Note - 3 Material Accounting Policies Information
3.1 Statement of Compliance with Ind AS
The Standalone Financial Statements of the Company are prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 and the subsequent amendments from time to time, notified under Section 133 of the Companies Act, 2013 (the "Act") and other relevant provisions of the Act.
The Company has adopted all the relevant Ind AS and the adoption was carried out in accordance with Ind AS 101, "First Time Adoption of Indian Accounting Standards". Accordingly, these Standalone Financial Statements for the year ended March 31, 2024 are the Company's First Ind AS Standalone Financial Statements.
For all periods upto and including the year ended March 31, 2023, the Company prepared its Standalone Financial Statements in accordance with Accounting Principles generally accepted in India including Accounting Standards notified under Section 133 of the Act read with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP). Reconciliation and description of the effect of the transition have been summarised in Note No. 46.
The transition to Ind AS has resulted in changes in the presentation of the Financial Statements,
disclosures in the notes thereto and accounting policies and principles.
In accordance with the amendments to the Ind AS effective April 1, 2023, the Company is disclosing material accounting policies information in its financial statements, instead of significant accounting policies as required previously. This change aligns the Company's disclosure practices with the updated Ind AS framework and all other amendments do not have material impact on the financial statements.
The material accounting policy information related to preparation of the standalone financial statements have been discussed in the respective notes.
3.2 Basis of Preparation
The Standalone Financial Statements have been prepared on going concern basis on the historical cost convention using accrual system of accounting except for certain assets and liabilities such as Debentures, Gratuity and Investments which are measured at fair value/amortised cost/net present value at the end of each reporting period, as explained in the accounting policies.
The Standalone Financial Statements are presented in Indian Rupees (t) and all values are rounded off to the nearest two decimal Crores except otherwise indicated and amount less then ”H50,000/-” have been presented as ”0.00”
3.3 Property, Plant and Equipment
(a) Property, Plant and Equipment
(i) Recognition and Measurement
Items of property, plant and equipment are measured at cost, less accumulated depreciation, and accumulated impairment losses, if any, except freehold land which is carried at historical cost.
Cost of an item of property, plant and equipment comprises its purchase price (after deducting trade discounts and rebates), including import duties and nonrefundable purchase taxes, any directly attributable cost of bringing the item to its working condition for its intended use and estimated costs of dismantling and removing the item and restoring the site on which it is located.
The cost of a self-constructed item of property, plant and equipment is determined using the same primciples as for an acquired asset, except that any
internal profits are eliminated at arriving at such costs. Interest cost is recognised as a component of the carrying amount of the self constructed item of the PPE in accordance with Ind AS 23 Borrowing costs.
Part of an item of property plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciatied separately. Significant items of PPE having the same useful life and depreciation method are grouped together in determining the depreciation charge.
(ii) Transition to Ind AS
On transition to Ind AS, in accordance with para D7AA of Ind AS 101 First Time Adoption to Ind AS the Company has elected to continue with the carrying value of all its property, plant and equipment recognised as at April 1, 2022 (transition date), measured as per the previous GAAP, and used that carrying value as the deemed cost of such property, plant and equipment.
(iii) Subsequent Expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.
(iv) Derecognition
An item of Property, Plant and Equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of assets.
Any gain or loss on disposal or retirement of an item of property, plant and equipment is determined as the difference between the net sales / disposal proceeds and the carrying amount of the asset and is recognised in the Statement of Profit and Loss.
(v) Depreciation / Amortization
Depreciation on PPE commences when the assets are ready for their intended use. Depreciation is calculated on cost of items of property, plant and equipment (other than freehold land and properties under construction) less their estimated residual values over their estimated useful lives using the Staright Line Method. Depreciation is generally recognised in the Statement of Profit and Loss.
Useful lives have been determined in accordance with Schedule II to the Companies Act, 2013 which are as under :
The residual values are not more than 5% of the original cost of the asset.
Depreciation method, useful lives and residual values are reviewed at each financial year-end and adjusted, if appropriate. Based on technical evaluation and consequent advice, the management believes that its estimates of useful lives best represent the period over which management expects to use these assets. The useful lives of the Company's Plant and Equipments are considered on the basis of continuous process plant.
Depreciation on additions (disposals) is provided on a pro rata basis i.e. from (upto) the date on which asset is ready for use (disposed of) except low value items not exceeding H5,000/- which are fully depreciated at the time of addition.
Depreciation on subsequent expenditure on PPE arising on account of capital improvement or other factors is provided for prospectively over the remaining useful life.
Right-of-use assets are depreciated on a straight-line basis over the lease term or useful life of the underlying asset, whichever is less, following with the principles of Ind AS 116 "Leases”.
