Note 2 : Material Accounting Policies
1 Property , Plant and Equipment
(i) Recognition and Measurement :
Property, Plant and Equipment (PPE) are measured at
Original cost and are net of tax / duty credit availed less
accumulated depreciation and accumulated impairment
losses, if any. Historical cost includes expenditure that
is directly attributable to the acquisition of the items.
Advances paid towards the acquisition of PPE outstanding
at each reporting date are classified as capital advances
under Other Non-Current Assets and 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.
Capital expenditure on tangible assets for Research
and Development is classified under Property, Plant and
Equipment and is depreciated on the same basis as other
Property, Plant and Equipment.
Property, Plant and Equipment are eliminated from
financial statement on disposal and gains or losses
arising from disposal are recognised in the statement of
Profit and Loss in the year of occurrence.
Lease arrangements for land are identified as finance
lease, in case such arrangements result in transfer of the
related risks and rewards to the Company
The cost of the property, plant and equipment's at April
01, 2016, the company's date of transition to Ind AS, was
determined with reference to its carrying value at that date.
(ii) Subsequent expenditure :
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.
When Significant parts of Property, Plant and Equipment's
are required to be replaced, the Company derecognises
the replaced part and recognises the new part with its own
associated useful life and it is depreciated accordingly.
(iii) Depreciation :
Depreciation on property, plant and equipment other than
Improvements to Leasehold/Licensed Premises have
been provided on straight-line method and computed
with reference to the useful life of respective assets
specified and in the manner prescribed in Schedule II of
the Companies Act, 2013.
In case of additions/deductions to/from the property,
plant and equipment made during the year, depreciation
has been provided on pro-rata basis.
Leasehold land is amortized over primary lease period.
Improvements to Leasehold/Licensed Premises are
depreciated on a straight-line method over the Primary
Lease Period or over a period of 5 years whichever is less
starting from the date when the Leasehold/Licensed
Premises are put to use.
Useful life considered for calculation of depreciation
(Specified in Schedule II) for various assets class
are as follows:
The residual value is not more than 5% of the original
cost of the asset. Depreciation on additions / deletions
is calculated pro-rata from month of such additions
/ deletion as case the may be. Gains and losses on
disposals are determined by comparing proceeds with
carrying amount. These are included in Statement of
profit and loss.
2 Investment Properties
(i) Recognition and Measurement :
Investment Property comprise of Freehold
Land and Buildings.
Investment properties are measured initially at cost,
including transaction costs. Subsequent to initial
recognition, investment properties are stated at cost
less accumulated depreciation and accumulated
impairment loss, if any.
Investment properties are derecognised either when they
have been disposed off or when they are permanently
withdrawn from use and no future economic benefit is
expected from their disposal. The difference between
the net disposal proceeds and the carrying amount of the
asset is recognised in the Statement of Profit and Loss in
the period of derecognition.
The cost of the Investment properties at April 01, 2016, the
company's date of transition to Ind AS, was determined
with reference to its carrying value at that date.
(ii) Depreciation
Depreciation on Investment Property is provided, under
the Straight Line Method, pro rata to the period of use,
based on useful lives specified in Schedule II to the
Companies Act, 2013.
Useful life considered for calculation of depreciation
(Specified in Schedule II) for various assets class
are as follows:
The residual value is not more than 5% of the original
cost of the asset. Depreciation on additions / deletions is
calculated pro-rata from month of such additions / deletion
as case the may be. Gains and losses on disposals are
determined by comparing proceeds with carrying amount.
These are included in Statement of profit and loss.
3 Intangible Assets
(i) Recognition and measurement
Intangible assets are recognised when it is probable
that future economic benefits that are attributable to
concerned assets will flow to the Company and the cost
of the assets can be measured reliably.
Gain or loss arising from derecognition of an intangible
asset is recognised in the Statement of Profit and Loss.
(ii) Technical know-how developed by the Company-
Expenditure incurred on know-how developed by the
company, post research stage, is recognized as an
intangible asset, if and only if the future economic benefits
attributable are probable to flow to the Company and the
costs can be measured reliably.
