2.0 Summary of Material Accounting Policies
a) Basis of preparation
(i) Compliance with Indian Accounting Standards
These Standalone financial statements have been
prepared in accordance with the Indian Accounting
Standards (‘IND AS’) as notified by Ministry of Corporate
Affairs pursuant to Section 133 of the Companies Act, 2013
read with the Companies (Indian Accounting Standards)
Rules, 2015, as amended, and other relevant provisions
of the Act and guidelines issued by the Securities and
Exchange Board of India (SEBI).
The accounting policies have been applied consistently
to all the periods presented in the financial statements.
(ii) Historical cost convention
The financial statements have been prepared on an
accrual basis under historical cost convention with the
exception of certain financial assets and liabilities that
are required to be carried at fair values at the end of each
reporting period by Ind AS.
(iii) Current versus non-current classification
All the assets and liabilities have been classified as
current or non-current as per the Company’s normal
operating cycle and other criterion set out in Schedule
III to the Companies Act, 2013. Based on the nature of
products and the time between the acquisition of assets
for processing and their realization in cash and cash
equivalent, the Company has ascertained its operating
cycle to be of 12 months for the purpose of current and
non-current classification of assets and liabilities.
(iv) Rounding of amounts
All amounts disclosed in the financial statements and
notes have been rounded off to the nearest Lakh as per
the requirement of Schedule III to the Companies Act,
2013, unless otherwise stated.
b) Use of estimates and judgements
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions, based upon
the best knowledge of current events and actions that affect
the reported amounts of assets and liabilities and disclosure
of contingent liabilities as at the date of financial statements
and the reported amounts of incomes and expenses during
the reported period. Actual results may differ from those
estimates. Any difference between the actual results and the
estimates are recognized in the period in which the results are
known/ materialized.
c) Foreign currency translation
(i) Functional and presentation currency
The financial statements are presented in Indian rupee (‘H’),
which is Company’s functional and presentation currency.
(ii) Transactions and balances
Transactions in foreign currencies are recognised at
the prevailing exchange rates on the transaction dates.
Realised gains and losses on settlement of foreign
currency transactions are recognized in the statement of
profit and loss.
Monetary foreign currency assets and liabilities at the
year-end are translated at the year-end exchange rates
and the resultant exchange differences are recognized in
the statement of profit and loss. Exchange differences, in
respect of foreign currency borrowings taken for acquiring
qualifying assets included in property, plant and
equipment, to the extent it is an adjustment to interest
cost, has been capitalized. Additionally, exchange gains or
losses on foreign currency borrowings taken prior to April
1, 2017 which are related to the acquisition of qualifying
assets are adjusted in the carrying cost of such assets.
d) Revenue recognition
The Company derives revenues primarily from sale of
manufactured goods, traded goods and related services.
The specific criterion for each of the Company’s activities has
been stated below:
(i) Sale of goods
Revenue is recognized upon transfer of control of promised
goods to customers (i.e. when performance obligation is
satisfied) for an amount that reflects the consideration
which the Company expects to receive in exchange for
those products. The Company does not expect to have
any contracts where the period between the transfer of
promised goods to the customer and payment by the
customer exceeds one year. As a consequence, it does not
adjust any of the transaction prices for the value of money.
Revenue is measured based on transaction price, which
is the consideration, adjusted for trade discounts such
as cash discounts, volume discounts or any other price
concession as may be agreed with the customers.
Revenues also excludes Goods and Services Tax (GST) or
any other tax collected from customers.
(ii) Job work receipts
Revenue from job work is recognized at the time of
dispatch of material.
(iii) Export incentives
Export incentives under various schemes are accounted
for in the year of export.
(iv) Recycling credits income
Income is recognized in the year in which the certificate
is issued or when there is virtual certainty to realize the
credits in subsequent period.
(v) Interest income
Interest income is recognized on time proportion accrual
basis using the applicable/ effective interest rate.
(vi) Insurance claims
Insurance claims are accounted only when there is
reasonable certainty of its ultimate collection. Insurance
claim receivable is recognized as a separate asset, but
only when the ultimate recovery is reasonably certain.
(vii) Dividend income on preference shares
Dividend income on investment in preference shares of
subsidiary company is recognized on a time proportion
accrual basis using the applicable coupon rate.
e) Government grants
Government grant/subsidies are measured at amounts
receivable from the government and are recognized as income
when there is a reasonable assurance that the subsidy will
be received, amount is fairly ascertainable and all attached
conditions will be complied with. When the subsidy relates to
an expense item, it is recognized as income on a systematic
basis over the periods that the related costs, which are
intended to be compensated, are expensed and it is classified
under other operating income.
