A summary of the significant accounting policies applied in the preparation of the financial statements are as given below.
These accounting policies have been applied consistently to all the periods presented in the financial statements.
i. PROPERTY, PLANT AND EQUIPMENT
All property, plant and equipment (other than freehold land) are stated at cost of acquisition or construction less
accumulated depreciation and impairment losses. The cost comprises of the purchase price or construction cost (including
non-creditable/non-refundable taxes), any costs directly attributable to bringing the property, plant and equipment into
the location and condition necessary for it to be capable of operating in the manner intended by management, the initial
estimate of any decommissioning obligation, if any, and, for assets that necessarily take a substantial period of time to get
ready for their intended use, finance costs. The purchase price or construction cost is the aggregate amount paid and the
fair value of any other consideration given to acquire the asset. Freehold land is being carried at revalued amount, being
the fair value at the date of revaluation less any accumulated impairment losses. Revaluations are performed with sufficient
regularity to ensure carrying amounts do not differ materially from fair value at the reporting date. If fair values change
significantly, revaluations are refreshed accordingly. Amount of revaluation are recognized in Other Comprehensive
Income and accumulated in equity under “Revaluation Reserve”.
Subsequent expenditures related to an item of property, plant and equipment are added to its gross book value or
recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with
them will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance are
charged to profit and loss during the reporting period in which they are incurred.
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.
The accounting policy for freehold land included in property, plant and equipment was erroneously stated as the cost
model during preceding years. However, revaluation model was applied. The relevant disclosure has now been corrected.
This error did not impact the reported financial position and result of the company.
Depreciation method, estimated useful life and residual value
Depreciation on property, plant and equipment is provided using the Straight-Line Method (SLM) so as to expense the
cost less residual values over their estimated useful lives as prescribed under Part C of Schedule II to the Companies
Act, 2013.
Property, plant and equipment which are added or disposed of during the year, depreciation is provided on pro-rata basis.
I n line with the provisions of Schedule II of the Companies Act 2013, the Company depreciates significant components
having different useful lives as compared to the main asset, based on the individual useful life of the components. Useful
life for such components is assessed based on the historical experience and internal technical inputs.
The residual values are not more than 5% of the original cost of the asset. The assets’ residual values and useful lives are
reviewed, and adjusted if appropriate, at the end of each reporting period.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit
or loss with other gains/losses.
a) Intangible Assets
Intangible assets comprise of computer software and is stated at acquisition cost, net of accumulated amortization
and accumulated impairment loss, if any.
A table of estimate of useful life of assets is stated below:
Amortization
The estimated useful life and amortization method are reviewed at the end of each annual reporting period, with the
effect of any changes in the estimate being accounted for on a prospective basis.
b) Impairment of assets
All assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is recognized 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 of disposal
and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or group
of assets (cash generating units). Non-financial assets that suffered impairment earlier are reviewed for possible
reversal of the impairment at the end of each reporting period.
ii. INVESTMENT PROPERTY
Properties held for long-term rental yields or for capital appreciation or both, and that is not occupied by the Company,
is classified as investment property. Investment property is measured initially at its cost, including related transaction
costs and wherever applicable borrowing costs. Subsequent expenditure is capitalized to the asset’s carrying amount
only when it is probable that future economic benefits associated with the expenditure will flow to the Company and the
cost of the item can be measured reliably. Transfers to, or from, investment properties are made at the carrying amount
when and only when there is a change in use. All other repairs and maintenance costs are expensed when incurred. An
item of investment property 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 investment property is
determined as the difference between the sales proceeds and the carrying amount of the property and is recognized in
the Statement of Profit and Loss.
iii. LEASES
Company as a lessee
The Company’s lease asset classes primarily consist of leases for Land. The Company assesses whether a contract is or
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.
At the date of commencement of the lease, the Company recognizes a right-of-use asset (“ROU”) and a corresponding
lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short
term leases) and leases of low value assets. For these short term and leases of low value assets, the Company recognizes
the lease payments as an operating expense on a straight line basis over the term of the lease.
The right-of-use assets are recognized under revaluation model, in accordance with the provisions of Ind AS 16 - Property,
Plant and Equipment. Under this model, ROU assets are carried at a revalued amount, being their fair value at the date
of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses.
Revaluations are made with sufficient regularity to ensure that the carrying amount does not differ materially from that
which would be determined using fair value at the balance sheet date. Changes in the revaluation surplus are recognised
in other comprehensive income and accumulated in equity under “revaluation reserve”.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease
term and useful life of the underlying asset.
The lease liability (if any) is initially measured at the present value of the future lease payments. The lease payments are
discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing
rates. 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.
A lease liability is remeasured upon the occurrence of certain events such as a change in the lease term or a change in an
index or rate used to determine lease payments. The remeasurement normally also adjusts the leased assets.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been
classified as financing cash flows.
The accounting policy for ROU asset was erroneously stated as the cost model during preceding years. However,
revaluation model was applied. The relevant disclosure has now been corrected. This error did not impact the reported
financial position and result of the company.
Company as a lessor
Finance Lease
Leases which effectively transfer to the lessee substantially all the risks and benefits incidental to ownership of the leased
item are classified and accounted for as finance lease. Lease rental receipts are apportioned between the finance income
and capital repayment based on the implicit rate of return. Contingent rents are recognized as revenue in the period in
which they are earned.
