4. Material accounting policies information
4.1.1. Revenue Recognition
Revenue from Contracts with Customers
Revenue from contracts with customers is recognised when control of the goods or services are
transferred to the customer at an amount that reflects the consideration to which the Company
expects to be entitled in exchange for those goods or services. The Company has generally
concluded that it is the principal in its revenue arrangements, because it typically controls the goods
or services before transferring them to the customer. Revenue excludes amounts collected on behalf
of third parties.
Sale of Products
The Company earns revenue from domestic and export of goods (both manufactured and traded).
In domestic sales, the Company sells products to wholesaler dealers, modern trade retailers and to
retail customers.
Revenue from sale of products is recognised at a point in time when control of the goods is
transferred to the customer. Following delivery/loading for shipment, as the case maybe, the
customer has full discretion over the responsibility, manner of distribution, price to sell the goods
and bears the risks of obsolescence and loss in relation to the goods. Payment is generally due
within 0-180 days as per credit terms with the customers. The Company considers the effects of
variable consideration, if any, the existence of significant financing components and consideration
payable to the customer (if any).
For sale of retail goods, revenue is recognised when control of the goods is transferred, being at the
point the customer purchases the goods at the retail outlet. Payment of the transaction price is due
immediately at the point the customer purchases the goods.
(i) Variable consideration
If the consideration in a contract includes a variable amount, the Company estimates the amount of
consideration to which it will be entitled to in exchange for transferring the goods to the customer.
The variable consideration is estimated at contract inception and constrained until it is highly
probable that a significant revenue reversal in the amount of cumulative revenue recognised wilf not
occur when the associated uncertainty with the variable consideration is subsequently resolved. The
Company recognizes changes in the estimated amount of variable consideration in the period in
which the change occurs.
-Rebates and discounts
The Company accounts for cash discounts, volume discounts, redemption schemes and pricing
incentives to customers or end users as a reduction of revenue based on the rateable allocation of
the discounts/ incentives to the underlying performance obligation that corresponds to the progress
by the customer towards earning the discount/ incentive. If it is probable that the criteria for the
discount will not be met, or if the amount thereof cannot be estimated reliably, then discount is not
recognized until the payment is probable and the amount can be estimated reliably.
(ii) Significant financing component
Generally, the Company receives short-term advances from its customers. Using the practical
expedient in Ind AS 115, the Company does not adjust the promised amount of consideration for
the effects of a significant financing component if it expects, at contract inception, that the period
between the transfer of the promised good or service to the customer and when the customer pays
for that good or service will be one year or less.
Contract balances
Trade receivables
A receivable represents the Company's right to an amount of consideration that is unconditional
(i.e., only the passage of time is required before payment of the consideration is due). Refer to
accounting policies of financial assets in section Financial instruments.
Contract liabilities
Contract liabilities (termed as Advance from customers in the financial statements) represents
the obligation to transfer goods or services to a customer for which the Company has received
consideration (or an amount of consideration is due) from the customer. if a customer pays
consideration before the Company transfers goods or services to the customer, a contract liability
is recognised when the payment is made or the payment is due (whichever is earlier). Contract
liabilities are recognised as revenue when the Company performs its obligations under the contract.
Cost to obtain a contract
The Company pays sales commission to its selling agents for contracts that they obtain for the
Company. The Company has elected to apply the optional practical expedient for costs to obtain a
contract which allows the Company to immediately expense sales commissions (included in other
expenses) because the amortization period of the asset that the Company otherwise would have
used is one year or less.
Costs to fulfil a contract i.e. freight, insurance and other selling expenses are recognized as an
expense in the period in which related revenue is recognised.
4.1.2. Dividend and interest income
Dividend income from investments is recognised when the shareholder's right to receive payment
has been established provided that it is probable that the economic benefits will flow to the
Company and the amount of income can be measured reliably.
Interest income from a financial asset is recognised when it is probable that the economic benefits
will flow to the Company and the amount of income can be measured reliably. Interest income
is accrued on a time basis, by reference to the principal outstanding and at the effective interest
rate applicable, which is the rate that exactly discounts estimated future cash receipts through the
expected life of the financial asset to that asset's net carrying amount on initial recognition.
Rental income arising from operating leases on investment properties is accounted for on a straight¬
line basis over the lease terms and is included in revenue in the statement of profit or loss due to its
operating nature.
