2. SIGNIFICANT ACCOUNTING POLICIES AND
NOTES TO ACCOUNTS
2.1 BASIS OF PREPARATION
The Standalone Audited financial statements of the
Company have been prepared in accordance with Indian
Generally Accepted Accounting Principles (Indian GAAP)
under the historical cost convention on the accrual basis.
Indian Generally Accepted Accounting Principles (Indian
GAAP) comprises mandatory accounting stantards as
prescibed under section 133 of the Companies Act,
2013 (the Act and other relevant provisions of the Act)
read with Rule 7 of Companies (Accounts) Rules, 2014
(as amended from time to time) as applicable and other
relevant provisions of the Act. Accouting policies have
been consistently applied except where a newly issued
accouniting statndard is initially adopted or a revision to
an existing accounting standard requires a change in the
accounting policy hitherto in use.
The Standalone Audited financial statements is presented
in Indian Rupees (INR) and all values are rounded to the
nearest lakh, except when otherwise indicated.
2.2 PRESENTATION OF FINANCIAL STATEMENT
The Standalone Audited financial statements of the
Company are presented as per schedule III (Division II)
of the Companies Act, 2013, as notified by the Ministry
of Corporate Affairs (MCA). Financial assets and financial
liabilities are generally reported on a gross basis except
when, there is an unconditional legally enforceable
right to offset the recognised amounts without being
contingent on a future event and the parties intend to
settle on a net basis.
2.3 SIGNIFICANT ACCOUNTING POLICIES
2.3.1CURRENT VS NON-CURRENT CLASSIFICATION
The Company presents assets and liabilities
in the balance sheet based on current/non-
current classification. An asset is treated as
current when it is:
- Expected to be realised or intended to be sold
or consumed in normal operating cycle
- Held primarily for the purpose of trading
- Expected to be realised 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
All other assets are classified as non-current.
A liability is current when:
- Expected to be settled in normal operating cycle
- Held primarily for the purpose of trading
- Due to be settled within twelve months after
the reporting period, or
- There is no unconditional right to defer the
settlement of the liability for at least twelve
months after the reporting period
The Company classifies all other liabilities
as non-current.
Deferred tax assets and liabilities are classified as
non-current assets and liabilities.
Based on the nature of products and time between
the acquisition of assets for processing and
their realisation in cash and cash equivalents,
the Company has identified twelve months as its
operating cycle.
2.3.2REVENUE RECOGNITION
Revenue is recognized to the extent that it is
probable that the economic benefits will flow to the
company and the revenue can be reliably measured.
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. The specific
recognition criteria described below must also be
met before revenue is recognized. Revenues are
generally measured and accounted for on accrual
basis. The following specific recognition criteria
must also be met before revenue is recognized.
Sale of goods and services:
Revenue from sale of goods is recognized when all
the significant risks and rewards of ownership of
the goods have been passed to the buyer, usually on
delivery of the goods. The company collects goods &
service taxes (GST) on behalf of the government and,
therefore, these are not economic benefits flowing to
the company. Hence, they are excluded from revenue.
Revenue is recognised upon transfer of control
of promised goods or services to customers in an
amount that reflects the consideration which the
Company expects to receive in exchange for those
products or services.
- Revenue from sales of goods is recognised
on output basis measured by units delivered,
number of transactions etc.
- Revenue from the sale of goods is recognised at
the point in time when control is transferred to the
customer which coincides with the performance
obligation under the contract with the customer.
- Revenue from services is recognized in
accordance with the terms of contract when
the services are rendered and the related
costs are incurred
Revenue is measured based on the transaction
price, which is the consideration, adjusted for cash
discounts, schemes discounts, claim paid, price
concessions and incentives, if any, as specified
in the contract with the customer. Revenue also
excludes taxes collected from customers.
Revenue from related party is recognised based on
transaction price which is at arm's length.
Use of significant judgments in revenue recognition :
- The Company's contracts with customers could
include promises to transfer multiple products
and services to acustomer. The Company
assesses The products / services promised in
a contract and identifies distinct performance
obligations in The contract. Identification
of distinct performance obligation involves
judgments to determine The deliverables
and The ability of The customer to benefit
independently from such deliverables.
