2. Material accounting policies
(A) Statement of Compliance
The Company's financial statements have been prepared in compliance with Indian Accounting Standards
(the 'Ind AS') notified under Section 133 of the Companies Act, 2013 (the 'Act') read with Rule 3 of the
Companies (Indian Accounting Standards) Rules, 2015, as amended and other relevant provisions of the Act.
The accounting policies are applied consistently to all the periods presented in the financial statements.
All assets and liabilities have been classified as current or non-current as per the Company's normal
operating cycle and other criteria as set out in the Division II of Schedule III to the Companies Act, 2013.
Based on the nature of products and the time between acquisition of assets for processing and their
realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for
the purpose of current or non-current classification of assets and liabilities.
The Standalone Financial statements presents the financial position of the Company and it includes the
financial information of one trust viz. Faze Three Employee Trust which is controlled by the Company.
Treasury shares are held in trust whose sole beneficiary is Faze Three Limited.
(B) Basis of presentation
The Balance sheet and the Statement of profit and loss are prepared and presented in the format prescribed
in the Division II of Schedule III to the Act. The Statement of Cash Flows has been prepared and presented as
per the requirements of Ind AS 7, Statement of Cash Flows. The disclosure requirements with respect to
items in the Balance sheet and Statement of profit and loss, as prescribed in the Schedule III to the Act, are
presented by way of notes forming part of the financial statements along with the other notes required to be
disclosed under the notified Accounting Standards and the SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015 as amended.
(C) Basis of measurement
The standalone financial statements have been prepared on a historical cost convention on accrual basis,
except for the following assets and liabilities which have been measured at fair value or revalued amount:
• Land classified under property, plant and equipment at Fair value
• Derivative financial instruments,
• Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial
instruments),
The Company has prepared the financial statements on the basis that it will continue to operate as a going
concern.
A historical cost is a measure of value used in accounting in which the value of an asset on the balance sheet
is recorded at its original cost when acquired by the company.
Fair Value Measurement: - 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 entity.
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 Entity 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 minimising 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 observable
• Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable.
(D) Use of estimates
The preparation of the financial statements requires management to exercise judgment and to make
estimates and assumptions. These estimates and associated assumptions are based on historical
experiences and various other factors that are believed to be reasonable under the circumstances. Actual
results may differ from these estimates. The estimates and underlying assumptions are reviewed on an on¬
going basis. Revision to accounting estimates are recognized in the period in which the estimate is revised if
the revision affects only that period, or in the period of the revision and future periods if the revision affects
both current and future period. The areas involving critical estimates or judgements are:
Useful life of property, plant and equipment:
The charge in respect of periodic depreciation is derived after determining an estimate of an asset's expected
useful life and the expected residual value. Increasing an asset's expected life or its residual value would
result in a reduced depreciation charge in the statement of profit and loss. The useful lives of the Company's
assets are determined by management at the time the asset is acquired and reviewed at least annually for
appropriateness. The lives are based on historical experience with similar assets as well as anticipation of
future events, which may impact their life, such as changes in technology.
Defined benefit obligations
The cost of defined benefit gratuity plans is determined using actuarial valuations. The actuarial valuation
involves making assumptions about discount rates, future salary increases, mortality rates and future pension
increases. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty.
Recognition of Deferred Tax Assets
Deferred tax assets are recognised for the future tax consequences of temporary differences between the
carrying values of assets and liabilities and their respective tax bases, and unutilised business loss and
depreciation carry forwards and tax credits. Deferred tax assets are recognised to the extent that it is probable
that future taxable income will be available against which the deductible temporary differences, unused tax
losses, depreciation carry-forwards and unused tax credits could be utilised
2.2 Property, plant and equipment
Property, plant and equipment are stated at original cost inclusive of incidental expenses related to
acquisition net of tax / duty credit availed, net of accumulated depreciation and accumulated impairment
losses, if any. Cost includes financing cost relating to borrowed funds attributable to the construction or
acquisition of qualifying tangible assets up to the date the assets are ready for use. Subsequent expenditures
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. When significant parts of plant and equipment are required to be replaced at
intervals, the Company depreciates them separately based on their specific useful lives. Likewise, when a
major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a
replacement if the recognition criteria are satisfied. All other repairs and maintenance are charged to the
statement of profit and loss during the reporting period in which they are incurred. The present value of the
expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if
the recognition criteria for provisions are met.