4.2. Leases
Company as a lessor
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the
risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
4.2.1. Operating lease
Lease arrangements where the risks and rewards incidental to ownership of an asset substantially
vest with the lessor, are recognised as operating lease. Operating lease payments are recognised
on a straight line basis over the lease term in the statement of profit and loss.
4.2.2. Finance lease
A lease that transfers substantially all the risks and rewards incidental to ownership to the lessee
is classified as a finance lease. Amounts due from lessees under finance leases are recorded as
receivables at the Company's net investment in the leases. Finance lease income is allocated
to accounting periods so as to reflect a constant periodic rate of return on the net investment
outstanding in respect of the lease.
4.2.3 Company as a lessee
At the date of commencement of the lease, the Company recognises a right-of-use-asset ("ROU")
and a corresponding lease liability for all the lease arrangements in which it is a lessee, except for
the leases with a term of 12 months or less (short term leases) and the leases of low value assets.
For these short term and leases of low value assets, the Company recognises the lease payments
as an operating expense on accrual basis.
i) Right of use assets
The Company recognises right-of-use assets at the commencement date of the lease (i.e.,
the date the underlying asset is available for use).The ROU assets are initially recognised
at cost, which comprise of the initial amount of the lease liability adjusted for any payment
made at or prior to the commencement date of the lease plus any initial direct cost less any
lease incentive. They are subsequently measured at cost less accumulated depreciation and
impairment losses, if any. The ROU asset are depreciated on a straight line basis over the
shorter of the lease term (Refer Note 43) and the estimated useful life of the underlying asset.
The right-of-use assets are also subject to impairment. Refer to the accounting policies in
section 4.9. Impairment of non-financial assets.
ii) Lease liabilities
At the commencement date of the lease, the Company recognises lease liabilities measured at
the present value of lease payments to be made over the lease term. The lease payments include
fixed payments (including insubstance fixed payments) 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. In calculating the present value of lease payments, the Company
uses its incremental borrowing rate at the lease commencement date because the interest rate
implicit in the lease is 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 remeasured if there is a modification,
a change in the lease term, a change in the lease payments (e.g., changes to future payments
resulting from a change in an index or rate used to determine such lease payments) or a change
in the assessment of an option to purchase the underlying asset.
ROU assets and Lease liabilities have been separately presented in the Balance Sheet and lease
payments have been classified as financing cash flows.
4.3. Foreign currencies
4.3.1. Functional and presentational currency
The Company's standalone financial statements are presented in Indian Rupees (Rs.), which is also
the Company's functional currency. Functional currency is the currency of the primary economic
environment in which an entity operates and is normally the currency in which the entity primarily
generates and expends cash.
Foreign currency transactions are translated into the functional currency using the exchange rates
at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of
such transactions and from the translation of monetary assets and liabilities denominated in foreign
currencies at year end exchange rates are generally recognised in the statement of profit and loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated
using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair
value in a foreign currency are translated using the exchange rates at the date when the fair value
is determined. The gain or loss arising on translation of non-monetary items measured at fair value
is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e.,
translation differences on items whose fair value gain or loss is recognised in other comprehensive
income or profit or loss are also recognised in other comprehensive income or profit or loss, respectively).
4.4. Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
4.4.1. Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from 'profit
before tax' as reported in the statement of profit and loss because of items of income or expense
that are taxable or deductible in other years and items that are never taxable or deductible. The
Company's current tax is calculated in accordance with the Income-tax Act, 1961, using tax rates
that have been enacted or substantially enacted by the end of the reporting period.
Management periodically evaluates positions taken in the tax returns with respect to situations in
which applicable tax regulations are subject to interpretation and considers whether it is probable
that a taxation authority will accept an uncertain tax treatment. The Company then reflects the effect
of uncertainty for each uncertain tax treatment by using either most likely method or expected value
method, depending on which method predicts better resolution of the treatment.
