3. Material accounting policies
a. Current and non-current classification
All assets and liabilities are classified as current or
non-current as per the Company’s normal operating cycle
and other criteria set out in the Schedule III to the Act.
Assets
An asset is classified as current when it satisfies any of
the following criteria:
(i) it is expected to be realised in, or is intended for
sale or consumption in the Company’s normal
operating cycle;
(ii) it is held primarily for the purpose of being traded;
(iii) it is expected to be realised within 12 months after
the reporting date; or
(iv) it is cash or cash equivalent unless it is restricted
from being exchanged or used to settle a liability
for at least 12 months after the reporting date.
Current assets include current portion of non-current
financial assets.
All other assets are classified as non-current.
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A liability is classified as current when it satisfies any of
the following criteria:
(i) it is expected to be settled in the Company’s
normal operating cycle;
(ii) it is held primarily for the purpose of being traded;
(iii) it is due to be settled within 12 months after the
reporting date; or
(iv) the Company does not have an unconditional right
to defer settlement of the liability for at least 12
months after the reporting date. Terms of a liability
that could, at the option of the counterparty, result
in its settlement by the issue of equity instruments
do not affect its classification.
Current liabilities include current portion of non-current
financial liabilities.
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as
non-current assets and liabilities.
Operating cycle
For the purpose of current/non-current classification of
assets and liabilities, the Company has ascertained its
normal operating cycle as twelve months. This is based
on the nature of business and the time between the
acquisition of assets for processing and their realisation
in cash and cash equivalents.
b. Foreign currency transactions
Transactions in foreign currencies are translated into the
respective functional currency of the Company at the
exchange rates prevailing at the dates of the transactions.
Monetary assets and liabilities denominated in
foreign currencies are translated into the functional
currency at the exchange rate at the reporting date.
Non-monetary assets and liabilities that are measured
at fair value in a foreign currency are translated into
the functional currency at the exchange rate when the
fair value was determined. Non-monetary assets and
liabilities that are measured based on historical cost in
a foreign currency are translated at the exchange rate
at the date of the transaction. Exchange differences are
recognised in the Statement of Profit and Loss in the
period in which they arise.
c. Financial instruments
(i) Recognition and initial measurement
Trade receivables are initially recognised when they are
originated. All financial assets and financial liabilities
are initially recognised when the Company becomes
a party to the contractual provisions of the instrument.
Trade receivables are initially measured at transaction
price. A financial asset or financial liability is initially
measured at fair value plus transaction costs that are
directly attributable to its acquisition or issue, for an item
not at fair value through profit and loss (FVTPL)
(ii) Classification and subsequent measurement
Financial assets
On initial recognition, a financial asset is classified and
measured at Amortised cost; or Fair value through
Profit or Loss (FVTPL); or Fair value through Other
Comprehensive Income (FVTOCI). Financial assets are
not reclassified subsequent to their initial recognition,
except if and in the period the Company changes its
business model for managing financial assets.
Financial assets at amortised cost
A financial asset is measured at amortised cost if
it meets both of the following conditions and is not
designated as at FVTPL (a) the asset is held within a
business model whose objective is to hold assets to
collect contractual cash flows; and (b) the contractual
terms of the financial asset give rise on specified dates
to cash flows that are solely payments of principal and
interest (SPPI) on the principal amount outstanding.
The effective interest rate (EIR) method of amortisation
is included in finance income in the Statement of Profit
and Loss. This category generally applies to long-term
deposits and long-term trade receivables.
Financial assets at FVTPL
All financial assets which are not classified and
measured at amortised cost or Fair value through other
comprehensive income (FVOCI) as described above
are measured at FVTPL. On initial recognition, the
Company may irrevocably designate a financial asset
that otherwise meets the requirements to be measured
at amortised cost or at FVOCI as at FVTPL if doing
so eliminates or significantly reduces an accounting
mismatch that would otherwise arise.
Financial assets: Assessment whether contractual
cash flows are solely payments of principal and
interest (SPPI). For the purposes of this assessment,
‘principal’ is defined as the fair value of the financial
asset on initial recognition. ‘Interest’ is defined as
consideration for the time value of money and for
the credit risk associated with the principal amount
outstanding during a particular period of time and for
other basic lending risks and costs (e.g. liquidity risk
and administrative costs), as well as a profit margin.
In assessing whether the contractual cash flows are
solely payments of principal and interest, the Company
considers the contractual terms of the instrument.
This includes assessing whether the financial asset
contains a contractual term that could change the
timing or amount of contractual cash flows such that it
would not meet this condition.
In making this assessment, the Company considers:
• contingent events that would change the amount or
timing of cash flows;
• terms that may adjust the contractual coupon rate,
including variable interest rate features;
• prepayment and extension features; and
• terms that limit the Company’s claim to cash flows
from specified assets (e.g. non-recourse features).
A prepayment feature is consistent with the solely
payments of principal and interest criterion if the
prepayment amount substantially represents unpaid
amounts of principal and interest on the principal
amount outstanding, which may include reasonable
additional compensation for early termination of the
contract. Additionally, for a financial asset acquired
at a significant discount or premium to its contractual
paramount, a feature that permits or requires
prepayment at an amount that substantially represents
the contractual par amount plus accrued (but unpaid)
contractual interest (which may also include reasonable
additional compensation for early termination) is treated
as consistent with this criterion if the fair value of the
prepayment feature is insignificant at initial recognition.
Financial assets: Subsequent measurement
Financial assets at FVTPL: These assets are
subsequently measured at fair value. Net gains and
losses, including any interest or dividend income, are
recognised in Statement of Profit and Loss.
