2. Summary of material accounting
policies
The accounting poLicies appLied by the Company in the
preparation of its financial statements are Listed beLow.
Such accounting poLicies have been appLied consistently
to aLL the periods presented in these financiaL
statements.
2.1 Basis of preparation of Financial
Statements
a) Statement of compliance with Ind AS:
These financiaL statements are prepared in accordance
with the Indian Accounting Standards (hereinafter
referred to as the ‘Ind AS’) notified under the Companies
(Indian Accounting Standards) RuLes, 2015 (as amended
from time to time) and presentation requirements of
Division II of ScheduLe III to the Companies Act, 2013
(Ind AS compLiant scheduLe III), as are appLicabLe.
b) Basis of measurement
These financiaL statements are prepared under the
historicaL cost convention on accruaL basis except for the
foLLowing materiaL items that have been measured at fair
vaLue as required by reLevant Ind AS:
- certain financiaL assets (incLuding derivative financiaL
instruments) that are measured at fair vaLue;
- share based payments;
- defined benefit pLans - pLan assets measured at fair
vaLue;
- certain property, pLant and equipment measured
at fair vaLue (viz LeasehoLd Land and freehoLd Land)
which has been considered as deemed cost.
The fair vaLues of financiaL instruments measured at
amortised cost are required to be discLosed in the said
financiaL statements.
HistoricaL cost is generaLLy based on the fair vaLue of the
consideration given in exchange for assets.
Fair value measurement:
Fair vaLue is the price that wouLd be received on
saLe of an asset or paid to transfer a LiabiLity in an
orderLy transaction between market participants at
the measurement date (that is, an exit price). It is a
market-based measurement, not an entity-specific
measurement. 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 to 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
best economic 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 is avaiLabLe to measure fair vaLue,
maximizing the use of reLevant observabLe inputs and
minimising the use of unobservabLe inputs.
Where required/appropriate, external
valuers are involved.
ALL financiaL assets and LiabiLities for which fair vaLue is
measured or discLosed in the financiaL statements are
categorised within the fair vaLue hierarchy estabLished by
Ind AS 113, that categorises into three LeveLs, the inputs
to vaLuation techniques used to measure fair vaLue.
These are based on the degree to which the inputs to
the fair vaLue measurements are observabLe and the
significance of the inputs to the fair vaLue measurement
in its entirety:
Level 1 inputs are quoted prices (unadjusted) in active
markets for identicaL assets or LiabiLities that the entity
can access at the measurement date.
Level 2 inputs are inputs other than quoted prices
incLuded within LeveL 1 that are observabLe for the asset
or LiabiLity, either directLy(i.e. as prices) or indirectLy(i.e.
derived from prices).
Level 3 inputs are unobservabLe inputs for the asset or
LiabiLity.
The fair vaLue hierarchy gives the highest priority to
quoted prices (unadjusted) in active markets for identicaL
assets or LiabiLities (LeveL 1 inputs) and the Lowest
priority to unobservabLe inputs (LeveL 3 inputs).
For financial, assets and Liabilities maturing within one
year from the BaLance Sheet date and which are not
carried at fair vaLue, the carrying amount approximates
fair vaLue due to the short maturity of these instruments.
The Company recognises transfers between LeveLs of
fair vaLue hierarchy at the end of reporting period during
which change has occurred.
c) 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:
- Expected to be reaLised or intended to be soLd or
consumed in normaL operating cycLe
- HeLd primariLy for the purpose of trading
- Expected to be reaLised within tweLve months after
the reporting period, or
- Cash or cash equivaLent unLess restricted from
being exchanged or used to settLe a LiabiLity for at
Least tweLve months after the reporting period
ALL other assets are cLassified as non-current.
A liability is current when:
- It is expected to be settLed in normaL operating
cycLe
- It is heLd primariLy for the purpose of trading
- It is due to be settLed within tweLve months after
the reporting period, or
- There is no unconditionaL right to defer the
settlement of the LiabiLity for at Least tweLve months
after the reporting period
The Company cLassifies aLL other LiabiLities as non¬
current.
Deferred tax assets and LiabiLities are cLassified as non¬
current assets and LiabiLities.
The operating cycLe is the time between the acquisition
of assets for processing and their reaLisation in cash
and cash equivaLents. Based on the nature of products/
services and time between acquisition of assets for
processing/rendering of services and their reaLization in
cash and cash equivaLents, operating cycLe is Less than
12 months. However, for the purpose of current/non-
current cLassification of assets & LiabiLities period of 12
months has been considered as normaL operating cycLe.
d) Functional and presentation currency
Items incLuded in the financiaL statements of the
Company are measured using the currency of the
primary economic environment in which the Company
operates (i.e. the “functionaL currency”). The financiaL
statements are presented in Indian Rupee, the nationaL
currency of India, which is the functionaL currency of the
Company.
e) Rounding of amounts:
ALL amounts discLosed in the financiaL statements and
notes are in Indian Rupees in Lakhs rounded off to
two decimaL pLaces as permitted by ScheduLe III to the
Companies Act, 2013, unLess otherwise stated.