4.4.2. Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases
of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting
date. Deferred tax liabilities are recognised for all taxable temporary differences, except:
1. When the deferred tax liability arises from the initial recognition of goodwill or an asset or
liability in a transaction that is not a business combination and, at the time of the transaction, affects
neither the accounting profit nor taxable profit or loss and does not give rise to equal taxable and
deductible temporary differences;
2. In respect of taxable temporary differences associated with investments in subsidiaries and
associates, when the timing of the reversal of the temporary differences can be controlled and it is
probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences and the carry forward of
unused tax credits. Deferreatax assets are recognised to the extent that it is probable that taxable
profit will be available against which the deductible temporary differences, and the carry forward
of unused tax credits can be utilised, except:
1. When the deferred tax asset relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the
time of the transaction, affects neither the accounting profit nor taxable profit or loss and does not
give rise to equal taxable and deductible temporary differences;
2. In respect of deductible temporary differences associated with investments in subsidiaries and
associates deferred tax assets are recognised only to the extent that it is probable that the temporary
differences will reverse in the foreseeable future and taxable profit will be available against which
the temporary differences can be utilised.
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 asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the
year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have
been enacted or substantively enacted at the reporting date.
4.4.3. Current and deferred tax for the year
Current and deferred tax are recognised in profit or loss, except when they relate to items that are
recognised in other comprehensive income or directly in equity, in which case, the current and
deferred tax are also recognised in other comprehensive income or directly in equity respectively.
4.5. Employee benefits
4.5.1. Short term employee benefits
A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual
leave and sick leave in the period the related service is rendered at the undiscounted amount of the
benefits expected to be paid in exchange for that service.
Liabilities recognised in respect of short-term employee benefits are measured at the undiscounted amount
of the benefits expected to be paid in exchange for the related service.
4.5.2. Long term employee benefits
Long term employee benefits include compensated absences. The Company has a policy on
compensated absences which are both accumulating and non-accumulating in nature. The expected
cost of accumulating compensated absences is determined by actuarial valuation performed by
an independent actuary at each balance sheet date using projected unit credit method on the
additional amount expected to be paid/availed as a result of the unused entitlement that has
accumulated at the balance sheet date. Expense on non-accumulating compensated absences is
recognized in the period in which the absences occur.
As per the policies of the Company, there are restrictions on the number of leaves an employee can
avail or encash during the year. Leaves where either the employee has unconditional right to utilise
the same or encash or the management intends to allow the employees to utilise them in the next
twelve months are categorised as current and the balance as non-current.
4.5.3. Defined contribution plan
The contributions to these schemes are charged to the statement of profit and loss of the year
in which contribution to such schemes becomes due on the basis of services rendered by the
employees. The Company has no further obligation in respect of such plans except for the
contributions due from them.
4.5.4. Defined benefit plan
Present value of obligation is provided on the basis of an actuarial valuation made at the end of
each financial year as per projected unit credit method. Current and past service costs and interest
expense/income are recognised as employee costs. For all defined benefit plans the difference
between the present value of obligations and the fair value of plan assets is represented in the
balance sheet as a liability or an asset. However the assets are restricted to the present value of the
economic benefits available to the Company.
Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding
amounts included in net interest on the net defined benefit liability and the return on plan assets
(excluding amounts included in net interest on the net defined benefit liability), are recognised
immediately in the balance sheet with a corresponding debit or credit to retained earnings through
other comprehensive income in the period in which they occur. Re-measurements are not reclassified
to profit or loss in subsequent periods.
4.5.5. Termination benefits
Termination benefit is recognised as an expense at earlier of when the Company can no longer
withdraw the offer of termination benefit and when the expense is incurred.
4.6. Property, plant and equipment
4.6.1. Recognition and measurement
Property, plant and equipment are stated at cost of acquisition or construction less accumulated
depreciation and any recognised impairment losses, and include interest on loans attributable to the
acquisition of qualifying assets upto the date they are ready for their intended use. Freehold land is
measured at cost and is not depreciated.
4.6.2. Capital work in progress
Properties in the course of construction for production, supply or administrative purposes are carried
at cost, less any recognised impairment loss. Such properties are classified to the appropriate
categories of property, plant and equipment when completed and ready for intended use.
Depreciation of these assets, on the same basis as other property assets, commences when the
assets are ready for their intended use.
4.6.3. Depreciation
Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its
estimated residual value.
Depreciation on tangible property, plant and equipment (other than freehold land and properties
under construction) is recognised on straight-line method, taking into account their nature, their
estimated usage, their operating conditions, past history of their replacement and maintenance
support etc.
