2. SIGNIFICANT ACCOUNTING POLICIES .
The company has applied following accounting policies to all periods presented in the Ind AS
Financial Statement.
a) Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable, net of
discounts, volume rebates, outgoing sates taxes and other indirect taxes excluding excise
duty.
Dividend Income is recognized when the right to receive payment is established.
Interest Income is recognized on time basis using the effective interest method.
b) Property, Plant and Equipment ,
i. Property, Plant and Equipment
The Company has applied Ind AS 16 with prospective effect for all of its property, plant and
equipment as at the transition date, viz., April 1, 2016.
The initial cost of property, plant and equipment comprises its purchase price, including
import duties and non-refundable purchase taxes, attributable borrowing cost and any
other directly attributable costs of bringing an asset to working condition and location for
its intended use.
Expenditure incurred after the property, plant and equipment have been put into
operation, such as repairs and maintenance, are normally charged to the statements of
profit and loss in the period in which the costs are incurred. Major inspection and overhaul
expenditure is capitalized if the recognition criteria are met.
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 recognized in the carrying amount of the plant
and equipment as a replacement if the recognition criteria are satisfied. All other repair
and maintenance costs are recognized in the statement of profit and loss as incurred.
Gains and losses on disposal of an item of property, plant and equipment are determined
by comparing the proceeds from disposal with the carrying amount of property, plant and
equipment, and are recognized net within other income/other expenses in statement of
profit and loss.
An item of property, plant and equipment and any significant part initially recognized is
derecognized upon disposal or when no future economic benefits are expected from its
use or disposal. Any gain or loss arising on Derecognition 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 profit and loss, when the asset is Derecognized.
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.
ii. Depreciation
Property, plant and equipment are stated at cost less accumulated depreciation and any
provision for impairment. Depreciation commences when the assets are ready for their
intended use.
Depreciation is calculated on the depreciable amount, which is the cost of an asset less its
residual value. Depreciation is provided at rates calculated to write off the cost, less
estimated residual value, of each asset on a written down value basis.
Depreciation methods, useful lives and residual values are reviewed at each financial year
end and changes in estimates, if any, are accounted for prospectively.
However, the value of fixed assets as on the balance sheet date is insignificant and fixed
assets are carried at its residual value and no depreciation is provided during the year.
c) Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a
financial liability or equity instrument of another entity.
Financial Assets .
Initial recognition and measurement
All financial assets are recognized initially at fair value plus, in the case of financial assets not
recorded at fair value through statement of profit and loss, transaction costs that are
attributable to the acquisition of the financial asset. Purchases or sales of financial assets
that require delivery of assets within a time frame established by regulation or convention in
the market place (regular way trades) are recognized on the trade date, i.e,, the date that
the Company commits to purchase or sell the asset.
Subsequent Measurement
Subsequent measurement of financial assets is described below -
After initial measurement, such financial assets are subsequently measured at amortized
cost using the effective interest rate (EIR) method. Amortized cost is calculated by taking
into account any discount or premium on acquisition and tees or costs that are an integral ,
part of the EIR. The EIR amortization is included in finance income in the statement of profit
and loss. The losses arising from impairment are recognized in the statement of profit and
loss. This category generally applies to trade and other receivables.
However, reporting entity does not have such financial assets to be measured at amortized
cost using EIR method.
Financial Assets - Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar
financial assets) is primarily derecognized (i.e. removed from the Company's balance sheet)
when:
• The rights to receive cash flows from the asset have expired, or
• The Company has transferred its rights to receive cash flows from the asset or has
assumed an obligation to pay the received cash flows in full without material delay
to a third party under a 'pass-through' arrangement; and either ,
(a) the Company has transferred substantially all the risks and rewards of
the asset, or .
(b) the Company has neither transferred nor retained substantially all the
risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has
entered into a pass-through arrangement, it evaluates if and to what extent it has retained
the risks and rewards of ownership. When it has neither transferred nor retained
substantially all of the risks and rewards of the asset, nor transferred control of the asset,
the Company continues to recognize the transferred asset to the extent of the Company's
continuing involvement. In that case, the Company also recognizes an associated liability.
The transferred asset and the associated liability are measured on a basis that reflects the
rights and obligations that the Company has retained
Impairment of financial assets
In accordance with lnd AS 109, the Company applies expected credit loss (ECL) model for
measurement and recognition of impairment loss on the financial assets that are debt
instruments, and are measured at amortized cost e.g., loans, debt securities, deposits and
trade receivables or any contractual right to receive cash or another financial asset that
result from transactions that are within the scope of lnd AS 18.
The Company follows 'simplified approach’ for recognition of impairment loss allowance on .
trade receivables. The application of simplified approach does not require the Company to
track changes in credit risk. Rather, it recognizes impairment loss allowance based on
lifetime ECLs at each reporting dale, right from its initial recognition.
Financial liabilities - Recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value
through statement of profit and loss, loans and borrowings, payables, or as derivatives
designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognized initially at fair value and, in the case of loans and
borrowings and payables, net of directly attributable transaction costs.
The Company's financial liabilities include trade and other payables, loans and borrowings.
The measurement of financial liabilities depends on their classification, as described below: .
•Financial liabilities at fair value through statement of profit and loss .