2.2 Use of estimates
The preparation of financiaL statements in conformity
with the recognition and measurement principLes of
the Ind AS requires management to make judgements,
estimates and assumptions that affect the appLication
of the accounting poLicies and the reported amounts of
assets and LiabiLities, the discLosure of contingent assets
and LiabiLities on the date of the financiaL statements,
and the reported amounts of revenues, expenses and
the resuLts of operations during the reporting period.
ActuaL resuLts couLd differ from those estimates. The
estimates and underLying assumptions are reviewed
on an "ongoing basis". Such estimates & assumptions
are based on management evaLuation of reLevant facts
& circumstances as on date of financiaL statements.
Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision
affects onLy that period; they are recognised in the
period of the revision and future periods if the revision
affects both current and future periods.
2.3 Revenue recognition
Sale of goods
Revenue from contract with customers is recognised
when the Company satisfies performance obLigation
by transferring promised goods and services to the
customer. Performance obLigations are satisfied at the
point of time when the customer obtains controLs of the
asset.
Revenue towards satisfaction of a performance
obLigation is measured at the amount of transaction
price (net of variabLe consideration) aLLocated to that
performance obLigation. The transaction price of
goods soLd and services rendered is net of variabLe
consideration on account of various discounts and
schemes offered by the Company as part of the
contract.
Revenue (other than sale)
Revenue (other than saLe) is recognised to the extent that
it is probabLe that the economic benefits wiLL flow to the
Company and the revenue can be reLiabLy measured.
Insurance Claims
Insurance cLaims are accounted for on the basis of
cLaims admitted and to the extent that there is no
uncertainty in receiving the cLaims.
Export Benefits
Export benefits/incentives constituting Duty Draw back,
incentives under FPS/FMS/MEIS/RoDTEP and duty free
advance License scheme are accounted for on accruaL
basis where there is reasonabLe assurance that the
Company wiLL compLy with the conditions attached to
them and the export benefits wiLL be received.
Interest Income
Interest income is recognized on a time proportion basis
taking into account the amount outstanding and the
appLicabLe effective interest rate (EIR). EIR is the rate that
exactly discounts the estimated future cash payments or
receipts over the expected Life of a financial Liability or a
financial asset to their gross carrying amount.
Dividend
Dividend income is recognized when the Company’s
right to receive dividend is established by the reporting
date, which is generaLLy when shareholders approve the
dividend.
2.4 Property, plant and equipment (PPE)
Property, pLant and equipment is stated at acquisition
cost net of accumuLated depreciation and accumuLated
impairment Losses, if any. 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. ALL other repairs and maintenance
are charged to the Statement of Profit and Loss during
the period in which they are incurred.
Cost of an item of property, plant and
equipment comprises -
i. its purchase price, including import duties and
non -refundable purchase taxes (net of duty/tax
credit avaiLed), after deducting trade discounts and
rebates.
ii. any costs directLy attributable to bringing the asset
to the Location and condition necessary for it to be
capabLe of operating in the manner intended by
management.
iii. borrowing cost directLy attributable to the qualifying
asset in accordance with accounting poLicy on
borrowing cost.
iv. the costs of dismantling, removing the item and
restoring the site on which it is Located.
PPE in the course of construction for production, suppLy
or administrative purposes are carried at cost, Less any
recognised impairment Loss. Cost incLudes direct costs,
reLated pre-operationaL expenses and for qualifying
assets appLicabLe borrowing costs to be capitaLised
in accordance with the Company’s accounting poLicy.
Administrative, generaL overheads and other indirect
expenditure (including borrowing costs) incurred during
the project period which are not directLy reLated to the
project nor are incidental thereto, are expensed.
Property, pLant and equipment which are not ready
for intended use as on the date of BaLance Sheet
are discLosed as “CapitaL work-in-progress”. They are
classified to the appropriate categories of property, pLant
and equipment when completed and ready for intended
use. Depreciation of these assets, on the same basis as
other items of PPE, commences when the assets are
ready for their intended use.
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 the Statement of Profit and Loss.
The Company identifies and determines cost of each
component/part of the pLant and equipment separately,
if the component/part has a cost which is significant to
the totaL cost of the pLant and equipment and has usefuL
Life that is materiaLLy different from that of the remaining
pLant and equipment.
Machinery spares which meets the criteria of PPE is
capitalized and depreciated over the usefuL Life of the
respective asset.
On transition to Ind AS:
Under the Previous GAAP, aLL property, pLant and
equipment were carried at in the BaLance Sheet on
basis of historicaL cost. In accordance with provisions
of Ind AS 101 First time adoption of Indian Accounting
Standards, the Company, for certain properties, has
eLected to adopt fair vaLue and recognized as of ApriL
1, 2016 as the deemed cost as of the transition
date. The resulting adjustments have been directLy
recognized in retained earnings. The baLance assets have
been recomputed as per the requirements of Ind AS
retrospectiveLy as appLicabLe.