Freehold land and buildings are subsequently carried at fair value, based on periodic valuations by a
professionally qualified valuer. These revaluations are made with sufficient regularity to ensure that the
carrying amount does not differ materially from that which would be determined using fair value at the end of
the reporting period. Changes in fair value are recognised in other comprehensive income and accumulated
in the revaluation reserve except to the extent that any decrease in value in excess of the credit balance on
the revaluation reserve, or reversal of such a transaction, is recognised in profit or loss.
Property, plant and equipment not ready for their intended use as on the balance sheet date are disclosed as
“Capital work-in-progress”. Such items are classified to the appropriate category of property, plant and
equipment when completed and ready for their intended use. Advances given towards acquisition /
construction of property, plant and equipment outstanding at each balance sheet date are disclosed as
Capital Advances under “Other non-current assets”.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon
disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising
on recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying
amount of the asset) is included in the statement of the profit and loss when the asset is derecognised.
Depreciation methods, estimated useful lives
The Company depreciates property, plant and equipment using the straight-line method over their estimated
useful lives of assets which are determined based on technical parameters / assessment.
Useful life of property, plant and equipment:
The Company reviews the useful life of property, plant and equipment at the end of each reporting period. This
re-assessment may result in change in depreciation and amortisation expense in future periods. The
estimated useful lives of assets are as follows:
Individual assets costing up to ' Five thousand are depreciated in full in the year of purchase.
The Company has adopted a policy to transfer from revaluation reserve to profit or loss, an amount equivalent
to depreciation on account of gain in revaluation reserve recognised earlier, at every period end.
Based on technical assessment made by technical expert and management estimate, depreciates certain
items of building, plant and equipment over estimated useful lives which are different from the useful life
prescribed in Schedule II to the Companies Act, 2013. The management believes that these estimated useful
lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.
Depreciation on addition to property plant and equipment is provided on pro-rata basis from the date of
acquisition. An item of property, plant and equipment is derecognised upon disposal or when no future
economic benefits are expected to arise from the continued use of the 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 profit and loss.
The residual value of Property, plant and Equipment are within the limit specified in Schedule II (Part C) of
Companies act 2013. The residual values, useful lives and methods of depreciation of property, plant and
equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
2.3 Intangible Asset
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible
assets acquired in a business combination is their fair value at the date of acquisition. Following initial
recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated
impairment losses. Internally generated intangibles, excluding capitalised development costs, are not
capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is
incurred.
Intangible assets purchased are measured at cost as at the date of acquisition, as applicable, less
accumulated amortisation and accumulated impairment, if any.
Intangible assets consist of software licences. The estimated useful life of asset is as follows:
Intangible assets are amortised on a straight-line basis over the period of its economic useful life. Intangible
assets with finite life are evaluated for recoverability whenever there is any indication that their carrying
amounts may not be recoverable. If any such indication exists, the recoverable amount (i.e. higher of the fair
value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does
not generate cash flows that are largely independent of those from other assets.
2.4 Impairment of Non Financial Assets
The Company assesses at each year end whether there is any objective evidence that a non financial asset or
a group of non financial assets is impaired. If any such indication exists, the Company estimates the asset's
recoverable amount and the amount of impairment loss.
An impairment loss is calculated as the difference between an asset's carrying amount and recoverable
amount. Losses are recognized in Statement of Profit and Loss and reflected in an allowance account. When
the Company considers that there are no realistic prospects of recovery of the asset, the relevant amounts
are written off. If the amount of impairment loss subsequently decreases and the decrease can be related
objectively to an event occurring after the impairment was recognised, then the previously recognised
impairment loss is reversed through Statement of Profit and Loss.