Contract assets are recognised when there
is excess of revenue earned over billings on
contracts. Contract assets are classified as unbilled
receivables (only act of invoicing is pending) when
there is unconditional right to receive cash, and only
passage of time is required, as per contractual terms.
Unearned and deferred revenue ("contract
liability") is recognised when there is billings in
excess of revenues.
Interest Income is recognised on time proportion
basis taking into account the amount outstanding
and the applicable interest rates and is disclosed in
"other income".
2.3.3EXPENSES
(i) Borrowing Costs
Borrowing costs that are directly attributable
to the acquisition, construction or production
of an asset till the date of such acquisition,
construction or production is capitalized
as part of the cost of that asset. Alt other
borrowing costs are recognized as an expense
in the period in which they are incurred
(ii) RETIREMENT AND OTHER EMPLOYEE
BENEFITS:
Short term employee benefits: Alt employee
benefits payable wholly within twelve months of
rendering the services are classified as short¬
term employee benefits. These benefits include
salaries and wages etc and medical expenses
and are recognised in the period in which the
employee renders the related services.
Provident Fund is a defined contribution
scheme. The Company has no obligation, other
than the contribution payable to the Provident
Fund which is an amount determined as a
fixed percentage of basic pay to the fund every
month. The Company recognizes contribution
payable to the provident funds an expense,
when an employee renders the related service.
Grauity Plan - The Company provudes for
gratuity, a defined benefit plan (the "Gratuity"
plan) which is unfunded covering eligible
employees in accordance with the payment of
Gratuity Act, 1972. The Gratuity Plan provides
a lump sum payment to vested employees at
retirement, death, incapacitation or termination
of employment, of an amount based on the
respective employee's salary and the tenure
of employment. The Company's liability is
actuarially determined (using the Projected
Unit Credit method) at the end of each year.
Actuarial losses / gains are recognized in the
other comprehensive income in the year in
which they arise. Remeasurement recognized
in other comprehensive income is reflected
immediately in retained earnings and is not
reclassified to profit or loss.
Compensated absences: The employees of
the Company are entitled to compensated
absences which are both accumulating and
non-accumulating in nature. The expected
cost of accumulating compensated absences
is determined by actuarial valuation 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.
(iii) Other income and expenses
All other income and expense are recognized
in the period they occur.
2.3.4 Impairment of non-financial assets
The carrying amount of assets is reviewed at each
balance sheet date if there is any indication of
impairment based on internal/external factors.
An impairment loss is recognized wherever the
carrying amount of an asset exceeds its recoverable
amount. The recoverable amount is the greater of
the assets, net selling price 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 risks
specific to the asset.
In determining net selling price, recent market
transactions are taken into account, if available. If no
such transactions can be identified, an appropriate
valuation model is used. After impairment,
depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
2.3.5LEASES
The Company has taken premises under lease/
rent agreements-warehouse and industrial plots
having address B-39, Sector 59, Noida, Uttar
Pradesh, India -201301
The determination of whether an arrangement
is a lease/rent, or contains a lease, is based on
the substance of the arrangement and requires
an assessment of whether the fulfilment of the
arrangement is dependent on the use of a specific
asset or assets or whether the arrangement
conveys a right to use the asset. A contract is, or
contains, a lease if the contract conveys the right
to control the use of an identified asset for a time
in exchange for a consideration. The Leases have
been classified under operating leases and finance
leases depending upon the degree of risk and
rewards associated with the leased assets assumed
by the lessor and lessee in compliance with
accounting standards on leases. Under operating
lease, operating lease payments are recognized
as an expense in the Profit & Loss account. Under
finance lease, the leased assets are presented
under fixed assets at their fare value or present
value of future minimum lease payments with a
corresponding liability. Lease payments thereunder
have been segregated into finance charge and
reduction in liability.