Government grants relating to the purchase of property,
plant and equipment are included in non-current liabilities
as deferred income and are credited to the statement of profit
and loss on a straight line basis over the expected lives of
related assets and are presented within other income.
Export Promotion Capital Goods (‘EPCG’) scheme allows
import of certain capital goods at zero/ concessional duty
subject to an export obligation for the duty saved. The duty
saved on capital goods under EPCG scheme is treated as a
Government grant and is recognised as income spread equally
over the expected useful life of the related asset.
In case of interest free/ concessional loan provided by
Government, the loan or assistance is initially recognised and
measured at fair value and the Government grant is measured
as the difference between the initial fair value of the loan and
the proceeds received. The loan or assistance is subsequently
measured as per the accounting policy applicable to
financial liabilities.
f) Taxes
(i) Current income-tax
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
substantially enacted, at the reporting date.
(ii) Deferred income-tax
Deferred income-tax is provided in full, using the liability
method on temporary differences arising between the
tax bases of assets and liabilities and their carrying
amount in the financial statements. Deferred income-
tax is determined using tax rates (and laws) that have
been enacted or substantially enacted by the end of the
reporting period and are expected to apply when the
related deferred income-tax assets are realised or the
deferred income-tax liabilities are 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
utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there
is a legally enforceable right to off set current tax assets
and liabilities. Current tax assets and tax liabilities are off
set where the Company 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.
Current and deferred tax is recognized in the statement of
profit and loss, except to the extent that it relates to items
recognised in other comprehensive income or directly
in equity. In this case, the tax is also recognised in other
comprehensive income or directly in equity, respectively.
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 assets to be recovered.
g) Non-current assets held for sale
The Company classifies non-current assets as held for sale if
their carrying amounts will be recovered principally through a
sale transaction rather than through continuing use and a sale
is considered as highly probable. Non-current assets held for
sale are measured at the lower of their carrying amount and
the fair value less costs to sell. Asset classified as held for sale
are presented separately in the Balance Sheet. Property, plant
and equipment and intangible assets once classified as held
for sale are not depreciated or amortised.
h) Property, plant and equipment (including Capital
work-in-progress)
Freehold land is carried at cost. All other items of property,
plant and equipment are stated at cost less depreciation and
impairment, if any. Cost includes all expenditure necessary to
bring the asset to its working condition for its intended use.
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. The carrying amount of any component
accounted for as a separate asset is derecognised when
replaced. All other repairs and maintenance are charged to
the statement of profit and loss during the reporting period in
which they are incurred.
Property, plant and equipment which are not ready for their
intended use are disclosed under capital work-in-progress.
Expenditure during construction period (including borrowing
cost relating to borrowed funds for construction or acquisition
of property, plant and equipment) incurred on projects/ assets,
including trial run expenses (net of revenue) are treated as
pre-operative expenses, pending allocation to the assets, and
are included under capital work-in-progress. These expenses
are apportioned to related property, plant and equipment on
commencement of commercial production. Capital work-in¬
progress is stated at the amount expended up to the date of
the balance sheet.
Depreciation methods, estimated useful lives and
residual value
Depreciation on property, plant and equipment is provided
on Written Down Value Method (‘WDV’) except in respect of
buildings and plant & equipment of Kanpur Unit and Temra
(Bilaspur) Unit, where depreciation is provided on Straight
Line Method (‘SLM’).
The Company depreciates its property, plant and equipment
over the useful life in the manner prescribed in Schedule II to
the Act, and management believes that the useful life of assets
are same as those prescribed in Schedule II to the Act, except
for certain plant & equipment, wherein based on technical
evaluation, useful life has been estimated to be different from
that prescribed in Schedule II to the Act.
Useful life considered for calculation of depreciation for
various assets class are as follows:
Residual value of tangible assets is considered to be not more
than 5% of the cost of the asset.
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. 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.
i) Intangible assets
Intangible assets are stated at cost less accumulated
amortization and impairments, if any. Cost includes all
expenditure necessary to bring the asset to its working
condition for its intended use. Intangible assets which are not
ready for their intended use are disclosed as intangible assets
under development and are stated at the amount expended
up to the date of the balance sheet.
The Company amortizes computer software and technical
know-how using the straight line method over the period of
5 years.