(iii) Amortisation
Software's are stated at cost of acquisition and are
amortized on straight line basis over a period of 5 years
irrespective of the date of acquisition.
The cost of technical know-how developed is amortized
equally over its estimated life i.e. generally three years.
The cost of the Intangible Assets at April 01, 2016, the
company's date of transition to Ind AS, was determined
with reference to its carrying value at that date.
4 Impairment of non-financial assets
The carrying values of assets / cash generating units at each
balance sheet date are reviewed for impairment if any indication
of impairment exists.
If the carrying amount of the assets exceed the estimated
recoverable amount, impairment is recognized for such excess
amount. The impairment loss is recognized as an expense in
the Statement of Profit and Loss, unless the asset is carried
at revalued amount, in which case any impairment loss of
the revalued asset is treated as a revaluation decrease to the
extent a revaluation reserve is available for that asset.
When there is indication that an impairment loss recognized for an
asset in earlier accounting periods which no longer exists or may
have decreased, such reversal of impairment loss is recognized
in the Statement of Profit and Loss, to the extent the amount was
previously charged to the Statement of Profit and Loss.
5 Investments in Subsidiaries and Jointly Controlled
Entities
Investments in subsidiaries and jointly controlled entities are
carried at cost less accumulated impairment losses, if any as
per Ind As 27. 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, and jointly controlled entities the
difference between net disposal proceeds and the carrying
amounts are recognized in the Statement of Profit and Loss.
6 Inventories
(i) Raw Materials, Traded Goods, Stores & spares, Fuel,
Packing and Packaging Materials (Including in Transit) are
valued at cost or net realizable value whichever is lower.
The cost includes the purchase price, freight inwards and
other expenditure directly attributable to the acquisition
and is net of trade discounts and rebates as well as Tax
benefit available, if any.
(ii) Finished goods (including in Transit) are valued at cost
or net realizable value whichever is lower. Cost includes
appropriate allocation of overheads based on normal
operating capacity
(iii) Cost is arrived at on First-in-First-out basis in case of
Traded goods and on moving Weighted average basis in
case of other items of inventories.
7 Cash & Cash Equivalents
Cash and cash equivalents includes cash on hand , balances
with banks in current accounts, and cheques/drafts on hand.
8 Assets held for Sale
Non-current assets or disposal groups comprising of assets
and liabilities are classified as ‘held for sale' when all of the
following criteria's are met:
(i) decision has been made to sell;
(ii) the assets are available for immediate sale in its
present condition;
(iii) the assets are being actively marketed and
(iv) sale has been agreed or is expected to be concluded
within 12 months of the Balance Sheet date.
Subsequently, such non-current assets and disposal groups
classified as held for sale are measured at the lower of its
carrying value and fair value less costs to sell. Non-current
assets held for sale are not depreciated or amortised.
9 Financial Assets :
(i) 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, in case of Financial assets which are recognised at
fair value through profit and loss (FVTPL), its transaction
cost is recognised in the statement of profit and loss.
In other cases, the transaction cost is attributed to the
acquisition value of the financial asset.
(ii) Subsequent measurement
Financial assets are subsequently classified
and measured at
(i) Amortised Cost
(ii) fair Value through profit & Loss ( FVTPL)
(iii) fair Value through other
comprehensive income (FVOCI)
Financial assets are not reclassified subsequent to their
recognition, except if and in the period the Company
changes its business model for managing financial assets.
(iii) Trade Receivables and Loans
Trade receivables are initially recognised at fair value.
Subsequently, these assets are held at amortised cost,
using the effective interest rate (EIR) method net of any
expected credit losses. The EIR is the rate that discounts
estimated future cash income through the expected life
of financial instrument.
(iv) Debt Instruments
Debt instruments are initially measured at amortised
cost, fair value through other comprehensive income
(‘FVOCI') or fair value through profit or loss (‘FVTPL') till
derecognition on the basis of
(i) the Company's business model for managing the
financial assets and
(ii) the contractual cash flow characteristics of the
financial asset.