2.3.6TAXATION
CURRENT INCOME TAX
Current tax assets and liabilities for the current and
prior years are 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, by the reporting date in
the countries where the Company operates and
generates taxable income.
Current income tax relating to items recognised
outside profit or loss is recognised outside profit
or loss (either in other comprehensive income
or in equity). Current tax items are recognised in
correlation to the underlying transaction either
in Other Comprehensive Income (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.
In accordance with the provisions of Section 115BAA
of the Income Tax Act, the company has opted for
the lower tax rate regime, which necessitates the
forgoing of various tax incentives, including the
MAT (Minimum Alternate Tax) credit. As per the
policy adopted, MAT credit not utilized under the
previous tax regime is not applicable under the
provisions of Section 115BAA. Therefore, the MAT
credit that was accumulated under the earlier
provisions of the Income Tax Act is not recognized
in the current financial statements. This treatment
is in line with the statutory requirements and
ensures consistency with the tax regime opted for
under Section 115BAA. Consequently, MAT credit
is not carried forward or recognized as an asset in
the books of accounts, and no deferred tax assets
related to MAT credit are recognized or accounted
for in the financial statements.
DEFERRED TAX
Deferred tax assets and liabilities are recognised for
temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts.
Deferred income tax is determined using tax rates
(and laws) that have been enacted or substantively
enacted by the reporting date and are expected to
apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled.
Deferred tax assets are only recognised for
temporary differences, unused tax losses and
unused tax credits if it is probable that future
taxable amounts will arise to utilise those temporary
differences and losses. Deferred tax assets are
reviewed at each reporting date and are reduced
to the extent that it is no longer probable that the
related tax benefit will be realised.
Deferred tax assets and liabilities are offset where
there is a legally enforceable right to offset current
tax assets and liabilities and they relate to income
taxes levied by the same tax authority on the same
taxable entity, or on different tax entities, but they
intend to settle current tax liabilities and assets
on a net basis or their tax assets and liabilities are
realised simultaneously.
2.3.7FINANCIAL INSTRUMENTS
Initial recognition:
The Company recognizes Financial assets and
Financial liabilities when it becomes a party to
the contractual provisions of the instruments. All
Financial assets and liabilities are recognized at fair
value on initial recognition. Transaction costs that
are directly attributable to the acquisition or issue
of Financial assets and Financial liabilities, that are
not at fair value through profit or loss, are added to
the fair value on initial recognition.
Financial liabilities and equity instruments:
Classification as debt or equity
Financial liabilities and equity instruments issued
by the Company are classified according to the
substance of the contractual arrangements entered
into and the definitions of a financial liability and an
equity instrument.
Equity instruments
An equity instrument is any contract that evidences
a residual interest in the assets of the Company
after deducting all of its liabilities. Instruments
(including convertible preference shares ) that meet
the definition of 'Equity' in its entirety and which
do not have any component of liability, is classified
as Equity and grouped under 'Instruments entirely
equity in nature'. Equity instruments are recorded
at the proceeds received, net of direct issue costs.
The transaction costs of an equity transaction are
accounted for as a deduction from equity to the extent
they are incremental costs directly attributable to
the equity transaction that otherwise would have
been avoided. The costs of an equity transaction that
is abandoned are recognised as an expense.
Subsequent measurement:
i. Financial assets carried at amortized cost
A Financial asset is subsequently measured at
amortized cost if it is held within a business
model whose objective is to hold the asset in
order to collect contractual cash flows and the
contractual terms of the Financial asset give
rise on specified dates to cash flows that are
solely payments of principal and interest on
the principal amount outstanding.
ii. Financial assets at fair value
through profit or loss
A Financial asset which is not classified in the
above category is subsequently fair valued
through profit or loss.
iii. Financial liabilities
Financial liabilities are subsequently carried
at amortized cost using the effective interest
method. For trade and other payables maturing
within one year from the Balance Sheet date,
the carrying amounts approximate fair value
due to the short maturity of these instruments.
