C SIGNIFICANT ACCOUNTING POLICIES
a) Property, Plant and Equipment:
property, plant and equipment are stated at their cost of acquisition. The cost comprises purchase price,
borrowing cost if capitalisation criteria are met and directly attributable cost of bringing the asset to its
working condition for the intended use.
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. All other repair and maintenance costs are recognised in statement of profit and loss as incurred.
Subsequent measurement (depreciation and useful lives) :
Depreciation on property, plant and equipment is provided on written-down value, computed on the basis of
useful lives (as set out below) prescribed in Schedule II the Act:
The residual values, useful lives and method of depreciation are reviewed at each financial year end and
adjusted prospectively, if appropriate.
Material items such as spare parts, stand-by equipment and service equipment are classified as PPE when
they meet the definition of PPE as specified in Ind AS 16 - Property, Plant and Equipment.
After initial recognition, intangible assets are carried at cost less any accumulated amortisation and
accumulated impairment losses, if any.
De-recognition
An item of property, plant and equipment and any significant part initially recognised is derecognised upon
disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising
on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the
carrying amount of the asset) is included in the income statement when the asset is derecognised.
b) Intangible Assets :
computer software acquired are measured on initial recognition at cost. Cost comprises the purchase price
(net of tax/duty credits availed wherever applicable) and any directly attributable cost of bringing the assets
to its working condition for its intended use.
The amortisation period and the amortisation method for finite-life intangible assets is reviewed at each
financial year end and adjusted prospectively, if appropriate.
After initial recognition, intangible assets are carried at cost less any accumulated amortisation and
accumulated impairment losses, if any.
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from its
use or disposal. Gains or losses arising from derecognition of an item of intangible asset are measured as
the difference between the net disposal proceeds and the carrying amount of such item of intangible asset
and are recognised in the Statement of Profit and Loss when the asset is derecognised.
Research and Development :
Expenditure on research activities is recognised in profit or loss as incurred. Development expenditure is
capitalised as part of the cost of the resulting intangible assets only if the expenditure can be measured
reliably, the product or process is technically and commercially feasible, future economic benefits are probable,
and the Group intends to and has sufficient resources to complete development and to use or sell the
assets. Otherwise, it is recognised in profit or loss as incurred. Subsequent to initial recognition, development
expenditure is measured at cost less accumulated amortisation and any accumulated impairment losses.
Amortisation of Intangible Assets :
c) Investment Properties :
Property that is 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 at its cost, including
related transaction costs. and impairment if any.
d) Impairment of non-financial assets
At each reporting date, the Company assesses whether there is any indication based on internal/external
factors, that an asset may be impaired. If any such indication exists, the Company estimates the recoverable
amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating
unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its
recoverable amount and the reduction is treated as an impairment loss and is recognised in the statement of
profit and loss. All assets are subsequently reassessed for indications that an impairment loss previously
recognised may no longer exist. An impairment loss is reversed if the asset’s or cash-generating unit’s
recoverable amount exceeds its carrying amount.
The impairment losses and reversals are recognised in statement of profit and loss.
e) Investments in Subsidiaries, Associates and Joint Ventures:
Investments in subsidiaries, associates and joint ventures 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, associates
and joint venture, the difference between net disposal proceeds and the carrying amounts are recognized in
the Statement of Profit and Loss.
f) Financial instruments
Financial assets
Initial recognition and measurement
Financial assets are recognised when the Company becomes a party to the contractual provisions of the
instrument.
Subsequent measurement
On initial recognition, a financial asset is recognised at fair value, in case of Financial assets which are
recognised at fair value through other comprehensive Income (FVOCI), its transaction cost are recognised
in the statement of profit and loss. In other cases, the transaction cost are attributed to the acquisition value
of the financial asset.
Financial assets are subsequently classified as 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.
Trade Receivables and Loans:
Trade receivables are initially recognised at fair value. Subsequently, these assets are held at amortised
cost, using the effective interest rate (EIR) method net of any expected credit losses. The EIR is the rate that
discounts estimated future cash income through the expected life of financial instrument.
Mutual Funds, Equity investment, bonds and other financial instruments :
Mutual Funds, Equity Investment, bonds and other financial 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.
i) 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.
ii) Measured at fair value through other comprehensive income (FVOCI):
Mutual Funds, Equity investment, bonds and other financial instruments in the scope of Ind As 109 are
measured at fair value through profit and loss account( FVOCI).
iii) Measured at fair value through profit or loss (FVTPL):
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.
Financial liabilities
Initial recognition and measurement
All financial liabilities are recognised initially at fair value and transaction cost that is attributable to the
acquisition of the financial liabilities is also adjusted. These liabilities are classified as amortised cost.
Subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest
method. These liabilities include borrowings.
De-recognition of financial liabilities
A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or
expires. When an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or modification
is treated as the de- recognition of the original liability and the recognition of a new liability. The difference in
the respective carrying amounts is recognised in the statement of profit and loss.
g) Impairment of financial assets
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement
and recognition of impairment loss for financial assets.
ECL is the difference between all contractual cash flows that are due to the Company in accordance with the
contract and all the cash flows that the Company expects to receive. When estimating the cash flows, the
Company is required to consider -
• All contractual terms of the financial assets (including prepayment and extension) over the expected
life of the assets.
• Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual
terms
Trade receivables
The Company applies approach permitted by Ind AS 109, financial instruments, which requires expected
lifetime losses to be recognised from initial recognition of receivables.
Other financial assets
For recognition of impairment loss on other financial assets and risk exposure, the Company determines
whether there has been a significant increase in the credit risk since initial recognition and if credit risk has
increased significantly, impairment loss is provided.
h) Inventories
Raw Material: Lower of cost or net realisable value. Cost is determined on first in first out (‘FIFO’) basis.