The Company has changed the method of depreciation to Straight Line Method (SLM) from Written Down Value (WDV) from April 1, 2022. The impact of the said change, H 50,85,942/-, has been given in the opening Balance sheet (1st April 2022) by way of adjustment to the accumulated depreciation and opening retained earnings.
(b) Capital work-in-progress
Projects under commissioning and other Capital work-in-progress are carried at cost comprising of direct and indirect costs, related incidental expenses and attributable interest. It also includes the cost of Property, Plant And Equipments that are not ready to use at the balance sheet date. Depreciation on Capital work-in-progress commences when the construction and installation are complete and the assets are ready for their intended use.
(c) Intangible Assets
(i) Initial Recognition and Classification
Intangible assets including those acquired by the Company are initially measured at cost. Such intangible assets are subsequently measured at cost less accumulated amortisation and any accumulated impairment losses.
(ii) Subsequent Expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditures are recognised in profit or loss as incurred.
(iii) Transition to Ind AS
On transition to Ind AS, in accordance with para D7AA of Ind AS 101 First Time Adoption to Ind AS, the Company has elected to continue with the carrying value of all its property, plant and equipment recognised as at April 1, 2022 (transition date), measured as per the previous GAAP, and used that carrying value as the deemed cost of intangible asset.
(iv) Amortization
Amortization is calculated to write off the cost of intangible assets less their estimated residual values over the estimated useful lives using the stright line method and is included in Depreciation and Amortisation expense in the Statement of Profit and Loss. The Amortization method, useful lives and residual values are reviewed at the end of each financial year and adjusted, if appropriate.
(v) Derecognition
An item of intangible asset is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of assets.
Any gain or loss on disposal or retirement of an item of intangible asset is determined as the difference between the net sales / disposal proceeds and the carrying amount of the asset and is recognised in the Statement of Profit and Loss.
(vi) Intangible Assets under Development
Intangible assets not ready for the intended use on the date of the Balance Sheet are disclosed as "Intangible Assets under Development".
(d) Impairment
The Company's all tangible assets (PPE including capital work-in-progress), intangible assets, right-of-use assets and non-financial assets are reviewed at each reporting date to determine whether there is any significant indication that those assets have suffered an impairment loss. If any such indication exists, then the asset's recoverable amount is estimated in order to determine the extent of the impairment loss (if any).
Recoverable amount of an asset is the higher of its fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
An impairment loss is recognised if the carrying amount of an asset exceeds its estimated recoverable amount. In that case, the carrying amount of the asset is reduced to its recoverable amount and impairment loss is recognised in the Statement of Profit and Loss.
In respect of assets for which impairment loss has been recognised in prior periods, the Company reviews at each reporting date whether there is any indication that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. Such a reversal is made only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
3.4 Borrowing Costs
Borrowing costs are interest and other costs incurred in connection with the borrowing of funds. Borrowing
costs directly attributable to the acquisition or construction of qualifying asset that necessarily takes a substantial period of time to get ready for its intended use are capitalised as part of the cost of the respective asset until such time the assets are substantially ready for their intended use. All other borrowing costs are recognised as an expense in the period in which they are incurred and reported in finance costs.
3.5 Operating Cycle
Based on the nature of products / activities of the Company and the normal time between purchase of raw materials / rendering of services and their realisation in cash or cash equivalents, the Company has determined its operation cycle within 12 months for the purpose of classification of its assets and liabilities as current and non-current.
3.6 Current versus Non-Current Classification
The Company presents assets and liabilities in the Balance Sheet based on current/ non-current classification.
An asset / liability is treated as current when it is :-
- Expected to be realised or intended to be sold or consumed or settled in normal operating cycle.
- Held primarily for the purpose of trading.
- Expected to be realised / settled within twelve months after the reporting period, or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
All other assets and liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities respectively.
3.7 Inventories
Items of inventories (including materials and components) are measured at lower of cost and net realisable value after providing for obsolescence, wherever considered necessary. The cost of inventories comprises of all costs of purchase, costs of conversion and other costs including manufacturing overheads incurred in bringing the inventories to their present location and condition.
Net realisable value is the estimated selling price in the ordinary course of business, less cost of completion and applicable selling expenses.
Excess/ shortages, if any, arising on physical verification are absorbed in the respective consumption accounts.
3.8 Cash and Cash Equivalents
Cash and cash equivalents include cash and cheques in hand, bank balances, demand deposits with banks and other short term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Investments having a short maturity of say three months or less from the date of acquisition, qualifies as a cash equivalent.
3.9 Statement of Cash Flow
Cash flows are reported using the indirect method whereby the profit before tax is adjusted for the effect of the transactions of a non cash nature, any deferrals or accruals of past and future operating cash receipts or payments and items of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.
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