(a) Measured at amortised cost:
Financial assets that are held within a business
model whose objective is to hold financial assets
in order to collect contractual cash flows that
are solely payments of principal and interest, are
subsequently measured at amortised cost using
the effective interest rate (‘EIR') method less
impairment, if any. The amortisation of EIR and loss
arising from impairment, if any is recognised in the
Statement of Profit and Loss.
(b) Measured at fair value through other
comprehensive income:
Financial assets that are held within a business
model whose objective is achieved by both,
selling financial assets and collecting contractual
cash flows that are solely payments of principal
and interest, are subsequently measured at fair
value through other comprehensive income. Fair
value movements are recognized in the other
comprehensive income (OCI). Interest income
measured using the EIR method and impairment
losses, if any are recognised in the Statement of
Profit and Loss. On derecognition, cumulative gain
or loss previously recognised in OCI is reclassified
from the equity to ‘Other Income' in the Statement
of Profit and Loss.
(c) Measured at fair value through profit or loss:
A financial asset not classified as either amortised
cost or FVOCI, is classified as FVTPL. Such financial
assets are measured at fair value with all changes in
fair value, including interest income and dividend
income if any, recognised as ‘Other Income' in the
Statement of Profit and Loss.
(v) Equity Instruments and Mutual Fund
All investments in equity instruments classified under
financial assets are initially measured at fair value, 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. Fair value changes on an equity
instrument is recognised 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.
(vi) 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.
(vii) Impairment of Financial Asset
Expected credit losses are recognized for all debt
instruments subsequent to initial recognition other than
financials assets in FVTPL category.
For financial assets other than trade receivables, as per
Ind AS 109, the Company recognises 12 month expected
credit losses for all originated or acquired financial assets
if at the reporting date the credit risk of the financial asset
has not increased significantly since its initial recognition.
The expected credit losses are measured as lifetime
expected credit losses if the credit risk on financial asset
increases significantly since its initial recognition. The
Company's trade receivables do not contain significant
financing component and loss allowance on trade
receivables is measured at an amount equal to life time
expected losses i.e. expected cash shortfall.
The impairment losses and reversals are recognised in
Statement of Profit and Loss.
10 Financial Liabilities :
(i) Initial recognition and measurement
Financial liabilities are recognised when the Company
becomes a party to the contractual provisions of the
instrument. Financial liabilities are initially measured at
the amortised cost unless at initial recognition, they are
classified as fair value through profit and loss. In case of
trade payables, they are initially recognised at fair value
and subsequently, these liabilities are held at amortised
cost, using the effective interest method.
(ii) Subsequent measurement
Financial liabilities are subsequently measured at
amortised cost using the EIR method. Financial liabilities
carried at fair value through profit or loss are measured at
fair value with all changes in fair value recognised in the
Statement of Profit and Loss.
(iii) Financial guarantee contracts
Financial guarantee contracts issued by the Company
are those contracts that require a payment to be made
to reimburse the holder for a loss it incurs because the
specified debtor fails to make a payment when due in
accordance with the terms of a debt instrument. Financial
guarantee contracts are recognised initially as a liability
at fair value, adjusted for transaction costs that are
directly attributable to the issuance of the guarantee.
Subsequently, the liability is measured at the higher of the
amount of loss allowance determined as per impairment
requirements of Ind-AS 109 and the amount recognised
less cumulative amortisation.
(iv) Derecognition
A financial liability is derecognised when the
obligation specified in the contract is discharged,
cancelled or expires.
11 Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net
amount is reported in the balance sheet if there is a currently
enforceable legal right to offset the recognised amounts and
there is an intention to settle on a net basis, to realise the assets
and settle the liabilities simultaneously.
12 Derivative financial instruments
“The Company uses derivative financial instruments such as
forward currency contracts to hedge its foreign currency risks.
Such derivative financial instruments are initially recognised at
fair value on the date on which a derivative contract is entered
into and are subsequently re-measured at fair value at the
end of each reporting period. The accounting for subsequent
changes in fair value depends on whether the derivative is
designated as a hedging instrument, and if so, the nature of item
being hedged and the type of hedge relationship designated.
Derivatives are carried as financial assets when the fair value is
positive and as financial liabilities when the fair value is negative.”
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