Depreciation:
Depreciation on Property, PLant & Equipment (other than
freehoLd Land and capitaL work in progress) is provided
on the straight Line method, based on their respective
estimate of usefuL Lives, as given beLow. Estimated
usefuL Lives of assets are determined based on internaL
assessment estimated by the management of the
Company and supported by technical advice wherever
so required. The management beLieves that usefuL Lives
currently used, which is as prescribed under ScheduLe
II to the Companies Act, 2013, fairLy reflect its estimate
of the usefuL Lives and residuaL vaLues of Property, PLant
& Equipment (considered at 5% of the originaL cost),
though these Lives in certain cases are different from
Lives prescribed under ScheduLe II.
*Based on internal, technical evaluation and externaL
advise received, the management beLieves that the
usefuL Lives as considered for arriving at the depreciation
rates, best represent the period over which management
expect 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.
Assets individuaLLy costing ' 5000 or less are fuLLy
depreciated in the year of acquisition.
Depreciation of an asset begins when it is available
for use, i.e., when it is in the location and condition
necessary for it to be capable of operating in the manner
intended by management. Depreciation of an asset
ceases at the earlier of the date that the asset is retired
from active use and is held for disposal and the date
that the asset is derecognised.
Depreciation methods, useful lives and residual values
are reviewed periodically including at the end of each
financial year. Any changes in depreciation method,
useful lives and residual values are treated as a
change in accounting estimate and appLied/adjusted
prospectively, if appropriate.
Measurement of Fair Value:
a) Fair value hierarchy:
The fair value of freehold and leasehold land has been
determined by external, independent property valuers,
having appropriate recognised professional qualifications
and experience in the category of the property
being valued. The fair value measurement has been
categorised as level 2 fair value based on the inputs to
the valuations technique used.
b) Valuation technique:
Value of the property has been arrived at using market
approach using market corroborated inputs. Adjustments
have been made for factors specific to the assets valued
including location and condition of the assets, the extent
to which input relate to items that are comparable to
the assets and the volume or the level of activity in the
markets within which the inputs are observed.
2.5 Intangible assets
Identifiable intangible assets are recognised when the
Company controls the asset, it is probable that future
economic benefits attributed to the asset wiLL flow to
the Company and the cost of the asset can be reliably
measured.
At initial recognition, the separately acquired intangible
assets with finite useful lives are recognised at cost of
acquisition. FoLLowing initial recognition, the intangible
assets are carried at cost less any accumulated
amortisation and accumulated impairment losses, if any.
Intangible assets not ready for the intended use on the
date of the balance sheet are disclosed as ‘intangible
assets under development".
Intangible assets are derecognised (eliminated from the
balance sheet) on disposal or when no future economic
benefits are expected from its use and subsequent
disposal.
Gains or losses arising from the retirement or disposal
of an intangible asset are determined as the difference
between the net disposal proceeds and the carrying
amount of the asset are recognised as income or
expense in the statement of profit and Loss.
Deemed cost on transition to Ind AS:
Under the Previous GAAP, aLL IntangibLe assets were
carried at in the Balance Sheet on basis of historical
cost. The Company has elected to continue with the
carrying value of all of its intangible assets recognised
as of April 1, 2016 (the transition date) measured as per
the previous GAAP and use such carrying vaLue as its
deemed cost as of the transition date.
Amortisation:
IntangibLe assets are amortised on a straight Line basis
over the estimated usefuL Lives of respective assets
from the date when the asset are avaiLabLe for use, on
pro-rata basis. Estimated usefuL Lives by major cLass of
finite-Life intangibLe assets are as foLLows:
The amortisation period and the amortisation method for
finite-Life intangibLe assets is reviewed at each financial
year end. Changes in the expected usefuL Life or the
expected pattern of consumption of future economic
benefits embodied in the asset are considered to modify
the amortisation period or method, as appropriate, and
are treated as changes in accounting estimates and
adjusted prospectiveLy.
2.6 Research and development expenditure
Research expenditure is charged to the Statement of
profit and loss. Development costs of products are also
charged to the Statement of Profit and Loss unLess a
product’s technical feasibility has been established,
in which case such expenditure is capitalised as an
intangibLe asset under development. TangibLe assets
used in research and development are capitalised
under respective heads. These development costs are
amortised over the estimated usefuL Life of the projects
or the products they are incorporated within. The
amortisation of capitaLised development costs begins as
soon as the reLated product is reLeased to production.
2.7 Financial Instruments
Financial Assets:
Initial recognition and measurement:
Financial assets are recognised when the Company
becomes a party to the contractual provisions of the
instrument.
On initial, recognition, a financial, asset is recognised at
fair vaLue, except for trade receivabLes which are initially
measured at transaction price. In case of financial
assets which are recognised at fair vaLue through profit
and Loss (FVTPL), its transaction costs are recognised
in the statement of profit and Loss. In other cases, the
transaction costs are added to or deducted from the fail
vaLue of the financiaL assets.
Financial assets are subsequently
classified and measured at
- amortised cost (if it is heLd within a business model
whose objective is to hoLd the asset 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)"
- fair vaLue through profit and Loss (FVTPL)
- fair vaLue through other comprehensive income
(FVOCI).
