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 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/ materialised.
c) Foreign currency translation
(i) Functional and presentation currency
The financial statements are presented
in Indian rupee (t), 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
I ncome 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.
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 derecognised.
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
I nterest 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.
n) 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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