2.3.8FAIR VALUE MEASUREMENTS
On initial recognition, all the financial instruments
are measured at fair value. For subsequent
measurement, the Company measures certain
categories of financial instruments at fair value on
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:
i. In the principal market for the asset
or liability, or
ii. In 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.
A fair value measurement of a non-financial asset
takes into account a market participant's ability to
generate economic benefits by using the asset in
its highest and best use or by selling it to another
market participant that would use the asset
in its highest and best use. The Company uses
valuation techniques that are appropriate in the
circumstances and for which sufficient data are
available to measure fair value, maximising the use
of relevant observable inputs and minimising the
use of unobservable inputs.
2.3.9CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise the net
amount of short-term, highly liquid investments
that are readily convertible to known amounts of
cash (short-term deposits with an original maturity
of three months or less) and are subject to an
insignificant risk of change in value, cheques on
hand and balances with banks. They are held for the
purposes of meeting short-term cash commitments
(rather than for investment or other purposes). For
the purpose of the statement of cash flows, cash
and cash equivalents consist of cash and short¬
term deposits, as defined above.
2.3.10 PROPERTY, PLANT & EQUIPMENT (PPE)
Property, plant and equipment (PPE) are measured
at cost less accumulated depreciation and
accumulated impairment, (if any). The total cost
of assets comprises its purchase price, freight,
duties, taxes and any other incidental expenses
directly attributable to bringing the asset to the
location and condition necessary for it to be
capable of operating in the manner intended by
the management. Changes in the expected useful
life are accounted for by changing the amortisation
period or methodology, as appropriate, and treated
as changes in accounting estimates. Subsequent
expenditure related to an item of tangible asset are
added to its gross value only if it increases the future
benefits of the existing asset, beyond its previously
assessed standards of performance and cost can be
measured reliably. Other repairs and maintenance
costs are expensed off as and when incurred.
The present value of the expected cost for
decommissioning of an asset after its use is included
in the cost of the respective asset, if the recognition
criteria for a provision are met.
The Company identifies and determines cost of
each component/ part of the asset separately, if the
component/ part has a cost which is significant to
the total cost of the asset and has useful life that is
materially different from that of the remaining asset.
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 derecognition of the asset (calculated as
the difference between the net disposal proceeds
and the carrying amount of the asset) is recognised
in other income / expense in the statement of profit
and loss in the year the asset is derecognised.
The date of disposal of an item of property, plant
and equipment is the date the recipient obtains
control of that item in accordance with the
requirements for determining when a performance
obligation is satisfied.
The residual values, useful lives and methods of
depreciation of property, plant and equipment are
reviewed at each financial year end and adjusted
prospectively, if appropriate.
DEPRECIATION
Depreciation is calculated using the straight-line
method to write down the cost of property and
equipment to their residual values over their
estimated useful lives which is in line with the
estimated useful life as specified in Schedule II of
the Companies Act, 2013.
The estimated useful lives are as follows:
Plant and machinery: 15 years
Furniture and Fixtures: 10 Years
Computers: 3 Years
Vehicles: 8 Years
Depreciation on Property, plant & equipment added/
disposed off during the year is provided on pro-rata
basis with respect to date of acquisition/ disposal.
2.3.11 INVENTORIES
Inventories are valued at the lower of cost and net
realisable value.
Costs incurred in bringing each product to its present
location and condition are accounted for as follows:
Raw materials: Cost includes cost of purchase and
other costs incurred in bringing the inventories
to their present location and condition. Cost is
determined on weighted average basis.
Finished goods and work-in-progress: Cost includes
cost of direct materials and labour and a proportion
of fixed manufacturing overheads based on the
normal operating capacity. Cost is determined on a
weighted average basis.
Traded goods: Cost includes cost of purchase and
other costs incurred in bringing the inventories
to their present location and condition. Cost is
determined on weighted average basis.
Stores and spares: Cost includes cost of purchase
and other costs incurred in bringing the inventories
to their present location and condition. Cost is
determined on weighted average basis.
Net realizable value is the estimated selling price
in the ordinary course of business, less estimated
costs of completion and estimated costs necessary
to make the sale.
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