Equity Instruments:
ALL investments in equity instruments in scope of Ind
AS 109 cLassified under financiaL assets are initiaLLy
measured at fair vaLue.
Investments in equity instruments of subsidiary -
Investments in equity instruments of subsidiary are
carried at cost Less impairment Losses if any. Where an
indication of impairment exists, the carrying amount
of the investment is assessed and written down
immediateLy to its recoverabLe amount. On disposaL of
investments in subsidiaries, the difference between net
disposaL proceeds and carrying amounts are recognised
in the Statement of Profit & Loss.
If the equity investment is not heLd for trading, the
Company may, on initiaL recognition, irrevocabLy eLect
to measure the same either at FVOCI or FVTPL. The
Company makes such eLection on an instrument-by¬
instrument basis. Equity Instruments which are heLd for
trading are cLassified as measured at FVTPL.
Fair vaLue changes on an equity instrument is recognisec
as other income in the Statement of Profit and Loss
unLess the Company has eLected to measure such
instrument at FVOCI. Fair vaLue changes excLuding
dividends, on an equity instrument measured at FVOCI
are recognized in OCI. Amounts recognised in OCI are
not subsequentLy recLassified to the Statement of Profit
and Loss. Dividend income on the investments in equity
instruments are recognised as ‘other income’ in the
Statement of Profit and Loss.
The Company does not have any equity investments
designated at FVOCI.
On disposaL of the investment, the difference between
the net disposaL proceeds and the carrying amount is
charged or credited to the statement of profit & Loss
Investments in Mutual fund
Investments in MutuaL funds are measured at fair vaLue
through profit and Loss (FVTPL).
Derivative financial instruments:
The Company uses derivative financiaL instruments,
such as forward currency contracts and currency option
contracts to mitigate its foreign currency risks and
interest rate risks. Such derivative financiaL instruments
are recorded at fair vaLue. Derivatives are carried as
financiaL assets when the fair vaLue is positive and as
financiaL LiabiLities when the fair vaLue is negative.
The purchase contracts that meet the definition of
a derivative under Ind AS 109 are recognised in the
statement of profit and Loss.
Any gains or Losses arising from changes in the fair vaLue
of derivatives are taken directLy to statement of profit or
Loss.
Derecognition:
The Company derecognises a financiaL asset when the
contractuaL rights to the cash flows from the financiaL
asset expire, or it transfers the contractuaL rights to
receive the cash flows from the asset.
Impairment of Financial Asset:
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 or contract revenue receivabLes.
SimpLified approach does not require the Company
to track changes in credit risk. Rather, it recognizes
impairment Loss aLLowance based on Lifetime ECL at
each reporting date, right from its initiaL recognition.
This invoLves use of provision matrix constructed on the
basis of historicaL credit Loss experience and adjusted
for forward Looking information. The expected credit Loss
aLLowance is based on the ageing of the receivabLes that
are due and the rates used in the provision matrix.
For recognition of impairment Loss on other financiaL
assets and risk exposure, the Company determines that
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.
The Company measures the expected credit Loss
associated with its assets based on historical trend,
industry practices and the business environment in
which the entity operates or any other appropriate
basis. The impairment methodology applied depends on
whether there has been a significant increase in credit
risk.
ECL impairment Loss aLLowance (or reversal) recognised
during the period is recognised as income/expense in the
Statement of Profit and Loss.
Financial Liabilities and equity
instruments:
Classification as debt or equity
Debt and equity instruments issued by the Company
are cLassified as either financiaL LiabiLities or as equity
in accordance with the substance of the contractuaL
arrangements and the definitions of a financiaL LiabiLity
and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a
residual interest in the assets of an entity after deducting
aLL of its liabilities. Equity instruments issued by the
Company are recognised at the proceeds received, net o
direct issue costs.
Financial liabilities
Initial recognition and measurement:
Financial liabilities are recognised when the Company
becomes a party to the contractual provisions of the
instrument.
Financial liabilities are classified, at initial recognition,
as financial liabilities at fair value through profit or
Loss, loans and borrowings, payables, or as derivatives
designated as hedging instruments in an effective hedge
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.
The fair vaLue of a financiaL instrument at initiaL
recognition is normaLLy the transaction price. If the
Company determines that the fair vaLue at initial
recognition differs from the transaction price, difference
between the fair vaLue at initiaL recognition and the
transaction price shaLL be recognized as gain or Loss
unLess it qualifies for recognition as an asset or LiabiLity.
This normaLLy depends on the relationship between
the Lender and borrower or the reason for providing
the Loan. Accordingly in case of interest-free Loan from
promoters to the Company, the difference between the
Loan amount and its fair vaLue is treated as an equity
contribution to the Company.
In accordance with Ind AS 113, the fair vaLue of a
financiaL LiabiLity with a demand feature is not Less than
the amount payabLe on demand, discounted from the
first date that the amount couLd be required to be paid.
The Company’s financiaL Liabilities incLude trade and
other payabLes and Loans and borrowings including bank
overdrafts.