The amortization period and the amortization method for an
intangible asset are reviewed at each financial year end and
adjusted prospectively, if appropriate.
j) Borrowings
Borrowings are initially recognised at net of transaction costs
incurred and measured at amortised cost. Any difference
between the proceeds (net of transaction costs) and the
redemption amount is recognized in the statement of profit
and loss over the period of the borrowings using the effective
interest method.
k) Borrowing costs
Interest and other borrowing costs attributable to qualifying
assets, which takes substantial period of time to get ready
for its intended use, are capitalized. All other interest and
borrowing costs are charged to the statement of profit and
loss. Borrowing cost also includes exchange differences to the
extent regarded as an adjustment to the borrowing costs.
l) Lease
The Company assesses at contract inception whether a
contract is, or contains a lease. That is, if the contract conveys
the right to control the use of an identified asset for a period of
time in exchange for a consideration.
Company as a lessee
The Company applies a single recognition and measurement
approach for all leases, except for short-term leases (that do
not contain purchase option) and leases of low value assets.
The Company recognizes lease liabilities to make lease
payments and right-of-use assets representing the right to use
the underlying assets.
(i) Right-of-use Assets (ROU Assets)
The Company recognizes right-of-use assets at the
commencement date of the lease (i.e., the date on
which the underlying asset is available for use). Right-of-
use assets are measured at cost, less any accumulated
depreciation/ amortization and impairment losses, and
adjusted for any re-measurement of lease liabilities. The
cost of right-of-use assets includes the amount of lease
liabilities recognized, initial direct costs incurred and lease
payments made at or before the commencement date
less any lease incentives received. Right-of-use assets are
depreciated/ amortized on a straight-line basis over the
shorter of the lease term and estimated useful lives of the
assets, as estimated by the management. Leasehold land
has been amortized over the lease term of 90 years.
(ii) Lease liabilities
At the commencement date of the lease, the Company
recognizes lease liabilities measured at the present value
of lease payments to be made over the lease term. The
lease payments include fixed payment 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. Variable lease
payments that do not depend on an index or a rate
are recognized as expense (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 Company uses its
incremental borrowing rate at the lease commencement
date because the interest rate is implicit in the lease 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 re-measured if there is a modification, a change in
the lease term, a change in the lease payments or a
change in the assessment of an option to purchase the
underlying asset.
(iii) Short-term leases and leases of low-value assets
The lease payments on short-term leases and lease of
low-value assets are recognized as expense on a straight¬
line basis over the lease term.
m) Inventories
(i) Measurement of Inventory
Inventories of raw material, stores & spares, work-in¬
progress, finished goods and stock-in-trade (including
goods-in-transit) are stated at cost or net realizable
value, whichever is lower. Waste & scrap is valued at net
realizable value.
(ii) Cost of Inventories
Cost comprises all cost of purchase, cost of conversion
and other costs incurred in bringing the inventories to
their present location and condition.
The cost of purchase of inventories comprise the
purchase price, import duties and other non-recoverable
taxes, and transport, handling and other costs directly
attributable to the acquisition of inventory items. Trade
discounts, rebates and other similar items are deducted
in determining the costs of purchase.
The cost of conversion of inventories include costs directly
related to the units of production and a systematic
allocation of fixed and variable production overheads that
are incurred in converting material into finished goods.
Cost of inventories is ascertained on the ‘weighted
average’ basis except stock-in-trade, where cost is
ascertained on first-in-first-out (FIFO) basis.
(iii) Net realizable value
Net realizable 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. Net realizable value is ascertained for each item
of inventories with reference to the selling prices of related
finished products. Estimate of net realizable value of
finished goods and stock-in-trade are based on the most
reliable evidence, available at the time the estimates
are made, of the amount the inventories are expected
to realize. These estimates take into consideration
fluctuations of price or cost directly relating to events
occurring after the end of the period to the extent that
such events confirm conditions existing at the end of the
period. Materials and other supplies held for use in the
production of the inventories are not written down below
cost if the finished products in which they will be used are
expected to be sold at or above cost.
Amount of write down of the inventories below cost is
recognized as an expense as and when the event occurs.
1) Impairment of non-financial assets
The Company assesses, at each reporting date, whether there
is an indication that an asset may be impaired. If any indication
exists, the Company estimates the asset’s recoverable amount.
An asset’s recoverable amount is the higher of an asset’s fair
value less costs of disposal and its value in use. When the
carrying amount of an asset exceeds its recoverable amount,
the asset is considered impaired and is written down to its
recoverable amount.
Impairment losses, if any, are recognized in the statement
of profit and loss. Non-financial assets that suffered an
impairment are reviewed for possible reversal of impairment
at the end of each reporting period.
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