2. SIGNIFICANT ACCOUNTING POLICIES
This note provides a list of the significant accounting policies adopted in the preparation of
these financial statements. These policies have been consistently applied to all the years
presented, unless otherwise stated
(a) Basis of preparation
The financial statements of the Company have been prepared in accordance with the
Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Indian
Accounting Standards specified under Section 133 of the Companies Act, 2013, read with
Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the
Companies Act, 2013 ("the Act"). The financial statements have been prepared on accrual
basis under the historical cost convention. The accounting policies adopted in the
preparation of the financial statements are consistent with those followed in the previous
year.
(b) Use of estimates and critical accounting judgments
In preparation of the financial statements, the Company makes judgments, estimates and
assumptions about the carrying values of assets and liabilities that are not readily apparent
from other sources. The estimates and the associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual results may differ
from these estimates.
The estimates and the 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. Significant judgments and estimates relating to the carrying values of
assets and liabilities include useful lives of property, plant and equipment and intangible
assets, impairment of property, plant and equipment, intangible assets and investments,
provision for employee benefits and other provisions, recoverability of deferred tax assets,
commitments and contingencies.
(c) Property, plant and equipment
As per IND AS-16 an item of property, plant and equipment is recognized as an asset if it is
probable that the future economic benefits associated with the item will flow to the
Company and its cost can be measured reliably. This recognition principle is applied to the
costs incurred initially to acquire an item of property, plant and equipment and also to costs
incurred subsequently to add to, replace part of, or service it. All other repair and
maintenance costs, including regular servicing, are recognized in the statement of profit and
loss as incurred.
Property, plant and equipment are stated at cost, less accumulated depreciation and
impairment. Cost includes all direct costs and expenditures incurred to bring the asset to its
working condition and location for its intended use. Trial run expenses (net of revenue) are
capitalized. Borrowing costs incurred during the period of construction is capitalized as part
of cost of the qualifying assets. The gain or loss arising on disposal of an asset is determined
as the difference between the sale proceeds and the carrying value of the asset, and is
recognized in the statement of profit and loss.
(d) Depreciation and amortization of property, plant and equipment
Depreciation or amortization is provided so as to write off, on a straight line basis, the cost of
property, plant and equipment to their residual value. These charges are commenced from
the dates the assets are available for their intended use and are spread over their estimated
useful economic lives. The estimated useful lives of assets and residual values are reviewed
regularly and, when necessary, revised. No further charge is provided in respect of assets
that are fully written down but are still in use. Depreciation on assets under construction
commences only when the assets are ready for their intended use.
The estimated useful lives for the main categories of property, plant and equipment are:
(e) Impairment
At each balance sheet date, the Company reviews the carrying values of its property, plant
and equipment to determine whether there is any indication that the carrying value of those
assets may not be recoverable through continuing use. If any such indication exists, the
recoverable amount of the asset is reviewed in order to determine the extent of impairment
loss (if any).
(f) Inventories
As per IND AS-2 Inventories are stated at the lower of cost and net realizable value. Costs
comprise direct materials and, where applicable, direct labor costs and those overheads that
have been incurred in bringing the inventories to their present location and condition. Net
realizable value is the price at which the inventories can be realized in the normal course of
business after allowing for the cost of conversion from their existing state to a finished
condition and for the cost of marketing, selling and distribution.
Stores and spare parts are carried at lower of cost and net realizable value. Provisions are
made to cover slow moving and obsolete items based on historical experience of utilization
on a product category basis, which involves individual businesses considering their product
lines and market conditions.
|