Subsequent measurement
The measurement of financiaL Liabilities depends on their
classification, as described beLow:
Loans and borrowings
After initiaL recognition, interest-bearing Loans and
borrowings are subsequentLy measured at amortised
cost using the EIR method. Gains and Losses are
recognised in profit or Loss when the LiabiLities are
derecognised as weLL as through the EIR amortisation
process.
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, unLess and to the extent capitaLised as part of
costs of an asset.
The effective interest method is a method of caLcuLating
the amortised cost of a financiaL LiabiLity and of aLLocating
interest expense over the reLevant period. The effective
interest rate is the rate that exactLy discounts estimated
future cash payments (incLuding aLL fees and points paid
or received that form an integraL part of the effective
interest rate, transaction costs and other premiums
or discounts) through the expected Life of the financiaL
LiabiLity, or (where appropriate) a shorter period, to the
net carrying amount on initiaL recognition.
Trade and other payables
For trade and other payabLes maturing within one year
from the baLance sheet date, the carrying amounts
approximate fair vaLue due to the short maturity of these
instruments.
Derecognition
A financiaL LiabiLity is derecognised 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 in the
respective carrying amounts is recognised in the
statement of profit or Loss.
Off setting of Financial Instruments
FinanciaL assets and financiaL LiabiLities are offset and
the net amount is reported in the BaLance Sheet if
there is currentLy enforceabLe LegaL right to offset the
recognised amount and there is an intention to settLe on
a net basis, to reaLise the assets and settLe the LiabiLities
simultaneously.
2.8 Impairment of Non-financial assets
The carrying amounts of non-financiaL assets other
than inventories are assessed at each reporting date to
ascertain whether there is any indication of impairment.
If any such indication exists then the asset’s recoverable
amount is estimated. An impairment Loss is recognised,
as an expense in the Statement of Profit and Loss,
for the amount by which the asset’s carrying amount
exceeds its recoverable amount. The recoverable
amount is the higher of an asset’s fair vaLue Less cost
to seLL and vaLue in use. VaLue in use is ascertained
through discounting of the estimated future cash flows
using a discount rate that reflects the current market
assessments of the time vaLue of money and the risk
specific to the assets. For the purpose of assessing
impairment, assets are grouped at the Lowest LeveLs
into cash generating units for which there are separateLy
identifiabLe cash flows.
Impairment Losses recognised in prior years are reversed
when there is an indication that the impairment Losses
recognised no Longer exist or have decreased. Such
reversaLs are recognised as an increase in carrying
amounts of assets to the extent that it does not exceed
the carrying amounts that wouLd have been determined
(net of amortization or depreciation) had no impairment
Loss been recognised in previous years.
2.9 Borrowing costs
Borrowing costs comprises interest expense on
borrowings caLcuLated using the effective interest
method and exchange differences arising from foreign
currency borrowings to the extent that they are regarded
as an adjustment to interest costs.
The effective interest method is a method of caLcuLating
the amortised cost of a financiaL asset or a financiaL
LiabiLity and of aLLocating the interest income or interest
expense over the reLevant period.
The effective interest rate (EIR) is the rate that exactLy
discounts estimated future cash payments or receipts
through the expected Life of the financiaL instrument or,
when appropriate, a shorter period to the net carrying
amount of the financiaL asset or financiaL LiabiLity. EIR
caLcuLation does not incLude exchange differences.
Borrowing costs that are directLy attributabLe to the
acquisition, construction or production of a quaLifying
asset, which are assets that necessariLy take a
substantiaL period of time considering project as a whoLe
to get ready for their intended use or saLe, are incLuded
in the cost of those assets. Such borrowing costs are
capitaLised as part of the cost of the asset when it is
probabLe that they wiLL resuLt in future economic benefits
to the entity and the costs can be measured reLiabLy.
Other borrowing costs are recognised as an expense in
the period in which they are incurred.
The CapitaLisation of borrowing costs as part of the cost
of a quaLifying asset commences when expenditure for
the asset is being incurred, borrowing costs are being
incurred and activities that are necessary to prepare the
asset for its intended use or saLe are in progress.
CapitaLisation of borrowing costs is suspended or ceases
when substantiaLLy aLL the activities necessary to prepare
the quaLifying asset for its intended use or saLe are
interrupted or compLeted.
Investment income earned on the temporary investment
of specific borrowings pending their expenditure on
quaLifying assets is deducted from the borrowing costs
eLigibLe for CapitaLisation.
2.10 Foreign currency transactions
The financiaL statements are presented in Indian Rupees
('), the functionaL currency of the Company. Items
incLuded in the financiaL statements of the Company are
recorded using the currency of the primary economic
environment in which the Company operates (the
‘functionaL currency’).
Foreign currency transactions are transLated into the
functionaL currency using exchange rates at the date of
the transaction. Foreign exchange gains and Losses from
settlement of these transactions, and from transLation
of monetary assets and LiabiLities at the reporting date
exchange rates are recognised in the Statement of Profit
and Loss.
Non-monetary assets and LiabiLities denominated in a
foreign currency and measured at historicaL cost are
transLated at the exchange rate prevaLent at the date of
transaction.