Operating Lease
Leases in which the Company does not transfer substantially all the risks and rewards of ownership of an asset are
classified as operating leases. Rental income from operating leases is recognized on a straight-line basis over the term of
the relevant lease except where scheduled increase in rent compensates the Company with expected inflationary costs.
iv. INVENTORIES
Raw material, packing material, work in process, stores, tools and dies and finished goods are valued at cost or net
realisable value, whichever is lower.
Cost of raw material, packing material and stores, tools and dies comprises of cost of purchases. Cost of work in process
and finished goods comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead
expenditure, the latter being allocated on the basis of normal operating capacity. Cost of inventories also includes all other
costs incurred in bringing the inventories to their present location and condition. Costs are assigned to individual items of
inventory on first-in-first-out basis. Costs of purchased inventory are determined after deducting rebates and discounts.
Net realisable 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.
v. FINANCIAL ASSETS
Initial recognition and measurement
All financial assets are recognized initially at fair value plus transaction costs that are attributable to the acquisition of the
financial asset, except in the case of financial assets not recorded at fair value through profit or loss. Transaction costs of
financial assets carried at fair value through profit or loss are expensed through the Statement of Profit and Loss.
Classification and Subsequent Measurement:
For purposes of subsequent measurement, financial assets are classified in four categories:
• Measured at Amortized Cost;
• Measured at Fair Value Through Other Comprehensive Income (FVTOCI);
• Measured at Fair Value Through Profit or Loss (FVTPL); and
• Equity Instruments designated at Fair Value through Other Comprehensive Income (FVTOCI).
Financial assets are not reclassified subsequent to their initial recognition, except if and in the period the Company
changes its business model for managing financial assets.
• Measured at Amortized Cost: A debt instrument is measured at the amortized cost if both the following conditions
are met:
- The asset is held within a business model whose objective is achieved by both collecting 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 (SPPI) on the principal amount outstanding.
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 fees or
costs that are an integral part of the EIR. The EIR amortization is included in finance income in the statement of profit or
loss. The losses arising from impairment are recognized in the profit or loss.
his category generally applies to trade receivables, cash and bank balances, loans and other financial assets of
the company.
• Measured at FVTOCI: A debt instrument is measured at the FVTOCI if both the following conditions are met:
- The objective of the business model is achieved by both collecting contractual cash flows and selling the financial
assets; and
- The asset’s contractual cash flows represent SPPI.
Debt instruments meeting these criteria are measured initially at fair value plus transaction costs. They are subsequently
measured at fair value with any gains or losses arising on remeasurement recognized in other comprehensive income,
except for impairment gains or losses and foreign exchange gains or losses. Interest calculated using the effective interest
method is recognized in the statement of profit and loss in investment income.
• Measured at FVTPL: FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet
the criteria for categorization as at amortized cost or as FVTOCI, is classified as FVTPL. In addition, the company
may elect to designate a debt instrument, which otherwise meets amortized cost or FVTOCI criteria, as at FVTPL.
Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the
statement of profit and loss. Equity instruments which are, held for trading are classified as at FVTPL.
• Equity Instruments designated at FVTOCI: For equity instruments, which has not been classified as FVTPL as
above, the company may make an irrevocable election to present in other comprehensive income subsequent
changes in the fair value. The company makes such election on an instrument-by-instrument basis. The classification
is made on initial recognition and is irrevocable. In case the company decides to classify an equity instrument as at
FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the OCI. There is no
recycling of the amounts from OCI to P&L, even on sale of investment.
Derecognition:
The Company derecognizes a financial asset on trade date only when the contractual rights to the cash flows from the
asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset
to another entity.
Impairment of Financial Assets:
The Company assesses at each date of balance sheet whether a financial asset or a group of financial assets is impaired.
Ind AS - 109 requires expected credit losses to be measured through a loss allowance. The company recognizes
impairment loss for trade receivables that do not constitute a financing transaction using expected credit loss model,
which involves use of a provision matrix constructed on the basis of historical credit loss experience. For all other financial
assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount
equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since
initial recognition.
vi. TRADE RECEIVABLES
Trade receivables are recognized initially at fair value and subsequently measured at amortized cost net of any expected
credit losses, if any.
vii. FINANCIAL LIABILITIES
Classification as liability or equity
Financial liabilities and equity instruments issued by the Company are classified according to the substance of the
contractual arrangements entered into and the definitions of a financial liability and an equity instrument.
Initial recognition and measurement
Financial liabilities are recognized 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 or loss.
Subsequent measurement
Financial liabilities are subsequently measured at amortised cost using the effective interest rate method. Financial
liabilities carried at fair value through profit or loss are measured at fair value with all changes in fair value recognized in
the Statement of Profit and Loss.
Derecognition
A financial liability is derecognized when the obligation specified in the contract is discharged, cancelled or expires.
OFFSETTING FINANCIAL LIABILITIES
Financial assets and liabilities are offset and the net amount reported in the balance sheet where there is a legally
enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realise the asset
and settle the liability simultaneously.
viii. BORROWINGS
Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently measured
at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is
recognized in profit or loss over the period of the borrowings using the effective interest method.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or
expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to
another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized
in profit or loss or other gains/losses.
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the
liability for at least 12 months after the reporting period.
ix. BORROWING COSTS
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a
qualifying asset are capitalized during the period of time that is required to complete and prepare the asset for its intended
use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended
use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying
assets is deducted from the borrowing costs eligible for capitalization.
Other borrowing costs are expensed in the period in which they are incurred.
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