2.1 Property, Plant and Equipment
(i) Recognition and measurement
Property, plant and equipment (PPE) are measured at Original cost net of tax / duty credit availed less accumulated
depreciation and accumulated impairment losses, if any. Historical cost includes expenditure that is directly attributable
to the acquisition of the items.
Advances paid towards the acquisition of PPE outstanding at each reporting date are classified as capital advances
under Other Non-Current Assets and Property, plant and equipment which are not ready for intended use as on the
date of Balance Sheet are disclosed as "Capital work-in-progress”.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for
as separate items (major components) of property, plant and equipment.
Capital expenditure on tangible assets for Research and Development is classified under Property, Plant and Equipment
and is depreciated on the same basis as other property, plant and equipment.
Property, Plant and equipment are derecognised from financial statement on disposal and gains or losses arising from
disposal are recognised in the Statement of Profit and Loss in the year of occurrence.
(ii) Subsequent expenditure
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. All other repairs and maintenance are charged to the Statement of Profit and Loss
during the period in which they are incurred.
When significant parts of Property, Plant and Equipments are required to be replaced, the Company derecognises the
replaced part and recognises the new part with it's own associated useful life and it is depreciated accordingly.
(iii) Depreciation
Depreciation is provided, under the Straight Line Method, pro rata to the period of use, based on useful lives specified
in Schedule II to the Companies Act, 2013 except where the Company, based on technical evaluation, the condition of
the plants, regular maintenance schedule, material of construction and past experience, has considered useful life of
the following items of PPE different from that prescribed in Schedule II to the Act.
The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period,
with the effect of any changes in estimate accounted for on a prospective basis.
The range of useful lives of the Property, Plant and Equipment are as follows:
a) Plant and Machinery - 7 - 30 years
b) Furniture and fixtures - 7- 10 years
c) Office Equipments - 2 - 5 years
d) Factory Building - 10- 30 years
e) Non Factory Building - 10- 60 years
f) Vehicles - 3- 8 years
g) Computer Hardware - 3 - 5 years
Assets costing less than INR 5,000 are depreciated at 100% in the year of acquisition.
2.2 Investment Property
(i) Recognition and measurement
Investment Property comprises of Freehold Land and Buildings.
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.
Though the Company measures investment property using cost based measurement, the fair value of investment
property is disclosed in the notes. Fair values are determined based on an annual evaluation performed by an accredited
external independent valuer.
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 the Statement of Profit and Loss in the period
of derecognition.
(ii) Depreciation
Depreciation on Building classified as Investment Property is provided, under the Straight Line Method, pro rata to the
period of use, based on useful lives specified in Schedule II to the Companies Act, 2013.
2.3 Intangible Assets
(i) Recognition and measurement
Intangible assets are recognised when it is probable that future economic benefits that are attributable to concerned
assets will flow to the Company and the cost of the assets can be measured reliably.
Intangible assets are initially measured at cost and are subsequently measured at cost less accumulated amortization
(other than goodwill and indefinite life intangibles) and any accumulated impairment losses.
Gain or loss arising from derecognition of an intangible asset is recognised in the Statement of Profit and Loss.
(ii) Amortisation
Intangible Assets are amortised over the estimated useful life on Straight Line Method (SLM).
The useful lives of Intangible assets are assessed as either finite or indefinite. The amortisation period and the
amortisation method for an intangible asset with finite useful life are reviewed at the end of each reporting period.
Changes in the expected useful life or expected pattern of consumption of future economic benefits embodied in
the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in
accounting estimates. Goodwill and Indefinite life intangibles are not amortised but are tested for impairment annually
and whenever there is an indication that the intangible asset may be impaired.
Computer Software is amortised in a Straight Line basis over a period of 3 years.
2.4 Impairment of non-financial assets
The carrying values of assets / cash generating units at each balance sheet date are reviewed for impairment if any indication
of impairment exists.
If the carrying amount of the assets exceed the estimated recoverable amount, impairment is recognized for such excess
amount. The impairment loss is recognized as an expense in the Statement of Profit and Loss, unless the asset is carried at
revalued amount, in which case any impairment loss of the revalued asset is treated as a revaluation decrease to the extent a
revaluation reserve is available for that asset.
When there is indication that an impairment loss recognised for an asset in earlier accounting periods which no longer exists
or may have decreased, such impairment loss is reversed in the Statement of Profit and Loss only, to the extent that the
asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, if no
impairment loss had been recognised.
2.5 Investments in Subsidiaries and Associates
Investments in Subsidiaries and Associates are carried at cost less accumulated impairment losses, if any. Where an indication
of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable
amount. On disposal of investments in subsidiaries, associate and jointly controlled entities, the difference between net
disposal proceeds and the carrying amounts are recognized in the Statement of Profit and Loss.
2.6 Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is determined using the
weighted average method. In the case of manufactured inventories and work in progress, cost includes an appropriate share
of production overheads based on normal operating capacity. 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.
If payment for inventory is deferred beyond normal credit terms then cost is determined by discounting the future cash flows
at an interest rate determined with reference to market rates. The difference between the total cost and the deemed cost is
recognised as interest expense over the period of financing under the effective interest method.
Slow and non-moving material, obsolescence, defective inventories are duly provided for and valued at lower of cost and net
realizable value. Goods and materials in transit are valued at actual cost incurred upto the date of balance sheet. Materials and
supplies held for use in the production of inventories are not written down if the finished products in which they will be used
are expected to be sold at or above cost.
2.7 Cash and Cash Equivalents
Cash and cash equivalents in the balance sheet comprise cash on hand, bank balances and short-term deposits with an
original maturity of three months or less, which are subject to an insignificant risk of changes in value.