Estimated useful lives of the assets based on technical estimates are as under:
Buildings 30 - 60 years
Leased office buildings, warehouses and stores 2 - 18 years
Plant and machinery 15 years
Electrical installation and equipments 10 years
Computers and information technology equipments 3 - 6 years
Furniture, fixtures and office equipments including store equipments 5 -10 years
Motor vehicles 3 -8 years
Leasehold land 45 - 99 years
Leasehold building improvements and Plant & Machinery (Retail Segment) are depreciated on a
straight line basis over the period of lease (5 to 18 years) or, if shorter, their useful economic life.
The useful life estimated above are less than or equal to those indicated in Schedule II of the
Companies Act, 2013.
Freehold land is not amortised.
The ROU assets are depreciated on a straight line basis over the shorter of the lease term (Refer
Note 43) and the estimated useful life of the underlying asset (Refer Note No. 4.2.3).
The residual values, useful lives and methods of depreciation of property, plant and equipment are
reviewed at the end of each reporting period, with the effect of any changes in estimate accounted
for on a prospective basis.
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 the asset. Any gain or loss
arising on the disposal or retirement of an item of property, plant and equipment is determined as
the difference between the sale proceeds and the carrying amount of the asset and is recognised in
profit or loss.
The useful lives of plant and machinery stated above is based on single shift working. Except for
assets in respect of which no extra shift depreciation is permitted, if an item of plant and machinery
is used any time during the year on double shift, the rate of depreciation shall be increased by 50%
for that period and in case of triple shift the rate shall be increased by 100%.
4.7. Investment properties
Investment properties are properties held to earn rentals and/or for capital appreciation.
Investment properties are measured initially at cost, including transaction costs. Subsequent to initial
recognition, investment properties are stated at cost less accumulated depreciation and accumulated
impairment loss, if any.
No depreciation is charged in case of freehold land being designated as an investment property.
The Company based on technical assessment made by it, depreciates building component of
investment property on a straight line basis over a period of 30 to 60 years from the date of
original purchase.
Investment properties are derecognised either when they have been disposed of or when they are
permanently withdrawn from use and no future economic benefit is expected from their disposal. The
difference between the net disposal proceeds and the carrying amount of the asset is recognised in
profit or loss in the period of derecognition.
4.8. Intangible assets
4.8.1. Recognition and measurement of intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at cost less
accumulated amortisation and accumulated impairment losses, if any. Amortisation is recognised
on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation
method are reviewed at the end of each reporting period, with the effect of any changes in estimate
being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are
acquired separately are carried at cost less accumulated impairment losses.
4.8.2. Derecognition of intangible asset
An intangible asset is derecognised on disposal, or when no future economics benefits are expected
from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured
as the difference between the net disposal proceeds and the carrying amount of the asset, are
recognised in profit or loss when the asset is derecognised.
4.8.3. Amortisation method and useful life
Intangible assets are amortised on straight line method over their estimated useful life as follows:
Computer software - 5 years
4.9. Impairment of non-tinancial assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be
impaired. If any indication exists, or when annual impairment testing for an asset is required, the
Company estimates the asset's recoverable amount. An asset's recoverable amount is the higher
of an asset's or cash-generating unit's (CGU) fair value less costs of disposal and its value in use.
Recoverable amount is determined for an individual asset, unless the asset does not generate
cash inflows that are largely independent of those from other assets or groups of assets. When
the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount.
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. In determining fair value less costs of disposal, recent market transactions
are taken into account. If no such transactions can be identified, an appropriate valuation model is
used. These calculations are corroborated by valuation multiples, quoted share prices for publicly
traded companies or other available fair value indicators.
Impairment losses of operations, including impairment on inventories, are recognised in the
statement of profit and loss, except for properties previously revalued with the revaluation surplus
taken to OCI. For such properties, the impairment is recognised in OCI up to the amount of any
previous revaluation surplus.
4.10. Inventories
Inventories are stated at lower of cost and net realisable value. The cost of raw materials, stores and
spares and stock in trade is determined on moving weighted average cost basis. The cost of finished
goods and work-in-process is determined on standard absorption cost basis which approximates
actual costs. Absorption cost comprises raw materials cost, direct wages, appropriate share of
production overheads and applicable excise duty paid/payable thereon.
Net realisable value is the estimated selling price for inventories in the ordinary course of business,
less all estimated costs of completion and costs necessary to make the sale.
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