Work in progress, manufactured finished goods and traded goods are valued at lower of cost and net realisable
value. Cost of work in progress and manufactured finished goods comprises direct material, cost of conversion
and other costs incurred in bringing these inventories to their present location and condition. Trading goods
are valued at Cost or net realisable value, whichever is lower.
Finished goods: Lower of cost or net realisable value. Cost is determined on FIFO basis, includes direct
material and labour expenses and appropriate proportion of manufacturing overheads based on the normal
capacity for manufactured goods.
Net realisable value is the estimated selling price in the ordinary course of business less estimated costs of
completion and estimated costs of necessary to make the sale.
Inventories of cut and polished diamonds are valued at cost or net realisable value whichever is lower based
on the valuation report obtained from Government approved Valuer.
i) Foreign Currency Translation
Initial recognition
The Company’s financial statements are presented in Rupees, which is also the Company’s functional
currency. Transactions in foreign currencies are recorded on initial recognition in the functional currency at
the exchange rates prevailing on the date of the transaction.
Foreign currency monetary items of the Company, outstanding at the balance sheet date are restated at the
year-end rates. Non-monetary items which are carried at historical cost denominated in a foreign currency
are reported using the exchange rate at the date of the transaction. 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.
Treatment of exchange difference
Exchange differences that arise on settlement of monetary items or on reporting at each balance sheet date
of the Company’s monetary items at the closing rate are recognised as income or expenses in the period in
which they arise.
j) Income taxes :
Tax expense recognised in statement of profit and loss comprises the sum of deferred tax and current tax
not recognised in Other Comprehensive Income (‘OCI’) or directly in equity.
Current income tax relating to items recognised outside the statement of profit and loss is recognised in
correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates
positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to
interpretation and establishes provisions where appropriate. Current income tax is measured at the amount
expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute
the amount are those that are enacted or substantively enacted, at the reporting date.
Deferred income-tax is calculated using the liability method. Deferred tax liabilities are generally recognised
in full for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable
that the underlying tax loss, unused tax credits or deductible temporary difference will be utilised against
future taxable income. This is assessed based on the Company’s forecast of future operating results, adjusted
for significant non-taxable income and expenses and specific limits on the use of any unused tax loss or
credit. Deferred tax assets or liability arising during tax holiday period is not recognised to the extent it
reverses out within the tax holiday period. 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. Deferred tax relating to items recognised outside statement of
profit and loss is recognised outside statement of profit and loss (either in OCI or in equity).
k) Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, demand deposits with banks/corporations and short¬
term highly liquid investments that are readily convertible into known amount of cash and subject to an
insignificant risk of change in value.
l) Post-employment, long term and short term employee benefits
Defined contribution plans
Provident fund benefit is a defined contribution plan under which the Company pays fixed contributions into
funds established under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. The
Company has no legal or constructive obligations to pay further contributions after payment of the fixed
contribution.
Defined benefit plans
Gratuity is a post-employment benefit defined under The Payment of Gratuity Act, 1972 and is in the nature
of a defined benefit plan. The liability recognised in the financial statements in respect of gratuity is the
present value of the defined benefit obligation at the reporting date, together with adjustments for unrecognised
actuarial gains or losses and past service costs. The defined benefit/obligation is calculated at or near the
reporting date by an independent actuary using the projected unit credit method.
Actuarial gains and losses arising from past experience and changes in actuarial assumptions are credited
or charged to the statement of OCI in the year in which such gains or losses are determined.
Other long-term employee benefits
Liability in respect of compensated absences is estimated on the basis of an actuarial valuation performed
by an independent actuary using the projected unit credit method.
Actuarial gains and losses arising from past experience and changes in actuarial assumptions are charged
to statement of profit and loss in the year in which such gains or losses are determined.
Other Short-term employee benefits
Expense in respect of other short term benefits is recognised on the basis of the amount paid or payable for
the period during which services are rendered by the employee.
m) Share Based Payment Transactions
The Company operates equity-settled share based remuneration plans for its employees. All services received
in exchange for the grant of any share based payment are measured at their fair values on the grant date
and is recognised as an employee expense, in the profit or loss with a corresponding increase in equity, over
the period that the employees become unconditionally entitled to the options. The amount recognised as an
expense is adjusted to reflect the actual number of stock options that vest.
n) Business Combinations and Goodwill
The Company uses the acquisition method of accounting to account for business combinations. The Company
measures goodwill as of the acquisition date at the difference of the fair value consideration transferred
(including fair value of previously held interest and contingent consideration) less the net fair value of the
identifiable assets acquired and liabilities (including contingent liabilities) assumed. When such difference
results into deficit, the excess is recognised in equity as capital reserve.
Business combination involving entities or businesses under common control is accounted for using the
pooling of interest method. Under pooling of interest method, the assets and liabilities of combining entities
are reflected at their carrying amount and no adjustments are made to reflect fair values.
Transaction costs that the Company incurs in connection with a business combination are expensed as
incurred.
o) Operating expenses
Operating expenses are recognised in profit or loss upon utilisation of the service or as incurred.
p) Borrowing costs
Borrowing costs directly attributable to the acquisitions, construction or production of a qualifying asset are
capitalised during the period of time that is necessary to complete and prepare the asset for its intended use
or sale. Other borrowing costs are expensed in the period in which they are incurred and reported in finance
costs.
q) Fair value measurement
The Company measures financial instruments, at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The fair value measurement is based on
the presumption that the transaction to sell the asset or transfer the liability takes place either:
• ln the principal market for the asset or liability, or
• ln the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use
when pricing the asset or liability, assuming that market participants act in their economic best interest.
|