Under Previous GAAP, the Company had opted for
paragraph 46A of Accounting Standard for 'Effect of
Changes in Foreign Exchange Rates' (AS 11) which
provided an aLternative accounting treatment whereby
exchange differences arising on Long term foreign
currency monetary items reLating to depreciabLe capitaL
asset can be added to or deducted from the cost of the
asset and shouLd be depreciated over the baLance Life of
the asset.
Ind AS 101 incLudes an optionaL exemption that aLLows
a first-time adopter to continue the above accounting
treatment in respect of the Long-term foreign currency
monetary items recognised in the financiaL statements
for the period ending immediateLy before the beginning
of the first Ind AS financiaL reporting period as per the
previous GAAP. The Company has eLected to avaiL this
optionaL exemption. However, the capitaLization of
exchange differences is not aLLowed on any new Long
term foreign currency monetary item recognized from
the first Ind AS financiaL reporting period.
2.11 Leases
The determination of whether an arrangement is
(or contains) a Lease is based on the substance of
the arrangement at the inception of the Lease. The
arrangement is, or contains, a Lease if fuLfiLment of the
arrangement is dependent on the use of a specific asset
or assets and the arrangement conveys a right to use
the asset or assets, even if that right is not expLicitLy
specified in an arrangement.
Company as a lessee
The Company’s Lease asset cLasses primariLy consist of
Leases for Land & office building. 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.
The Company recognises a right-of-use asset and a
Lease LiabiLity at the Lease commencement date. The
right-of-use asset 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 or the site on which it is Located, Less any Lease
incentives received.
The right-of-use asset is subsequentLy depreciated using
the straight-Line method from the commencement date
to the earLier of the end of the usefuL Life of the right-of-
use asset or the end of the Lease term. The estimated
usefuL Lives of right-of-use assets are determined on the
same basis as those of property, pLant and equipment.
In addition, the right-of-use asset is periodicaLLy reduced
by impairment Losses, if any, and adjusted for certain re¬
measurements of the Lease LiabiLity.
The Lease LiabiLity is initiaLLy measured at the present
vaLue of the Lease payments that are not paid at the
commencement date, discounted using the interest
rate impLicit in the Lease or, if that rate cannot be readiLy
determined, Company’s incrementaL borrowing rate.
GeneraLLy, the Company uses its incrementaL borrowing
rate as the discount rate.
Lease payments incLuded in the measurement of the
Lease LiabiLity comprise the foLLowing:
- Fixed payments, incLuding in-substance fixed
payments;
- VariabLe Lease payments that depend on an index or
a rate, initiaLLy measured using the index or rate as
at the commencement date;
- Amounts expected to be payabLe under a residuaL
vaLue guarantee; and
- The exercise price under a purchase option that
the Company is reasonabLy certain to exercise,
Lease payments in an optionaL renewaL period if
the Company is reasonabLy certain to exercise an
extension option, and penaLties for earLy termination
of a Lease unLess the Company is reasonabLy certain
not to terminate earLy.
The Lease LiabiLity is subsequentLy remeasured by
increasing the carrying amount to reflect interest on
the Lease LiabiLity, reducing the carrying amount to
reflect the Lease payments made and remeasuring the
carrying amount to reflect any reassessment or Lease
modifications or to reflect revised in-substance fixed
Lease payments. The Company recognises the amount of
the re-measurement of Lease LiabiLity due to modification
as an adjustment to the right-of-use asset and
statement of profit and Loss depending upon the nature
of modification. Where the carrying amount of the right-
of-use asset is reduced to zero and there is a further
reduction in the measurement of the Lease LiabiLity, the
Company recognises any remaining amount of the re¬
measurement in the statement of profit and Loss.
The Company presents right-of-use assets and Lease
LiabiLities separateLy in baLance sheet.
Short-term leases and leases of low-
value assets
The Company has eLected not to recognise right-of-use
assets and Lease LiabiLities for short term Leases that
have a Lease term of 12 months or Less and Low vaLue
Leases. The Company recognises the Lease payments
associated with these Leases as an expense on a
straight-Line basis over the Lease term.
2.12 Inventories
Inventories are vaLued at the Lower of cost and net
reaLisabLe vaLue.
Costs incurred in bringing each product
to its present location and condition,
are accounted for as follows:
- Raw materiaLs, stores and spares: cost incLudes cost
of purchase (viz. the purchase price, import duties and
other taxes (other than those subsequentLy recoverabLe
by the entity from the taxing authorities), and transport,
handLing and other costs directLy attributabLe to the
acquisition and is net of trade discounts, rebates and
other simiLar items) and other costs incurred in bringing
the inventories to their present Location and condition.
Cost is determined on Moving Weighted Average Method.
- MateriaLs and other suppLies heLd for use in the
production of inventories are not written down
beLow cost if the finished products in which they
wiLL be incorporated are expected to be soLd at or
above cost.
- Spare parts, which do not meet the definition of
property, pLant and equipment are cLassified as
inventory.
- Finished goods and work in progress: cost incLudes
cost of direct materiaLs and Labour and a proportion
of manufacturing overheads based on the normaL
operating capacity, but excLuding borrowing costs.