The recoverable amount of an asset or cash-generating unit (as defined below) is the greater of its value in
use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are
grouped together into the smallest group of assets that generates cash in flows from continuing use that are
largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).
2.5 Investment in subsidiary
Subsidiaries are entities that are controlled by the Company. The Company controls an entity when the
Company is exposed, or has rights, to variable returns from its involvement with the entity and has the ability
to affect those returns through its power over the investee. Investments in subsidiaries are accounted at cost
less impairment, if any.
2.6 Borrowing costs
Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of
funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the
borrowing costs.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily
takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of
the asset. All other borrowing costs are expensed in the period in which they occur.
2.7 Foreign currency transactions
Functional and presentation currency
Items included in the standalone financial statements are measured using the currency of the primary
economic environment in which the entity operates ('the functional currency'). The standalone financial
statements are presented in Indian National Rupee (INR), which is the Company's functional and
presentation currency.
Transactions and balances
On initial recognition, all foreign currency transactions are recorded by applying to the foreign currency
amount the exchange rate between the functional currency and the foreign currency at the date of the
transaction. Gains/Losses arising out of fluctuation in foreign exchange rate between the transaction date
and settlement date are recognised as income or expense in the period in which they arise in the Statement of
Profit and Loss.
All monetary assets and liabilities in foreign currencies are restated at the year end at the exchange rate
prevailing at the year end and the exchange differences are recognised in the Statement of Profit and Loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using
the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a
foreign currency are translated using the exchange rates at the date when the fair value is determined.
2.8 Revenue recognition
A1 Sale of goods
The majority of the Company's revenue is derived from selling goods with revenue recognised at a point in
time when control of the goods has transferred to the customer. This is generally when the goods are
delivered to the customer. However, for export sales, control might also be transferred when delivered either
to the port of departure or port of arrival, depending on the specific terms of the contract with a customer.
There is limited judgement needed in identifying the point control passes: once physical delivery of the
products to the agreed location has occurred, the group no longer has physical possession, usually will have
a present right to payment (as a single payment on delivery) and retains none of the significant risks and
rewards of the goods in question.
Revenue towards satisfaction of performance obligation is measured at the amount of transaction price (net
of variable consideration) allocated to the performance obligation. Transaction price is reduced by goods and
service tax and for actual and expected sales deductions resulting from sales returns, rebates and discounts.
Sales deductions are estimated on the basis of historical experience, specific contractual terms and future
expectations of sales development.
B1 Rendering of services:
Revenues from services are recognised as and when services are rendered and on the basis of contractual
terms with the parties. The performance obligation in respect of professional services is satisfied over a
period of time and acceptance of the customer.
C1 Rebate / Drawback of Taxes and Duties
Revenue from export benefits arising from duty drawback scheme, merchandise export incentive scheme,
Rebate of State and Central Taxes and Levies and Remission of Duties or Taxes on Export Products Scheme
are recognised on export of goods in accordance with their respective underlying scheme at fair value of
consideration received or receivable.
D] Other Income
Interest income:
For all financial instruments measured at amortised cost, interest income is recorded using the effective
interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments or receipts
through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying
amount of the financial asset. Interest income is included in the other income in the statement of profit and
loss.
Other Incomes are recognised on accrual basis except financial instruments measured at amortised cost
which are recognised using the effective interest rate (EIR).
Dividend income is recorded when the right to receive payment is established.
Rental income:
Lease agreements where the risks and rewards incident to the ownership of an asset substantially vest with
the lessor are recognised as operating leases. Lease rentals are recognised on straight line basis as per the
terms of the agreements in the statement of profit and loss.
2.9 Taxes
Tax expense comprises current income tax and deferred income tax and includes any adjustments related to
past periods in current and / or deferred tax adjustments that may become necessary due to certain
developments or reviews during the relevant period. Current and deferred taxes are recognised in statement
of profit and loss, except when they relate to items that are recognised in other comprehensive income or
directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive
income or directly in equity, respectively.