For the purpose of the Statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined
above, net of outstanding bank overdrafts as they are considered an integral part of the Company's cash management.
2.8 Financial Assets
(i) Initial recognition and measurement
Financial assets are recognised when the Company becomes a party to the contractual provisions of the instrument.
On initial recognition, a financial asset is recognised at fair value, in case of Financial assets which are recognised at fair
value through profit and loss (FVTPL), its transaction cost is recognised in the Statement of Profit and Loss. In other
cases, the transaction cost is attributed to the acquisition value of the financial asset.
(ii) Classification and Subsequent measurement
Financial assets are subsequently classified and measured at
• amortised cost
• fair value through profit and loss (FVTPL)
• fair value through other comprehensive income (FVOCI)."
Financial assets are not reclassified subsequent to their recognition, except if and in the period the Company changes
its business model for managing financial assets.
(iii) Trade Receivables:
Trade receivables are initially recognised at their transaction price (as defined in Ind AS 115) unless those contain
significant financing component determined in accordance with Ind AS 115 (or when the entity applies the practical
expedient in accordance with para 63 of Ind AS 115). As a practical expedient, the Company uses a provision matrix
to measure lifetime ECL on its portfolio of trade receivables. The provision matrix is prepared based on historically
observed default rates over the expected life of trade receivables and is adjusted for forward looking estimates. At each
reporting date, the historically observed default rates and changes in the forward-looking estimates are updated.
(iv) Debt Instruments
Debt instruments are initially measured at amortised cost, fair value through other comprehensive income ('FVOCI')
or fair value through profit or loss ('FVTPL') till derecognition on the basis of (i) the Company's business model for
managing the financial assets and (ii) the contractual cash flow characteristics of the financial asset.
(a) Measured at amortised cost: Financial assets that are held within a business model whose objective is to hold
financial assets in order to collect contractual cash flows that are solely payments of principal and interest, are
subsequently measured at amortised cost using the effective interest rate ('EIR') method less impairment, if any.
The amortisation of EIR and loss arising from impairment, if any is recognised in the Statement of Profit and
Loss.
(b) Measured at fair value through other comprehensive income: Financial assets that are held within a business
model whose objective is achieved by both, selling financial assets and collecting contractual cash flows that are
solely payments of principal and interest, are subsequently measured at fair value through other comprehensive
income. Fair value movements are recognized in the other comprehensive income (OCI). Interest income
measured using the EIR method and impairment losses, if any are recognised in the Statement of Profit and Loss.
On derecognition, cumulative gain or loss previously recognised in OCI is reclassified from the equity to 'Other
Income' in the Statement of Profit and Loss.
(c) Measured at fair value through profit or loss: A financial asset not classified as either amortised cost or FVOCI,
is classified as FVTPL. Such financial assets are measured at fair value with all changes in fair value, including
interest income and dividend income if any, recognised as 'Other Income' in the Statement of Profit and Loss.
(v) Equity Instruments
For investments other than those stated in 2.5 above the equity instruments classified under financial assets are initially
measured at fair value and the Company may, on initial recognition, irrevocably elect to measure the same either at
FVOCI or FVTPL.
The Company makes such election on an instrument-by-instrument basis. Fair value changes on an equity instrument
is recognised as other income in the Statement of Profit and Loss unless the Company has elected to measure such
instrument at FVOCI. Fair value changes excluding dividends, on an equity instrument measured at FVOCI are
recognized in OCI. Amounts recognised in OCI are not subsequently reclassified to the Statement of Profit and Loss.
Dividend income on the investments in equity instruments are recognised as Income in the Statement of Profit and
Loss.
(vi) Derecognition
The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset
expire, or it transfers the contractual rights to receive the cash flows from the asset.
(vii) Impairment of Financial Asset
Expected credit losses are recognized for all financial assets subsequent to initial recognition other than financial assets
in FVTPL category.
For financial assets other than trade receivables, as per Ind AS 109, the Company recognises 12 month expected credit
losses for all originated or acquired financial assets if at the reporting date the credit risk of the financial asset has
not increased significantly since its initial recognition. The expected credit losses are measured as lifetime expected
credit losses if the credit risk on financial asset increases significantly since its initial recognition. The Company's trade
receivables do not contain significant financing component and loss allowance on trade receivables is measured at an
amount equal to life time expected losses i.e. expected cash shortfall.
The impairment losses and reversals are recognised in Statement of Profit and Loss.
2.9 Financial Liabilities
(i) Initial recognition and measurement
Financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument.
Financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of
directly attributable transaction costs.
(ii) Subsequent measurement
Financial liabilities are subsequently measured at amortised cost using the EIR (Effective Interest Rate) method or are
measured at fair value through profit and loss with changes in fair value being recognised in the Statement of Profit
and Loss.
(iii) Derecognition
A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled or expires.
Financial Liability is also derecognised on modification of terms of contract and when cashflows under modified terms
are substantially different.
2.10 Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently
enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets
and settle the liabilities simultaneously.
2.11 Derivative financial instruments
The Company uses derivative financial instruments, such as forward currency contracts and interest rate swaps, to hedge its
foreign currency risks and interest rate risks respectively. The Company also uses commodity futures contracts to hedge the
exposure to oil price risks. Such derivative financial instruments are initially recognised at fair value on the date on which a
derivative contract is entered into and are subsequently re-measured at fair value at the end of each reporting period. The
subsequent changes in fair value are recorded in Statement of Profit and Loss.
Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is
negative. The Company does not follow hedge accounting.
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