Financial liabilities at fair value through statement of profit and loss include financial
liabilities held for trading and financial liabilities designated upon initial recognition as at fair
value through statement of profit and loss. Financial liabilities are classified as held for
trading if they are incurred for the purpose of repurchasing in the near term.
•Loans and Borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured
at amortized cost using the effective interest rate (hereinafter referred as EIR) method.
Gains and tosses are recognized in statement of profit and loss when the liabilities are
derecognized as well as through the EIR amortization process.
Amortized 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 amortization is included as
finance costs in the statement of profit and loss.
Financial liabilities - Derecognition
A financial liability is de-recognized 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
differences, except when it is probable that the temporary differences will not reverse in the
foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences, the carry
forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized
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 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 utilized. Unrecognized deferred tax assets are
re-assessed at each reporting date and are recognized 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 realized 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 recognized outside profit or loss is recognized outside profit or
loss (either in other comprehensive income or in equity). Deferred tax items are recognized
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,
g) Employee Benefit Schemes
i. Short-term employee benefits
Employee benefits payable wholly within twelve months of receiving employee services are
classified as short-term employee benefits. These benefits include salaries and wages,
performance incentives and compensated absences which are expected to occur in next
twelve months. The undiscounted amount of short-term employee benefits to be paid in
exchange for employee services is recognized as an expense as the related service is
rendered by employees.
ii. Post-employment benefits
Defined benefit plans - Provident fund
Provisions of EPF are not applicable to the company as it does not fall under the implication
requirements of the act i.e. number of employees does not exceed the ceiling limit. Thus,
there is no contribution by the company towards post employment benefits.
h) Earnings Per Share
The Company presents basic and diluted earnings per share ("EPS") data for its equity
shares. Basic EPS is calculated by dividing the profit and loss attributable to equity
shareholders of the Company by the weighted average number of equity shares outstanding
during the period. Diluted EPS is determined by adjusting the profit and loss attributable to
equity shareholders and the weighted average number of equity shares outstanding for the
effects of all dilutive potential equity shares. .
i) Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting
provided to the chief operating decision-maker. Revenue and expenses are identified to
segments on the basis of their relationship to the operating activities of the segment. Inter
segment revenue are accounted for based on the cost price. Revenue, expenses, assets and
liabilities which are not allocable to segments on a reasonable basis, are included under
"Unallocated revenue/ expenses/ assets/ liabilities".
Company is operating in a single segment.
j) Cash Flow Statement '
Cash flows are reported using indirect method as set out in Ind AS -7 "Statement of Cash
Flows", whereby profit / (loss) before tax is adjusted for the effects of transactions of non¬
cash nature and any deferrals or accruals of past or future cash receipts or payments. The
cash flows from operating, investing and financing activities of the Company are segregated
based on the available information.
k) Use of Estimates and Judgments
The preparation of the financial statements in conformity with Ind AS requires management
to make judgments, estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities, income, expenses and disclosures of
contingent assets and liabilities at the date of these financial statements and the reported
amounts of revenues and expenses for the years presented. Actual results may differ from •
these estimates under different assumptions and conditions. •
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognized in the period in which the estimate is revised and
future periods affected.
l) Previous Year's Figures
Previous years' figures have been recast so as to make them comparable with current year's
figures.
m) Rounding Off
Figures are rounded off to the nearest lakhs.
18. Financial Instruments
Financial risk management objective and policies
This section gives an overview of the significance of financial instruments for the Company and
provides additional information on the balance sheet. Details of significant accounting policies,
including the criteria for recognition, the basis of measurement and the basis on which income and
expenses are recognized, in respect of each class of financial assets and financial liabilities are
disclosed in Note 2 (c) of accounting policies.
Fair Value Hierarchy
The table shown below analyses financial instruments carried at fair value, by valuation method. The
different levels have been defined below:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: 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 for the asset or liability that are not based on observable market data (unobservable
inputs)
The fair value of the financial assets and liabilities are included at the amount that would be received
to sell an asset and paid to transfer a liability in an orderly transaction between market participants.
The following methods and assumptions were used to estimate the fair values:
• Cash and Cash Equivalents, Other Current Assets and Trade Payables:- Approximate their
carrying amounts largely due to the short-term maturities of these instruments.
• Loans Current & Non-Current and Other Current Liabilities: All the amounts given/taken as
loans do not carry any interest obligation and it is not practicable to estimate the timing of
repayment of this loan. Thus, it is considered as repayable/receivable on demand and the face
value (i.e. amount payable on demand) of such asset is considered its fair value. .
19. Critical Estimates and Judgements in applying Accounting Policies:
The management believes that the estimates used in preparation of the financial statements are
prudent and reasonable. Information about estimates and judgments made in applying accounting
policies that have the most significant effect on the amounts recognized in the financial statements
are as follows:
i) Property, plant and equipment and useful life of property, plant and equipment and
intangible assets
The carrying value of property, plant and equipment is arrived at by depreciating the assets
over the useful life of assets. The estimate of useful life is reviewed at the end of each financial
year and changes are accounted for prospectively.
However, the value of fixed assets as on the balance sheet date is insignificant and fixed assets
are carried at its residual value.
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