- Traded goods: cost incLudes cost of purchase and
other costs incurred in bringing the inventories
to their present Location and condition. Cost is
determined on first in first out basis.
Net reaLisabLe vaLue is the estimated selling price in the
ordinary course of business, Less estimated costs of
completion and the estimated costs necessary to make
the sale.
Obsolete, sLow moving and defective inventories are
identified from time to time and, where necessary, a
provision is made for such inventories.
2.13 Employee benefits
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,
wages, sociaL security contributions, short term
compensated absences (paid annuaL Leaves) etc. are
measured on an undiscounted basis at the amounts
expected to be paid when the Liabilities are settLed
and are expensed in the period in which the empLoyee
renders the reLated service.
Post-employment benefits:
i) Defined contribution plan
The defined contribution pLan is post employment
benefit pLan under which the Company contributes
fixed contribution to a government administered fund
and wiLL have no obLigation to pay further contribution.
The Company’s defined contribution pLan comprises
of Provident Fund, EmpLoyee State Insurance Scheme
and Labour WeLfare Fund. The Company’s contribution
to defined contribution pLans are recognized in the
Statement of Profit and Loss in the period in which
empLoyee renders the reLated service.
ii) Defined benefit plan
The Company’s obLigation towards gratuity LiabiLity is a
"defined benefit" obLigation. The present vaLue of the
defined benefit obLigations is determined on the basis
of actuariaL vaLuation using the projected unit credit
method. The rate used to discount "defined benefit
obLigation" is determined by reference to market yieLds at
the BaLance Sheet date on Indian Government Bonds for
the estimated term of obLigations.
The amount recognised as ‘EmpLoyee benefit expenses’
in the Statement of Profit and Loss is the cost of
accruing empLoyee benefits promised to empLoyees over
the current year and the costs of individuaL events such
as past/future service benefit changes and settlements
(such events are recognised immediateLy in the
Statement of Profit and Loss).
The amount of net interest expense, caLcuLated by
appLying the Liability discount rate to the net defined
benefit LiabiLity or asset, is charged or credited to
‘Finance costs’ in the Statement of Profit and Loss.
Re-measurement of net defined benefit LiabiLity/asset
pertaining to gratuity comprise of actuariaL gains/Losses
(i.e. changes in the present vaLue of the defined benefit
obLigation resuLting from experience adjustments and
effects of changes in actuariaL assumptions), the return
on pLan assets (excLuding interest) and the effect of the
asset ceiLing (if any, excLuding interest) and is recognised
immediateLy in the baLance sheet with a charge or
credit recognised in other comprehensive income in
the period in which they occur. Re-measurements are
not recLassified to profit or Loss account in subsequent
periods.
Other long-term employee benefit
obligations:
The LiabiLities for earned Leave that are not expected to
be settLed whoLLy within 12 months are measured as
the present vaLue of expected future payments to be
made in respect of services provided by empLoyees up
to the end of the reporting period using the projected
unit credit method. The benefits are discounted using
the market yieLds at the end of the reporting period that
have terms approximating to the terms of the reLated
obLigation. Remeasurements as a resuLt of experience
adjustments and changes in actuariaL assumptions
are recognised in the Statement of Profit and Loss.
AccumuLated Leave, which is expected to be utiLized
within the next 12 months, is treated as short term
empLoyee benefit.
2.14 Share-Based Payments:
EmpLoyees of the Company receive remuneration in the
form of share based payments in consideration of the
services rendered (equity settLed transactions).
Under the equity settLed share based payment, the
fair vaLue on the grant date of the awards given to
empLoyees is recognised as ‘empLoyee benefit expense’
with a corresponding increase in equity over the vesting
period. The fair vaLue of the options on the grant date is
caLcuLated using an appropriate vaLuation modeL.
The totaL expense is recognised over the vesting period,
which is the period over which aLL of the specified
vesting conditions are to be satisfied. At the end of each
period, the entity revises its estimates of the number of
options that are expected to vest based on the non¬
market vesting and service conditions. It recognises the
impact of the revision to originaL estimates, if any, in
profit or Loss, with a corresponding adjustment to equity.
An additionaL expense is recognised for any modification
that increases the totaL fair vaLue of the shares based
payments transactions, or is otherwise beneficiaL to the
empLoyee as measured at the date of modification.
The diLutive effect of outstanding options is reflected as
additionaL share diLution in the computation of diLuted
earnings per share. When the options are exercised, the
Company issues fresh equity shares.
2.15 Government Grant:
Government grants are recognised onLy when there is
reasonabLe assurance that the Company wiLL compLy
with the conditions attaching to them and the grants wiLL
be received.
Government grants are recognised in profit or Loss on a
systematic basis over the periods in which the Company
recognises as expenses the reLated costs for which the
grants are intended to compensate.
Accordingly, government grants:
a) related to or used for assets are incLuded in the
Balance Sheet as deferred income and recognised
as income in profit or Loss on a systematic basis
over the usefuL Life of the assets.
b) reLated to an expense item is recognised in the
statement of profit and Loss on a systematic basis
over the periods that the reLated costs, for which
it is intended to compensate, are expensed and
presented as deduction from the reLated/reLevant
expense.