(A) Current tax
Current income tax is measured at the amount expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute the amount are those that are enacted or
substantively enacted, at the reporting date.
Current income tax relating to items recognised outside the statement of profit and loss is recognised in
correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates
positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to
interpretation and establishes provisions where appropriate.
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.
(B) Deferred tax
Deferred income tax is provided in full, using the balance sheet approach, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in financial statements. Deferred
income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction
other than a business combination that at the time of the transaction affects neither accounting profit nor
taxable profit (tax loss). Deferred income tax is determined using tax rates (and laws) that have been enacted
or substantially enacted by the end of the year and are expected to apply when the related deferred income
tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for all deductible temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to utilize those temporary differences and losses.
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 on the basis
of 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 realise the asset and settle the liability simultaneously.
Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised
in other comprehensive income, in which case, the current and deferred tax are also recognised in other
comprehensive income.
2.10 Leases
The Company as a Lessee
The Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or
contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in
exchange for consideration. To assess whether a contract conveys the right to control the use of an identified
asset, the Company assesses whether: (i) the contract involves the use of an identified asset (ii) the
Company has substantially all of the economic benefits from use of the asset through the period of the lease
and (iii) the Company has the right to direct the use of the asset.
A) Right-of-use asset (ROU):
The Company recognizes a right-of-use asset (“ROU”) and a lease liability at the lease commencement date
(i.e the date the underlying asset is available for use). The ROU is initially measured at cost, which comprises
the initial amount of the lease liability adjusted for any lease payments made at or before the commencement
date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying
asset or to restore the underlying asset, less any lease incentives received.
The ROU Asset is subsequently depreciated using the straight-line method over the shorter of the lease term
and the estimated useful life of the asset from the commencement date to the end of the lease term.
B) Lease Liabilities
At the commencement date of the lease, the entity recognises lease liabilities measured at the present value
of lease payments to be made over the lease term. The lease payments include fixed payments (including in
substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an
index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also
include the exercise price of a purchase option reasonably certain to be exercised by the entity and payments
of penalties for terminating the lease, if the lease term reflects the entity exercising the option to terminate.
Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they
are incurred to produce inventories) in the period in which the event or condition that triggers the payment
occurs.
In calculating the present value of lease payments, the entity uses its incremental borrowing rate at the lease
commencement date because the interest rate implicit in the lease is not readily determinable. After the
commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and
reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if
there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future
payments resulting from a change in an index or rate used to determine such lease payments) or a change in
the assessment of an option to purchase the underlying asset.
The Company presents ROU Asset separately and lease liabilities in 'Financial Liabilities' in the Balance
Sheet.
C) Short-term leases and leases of low-value assets
The Company has elected not to recognise ROU Assets and lease liabilities for
- short term leases that have a lease term of 12 months or lower and
- Leases of low value assets with annual lease rental lesser than or equal to Rs.10 lakhs.
The Company recognises the lease payments associated with these leases as an expense over the lease
term.
D) Company as a lessor:
Leases for which the Company is a lessor is classified as a finance or operating lease. Whenever the terms of
the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified
as a finance lease. All other leases are classified as operating leases
2.11 Inventories
Inventories are valued at the lower of cost and net realisable value.
Cost of raw materials, dyes and chemicals, packaging materials and stores and spare parts comprises cost of
purchases on weighted average basis.
Cost of work-in progress and finished goods comprises of all cost of purchase, cost of conversion and other
cost incurred in incurred in bringing the inventories to their present location and condition.
Costs are assigned to individual items of inventory moving weighted average basis. Costs of purchased
inventory are determined after deducting rebates and discounts. Net realisable 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.
Slow and non-moving material, obsolesce, defective inventories are duly provided for and valued at actual
cost or estimated net realisable value whichever is lower. Materials and supplies held for use in production of
inventories are not written down if the finished products in which they will be used are expected to be sold at or
above cost.
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