deferred tax is recognized
on temporary differences between the carrying
amounts of assets and liabilities and the amounts
used for taxation purposes (tax base), at the tax rates
and tax laws enacted or substantively enacted by the
end of the reporting period.
2.7 Revenue Recognition:
Revenue is measured at the fair value of the
consideration received or receivable for goods
supplied. Revenue from sale of products is recognized
when the company performs its obligations to
its customers and the amount of revenue can be
measured reliably and recovery of the consideration
is probable. The timing of such recognition in case
of sale of goods is when the control over the same
is transferred to the customer. Revenue from sale
of goods excludes Excise Duty, Sales Tax/GST and
Trade Discount.
Interest income is recognised in the Statement of
Profit and Loss using the effective interest method.
Dividend income is recognized in the Statement of
Profit and Loss when the right to receive dividend
is established.
2.8 Borrowing Cost:
Borrowing cost that are attributable to the acquisition
/ construction of qualifying assets are capitalized
as part of the cost of the respective assets. Other
borrowing costs are recognized as expenses in the
year in which they are incurred.
2.9 Leases:
The Company assesses at contract inception whether
a contract is, or contains, a lease. A contract is, or
contains, a lease if it conveys the right to control
the use of an identified asset for a period of time in
exchange for consideration.
Company as a Lessee
Right-of-Use (ROU) assets are recognized at
inception of a contract or arrangement for significant
lease components at cost less lease incentives, if any.
ROU assets are subsequently measured at cost less
accumulated depreciation and impairment losses, if
any. The cost of ROU assets includes the amount of
lease liabilities recognized, initial direct cost incurred
and lease payments made at or before the lease
commencement date. ROU assets are generally
depreciated over the shorter of the lease term and
estimated useful lives of the underlying assets on a
straight line basis. Lease term is determined based
on consideration of facts and circumstances that
create an economic incentive to exercise an extension
option, or not to exercise a termination option. Lease
payments associated with short-term leases and low
value leases are charged to the Statement of Profit
and Loss on a straight line basis over the term of the
relevant lease.
The Company recognises lease liabilities measured
at the present value of lease payments to be made
on the date of recognition of the lease. Such lease
liabilities do not include variable lease payments
(that do not depend on an index or a rate), which are
recognised as expense in the periods in which they
are incurred. Interest on lease liability is recognised
using the effective interest method. Lease liabilities
are subsequently increased to reflect the accretion
of interest and reduced for the lease payments
made. The carrying amount of lease liabilities is also
remeasured upon modification of lease arrangement
or upon change in the assessment of the lease term.
The effect of such remeasurements is adjusted to the
value of the ROU assets.
Company as a Lessor
Leases in which the Company does not transfer
substantially all the risks and rewards of ownership of
an asset are classified as operating leases. Where the
Company is a lessor under an operating lease, the asset
is capitalised within property, plant and equipment or
investment property and depreciated over its useful
economic life. Payments received under operating
leases are recognised in the Statement of Profit and
Loss on a straight line basis over the term of the lease.
2.10 Financial instruments: Financial assets, Financial
liabilities and Equity Instruments:
Financial Assets -
Recognition
Financial Assets are initially recognised at transaction
price. Management determines the classification of an
asset at initial recognition depending on the purpose
for which the assets were acquired. Financial assets
are classified as those measured at:
(a) amortized cost, where the financial assets are
held solely for collection of cash flows arising
from payments of principal and/or interest.
(b) fair value through other comprehensive income
(FVTOCI), where the financial assets are held
not only for collection of cash flows arising from
payments of principal and interest but also from the
sale of such assets. Such assets are subsequently
measured at fair value, with unrealized gains and
losses arising from changes in the fair value being
recognised in other comprehensive income.
(c) fair value through profit or loss (FVTPL), where
the assets are managed in accordance with
an approved investment strategy that triggers
purchase and sale decisions based on the fair
value of such assets. Such assets are subsequently
measured at fair value, with unrealized gains and
losses arising from changes in the fair value being
recognised in the Statement of Profit and Loss in
the period in which they arise.
Derecognition
Financial assets are derecognized when the right to
receive cash flows from the assets has expired, or
has been transferred, and the Group has transferred
substantially all of the risks and rewards of ownership.
If the asset is one that is measured at:
(a) amortized cost, the gain or loss is recognised in
the Statement of Profit and Loss;
(b) fair value through other comprehensive
income, the cumulative fair value adjustments
previously taken to
reserves are reclassified to the Statement of Profit
and Loss unless the asset represents an equity
investment, in which case the cumulative fair
value adjustments previously taken to reserves are
reclassified within equity.
Financial Liabilities -
Recognition
Borrowings, trade payables and other financial
liabilities are initially recognised at the value of
the respective contractual obligations. They are
subsequently measured at amortized cost. Any
discount or premium on redemption/ settlement is
recognised in the Statement of Profit and Loss as
finance cost over the life of the liability using the
effective interest method and adjusted to the liability
figure disclosed in the Balance Sheet.
Derecognition
Financial liabilities are derecognized when the
liability is extinguished, that is, when the contractual
obligation is discharged, cancelled or on expiry.
Equity Instruments-
Equity instruments are recognised at the value of the
proceeds, net of direct costs of the capital issue.
2.11 Employee Benefits:
a) Short Term Employee Benefits
All employee benefits payable wholly within
twelve months of rendering the service are
classified as short-term employee benefits.
Benefits such as salaries, performance,
incentives, etc, are recognised as an expense
at the undiscounted amount in the Statement
of Profit and Loss for the year in which the
employee renders the related service.
b) Post-Employment Benefits
Post retirement benefits like provident fund,
superannuation, gratuity and post retirement
medical benefits are provided for as below:
Defined Contribution Plans
Contributions under Defined Contribution Plans
i.e. provident fund & superannuation fund
are recognised in the Statement of Profit and
Loss in the period in which the employee has
rendered the service.
Defined Benefit Plans
For defined benefits retirement schemes the cost of
providing benefits is determined using the Projected
Unit Credit Method, with actuarial valuation being
carried out at each year end balance sheet date.
Re-measurement gains and losses of the net
defined benefit liability/(asset) are recognised as
an expense within employment costs.
Past service cost is recognised as an expense
when the plan amendment or curtailment
occurs or when any related restructuring
costs or termination benefits are recognised,
whichever is earlier.
The retirement benefit obligation recognised in
the balance sheet represents the present value
of defined-benefit obligation as reduced by the
fair value of plan assets.
c) Other benefits
Other long term benefits include compensated
absences, long term service benefit, pension and
sick leave. The liability towards other long term
benefits is determined by independent actuary
at every balance sheet date and service cost,
net interest on net defined liability/ (asset) are
recognised in profit and loss account.
2.12 Basic earning per share:
Basic earning per share is calculated by dividing the
net profit or loss (excluding other comprehensive
income) for the year attributable to equity shareholders
by the weighted average number of equity shares
outstanding during the year. The weighted average
number of equity shares outstanding during the year
is adjusted for events such as bonus issue, bonus
element in a right issue, shares split and reserve
share splits that have changed the number of
equity shares outstanding, without a corresponding
change in resources. For the purpose of calculating
diluted earnings per share, the net profit or loss
(excluding other comprehensive income) for the year
attributable to equity shareholders and the weighted
average number of shares outstanding during
the year are adjusted for the effects of all dilutive
potential equity shares.
2.13 Segment Information:
The Company is primarily engaged in the business of
"tobacco and allied products" and "Agro Commodities"
, which in terms of Ind AS 108 on "Segment Reporting"
constitutes a two reporting segments.
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