In the unLikeLy event that a grant previousLy recognised
is uLtimateLy not received, it is treated as a change in
estimate and the amount cumuLativeLy recognised is
expensed in the Statement of Profit and Loss.
Export benefits avaiLabLe under prevaLent schemes are
accrued in the year in which the goods are exported and
there is no uncertainty in receiving the same.
2.16 Taxation
Tax expense comprises of current and deferred 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 income tax:
Tax on income for the current period is determined on
the basis of taxabLe income (or on the basis of book
profits wherever minimum aLternate tax is appLicabLe)
and tax credits computed in accordance with the
provisions of the Income Tax Act 1961, and based on the
expected outcome of assessments/appeaLs.
Current income tax assets and Liabilities are 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 in the
countries where the Company operates and generates
taxabLe income.
Current income tax reLating to items recognised, either in
other comprehensive income or directLy in equity, is aLso
recognized in other comprehensive income or in equity,
as appropriate and not in the Statement of Profit and
Loss. 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 current tax LiabiLities are offset
when there is a LegaLLy enforceabLe right to set off the
recognized amounts and there is an intention to settLe
the asset and the LiabiLity on a net basis.
Deferred tax:
Deferred tax is provided using the LiabiLity method on
temporary differences between the tax basis of assets
and LiabiLities and their carrying amounts for financiaL
reporting purposes at the reporting date.
Deferred tax liabilities are recognised for aLL taxabLe
temporary differences, except:
- When the deferred tax LiabiLity arises from the initiaL
recognition of goodwiLL or an asset or LiabiLity in a
transaction that is not a business combination and,
at the time of the transaction, affects neither the
accounting profit nor taxabLe profit or Loss
- In respect of taxabLe temporary differences
associated with investments in subsidiaries,
associates and interests in joint arrangements,
when the timing of the reversaL of the temporary
differences can be controLLed and it is probabLe that
the temporary differences wiLL not reverse in the
foreseeabLe future
Deferred tax assets are recognised for aLL deductibLe
temporary differences, the carry forward of unused
tax credits and any unused tax Losses unabsorbed tax
depreciation. Deferred tax assets are recognised to
the extent that it is probabLe that taxabLe profit wiLL
be avaiLabLe against which the deductibLe temporary
differences, and the carry forward of unused tax credits
and unused tax Losses can be utiLised, except:
- When the deferred tax asset reLating to the
deductibLe temporary difference arises from
the initiaL recognition of an asset or LiabiLity in a
transaction that is not a business combination and,
at the time of the transaction, affects neither the
accounting profit nor taxabLe profit or Loss
- In respect of deductibLe temporary differences
associated with investments in subsidiaries,
associates and interests in joint arrangements,
deferred tax assets are recognised onLy to the
extent that it is probabLe that the temporary
differences wiLL reverse in the foreseeabLe future
and taxabLe profit wiLL be avaiLabLe against which the
temporary differences can be utiLized
The carrying amount of deferred tax assets is reviewed
at each reporting date and reduced to the extent that it
is no Longer probabLe that sufficient taxabLe profit wiLL
be avaiLabLe to aLLow aLL or part of the deferred tax asset
to be utiLised. Unrecognised deferred tax assets are
re-assessed at each reporting date and are recognised
to the extent that it has become probabLe that future
taxabLe profits wiLL aLLow the deferred tax asset to be
recovered.
Deferred tax assets and LiabiLities are measured at the
tax rates that are expected to appLy in the year when
the asset is reaLised or the LiabiLity is settLed, based
on tax rates (and tax Laws) that have been enacted or
substantiveLy enacted at the reporting date.
Deferred tax reLating to items recognised outside profit
or Loss is recognised outside profit or Loss. Deferred tax
items are recognised in correLation to the underLying
transaction either in OCI or directLy in equity.
Deferred tax assets and deferred tax LiabiLities are offset
if a LegaLLy enforceabLe right exists to set off current tax
assets against current tax LiabiLities and the deferred
taxes reLate to the same taxabLe entity and the same
taxation authority.
Deferred Tax Assets incLude Minimum Alternative Tax
(MAT) paid in accordance with the tax Laws in India,
which is LikeLy to give future economic benefits in the
form of avaiLabiLity of set off against future income tax
LiabiLity. AccordingLy, MAT is recognised as deferred
tax assets in the BaLance sheet when the asset can
be measured reLiabLy and it is probabLe that the future
economic benefit associated with the asset wiLL be
reaLised.
Uncertain Tax Issue:
The Company determines whether to consider each
uncertain tax treatment separateLy or together with
one or more other uncertain tax treatments and uses
the approach that better predicts the resoLution of the
uncertainty. In determining the approach that predicts
the resoLution of the uncertainty, the Company has
considered most LikeLy amount method & expected vaLue
method. Company adopted most LikeLy amount method
for resoLution of the uncertainty of its tax treatment. The
Company determined, based on its tax compLiance that
it is probabLe that its tax treatment wiLL be accepted by
taxation authorities.
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