Financial assets at amortised cost: These assets are
subsequently measured at amortised cost using the
effective interest rate (EIR) method. The amortised cost
is reduced by impairment losses, if any. Interest income,
foreign exchange gains and losses and impairment are
recognised in Statement of Profit and Loss. Any gain
or loss on derecognition is recognised in Statement of
Profit and Loss.
Financial liabilities: Classification, subsequent
measurement and gains and losses
Financial liabilities are classified as measured at
amortised cost or FVTPL.
Financial liabilities through FVTPL
A financial liability is classified as at FVTPL if it is classified
as held-for-trading, or it is a derivative or it is designated
as such on initial recognition. Financial liabilities at
FVTPL are measured at fair value and net gains and
losses, including any interest expense, are recognised
in Statement of Profit and Loss. This category also
includes derivative financial instruments entered
into by the Company that are not designated as
hedging instruments in hedge relationships as
defined by Ind AS 109.
Financial liabilities at amortised cost
Other financial liabilities are subsequently measured
at amortised cost using the effective interest rate
(EIR) method. Interest expense and foreign exchange
gains and losses are recognised in Statement of
Profit and Loss. Any gain or loss on derecognition
is also recognised in Statement of Profit and Loss.
Interest bearing loans and borrowings are subsequently
measured at amortised cost using the EIR method.
Gains and losses are recognised in Statement of Profit
and Loss when the liabilities are derecognised as well
as through the EIR amortisation process. For trade
and other payables maturing within one year from the
balance sheet date, the carrying amounts approximates
fair value due to the short maturity of these instruments.
(iii) Derecognition
Financial assets
The Company derecognises a financial asset:
• when the contractual rights to the cash flows from the
financial asset expire, or
• it transfers the rights to receive the contractual cash
flows in a transaction in which substantially all of the
risks and rewards of ownership of the financial asset
are transferred or in which the Company neither
transfers nor retains substantially all of the risks and
rewards of ownership and does not retain control of
the financial asset.
Financial liabilities
The Company derecognises a financial liability when
its contractual obligations are discharged or cancelled,
or expire. The Company also derecognises a financial
liability when its terms are modified and the cash flows
under the modified terms are substantially different.
In this case, a new financial liability based on the
modified terms is recognised at fair value. The difference
between the carrying amount of the financial liability
extinguished and the new financial liability with modified
terms is recognised in Statement of Profit and Loss.
(iv) Offsetting
Financial assets and financial liabilities are offset and
the net amount presented in the balance sheet when
and only when, the Company currently has a legally
enforceable right to set off the amounts and it intends
either to settle them on a net basis or to realise the
asset and settle the liability simultaneously.
(v) Derivative financial instruments
The Company holds derivative financial instruments,
such as foreign currency forward contracts, interest
rate swaps, to hedge its foreign currency and interest
rate risk exposures. Derivatives are initially measured
at fair value. Subsequent to initial recognition,
derivatives are measured at fair value, and changes
therein are recognised 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.
d. Property, plant and equipment
(i) Recognition and measurement
Items of property, plant and equipment are measured at
cost, which includes capitalised borrowing costs, less
accumulated depreciation and accumulated impairment
losses, if any. The cost of an item of property, plant and
equipment comprises its purchase price, including
import duties and non-refundable purchase taxes, after
deducting trade discounts and rebates, 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 comprises the
cost of materials and direct labour, any other costs
directly attributable to bringing the item to working
condition for its intended use, and estimated costs of
dismantling and removing the item and restoring the
site on which it is located.
Borrowing costs directly attributable to the acquisition
or construction of those qualifying property, plant
and equipment, which necessarily take a substantial
period of time to get ready for their intended use, are
capitalised. If significant parts of an item of property,
plant and equipment have different useful lives, then
they are accounted for as separate components of
property, plant and equipment.
A fixed asset is eliminated from the financial statements
on disposal or when no further benefit is expected from
its use. Any gain or loss on disposal of an item of property,
plant and equipment is recognised in Statement of
Profit and Loss. Property, plant and equipment under
construction are disclosed as Capital work-in-progress.
Assets retired from active use and held for disposal are
stated at the lower of their net book value and fair value
less cost to sell and shown under ‘Current assets’.
(ii) 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. Ongoing repairs
and maintenance are expensed as incurred.
(iii) Depreciation and amortisation
Depreciation and amortisation for the year is
recognised in the Statement of Profit and Loss.
Depreciation is calculated on cost of items of property,
plant and equipment less their estimated residual values
over their estimated useful lives using the straight line
method over the useful lives of assets, in the manner
specified in Part C of Schedule II of the Act.
Assets acquired under finance lease are depreciated
over the shorter of the lease term and their useful
life unless it is reasonably certain that the Company
will obtain ownership by the end of the lease term.
Freehold land is not depreciated. Leasehold land
(includes development cost) is amortised on a straight
line basis over the period of respective lease, except
leasehold land acquired on perpetual lease.
The estimated useful lives of items of property, plant
and equipment are as follows:
Depreciation method, useful lives and residual values
are reviewed at each financial year-end and adjusted
if appropriate. Depreciation on additions (discard/
disposals) is provided on a pro-rata basis i.e. from (upto)
the date on which asset is ready for use (discarded/
disposed off ).
e. Intangible assets
(i) Recognition and measurement
Intangible assets are initially measured at cost and
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 expenditure,
including expenditure on internally generated goodwill
and brands, is recognised in profit or loss as incurred.
(iii) Amortisation
Amortisation is calculated to write off the cost of
intangible assets less their estimated residual values
over their estimated useful lives using the straight-line
method, and is included in depreciation and amortisation
in Statement of Profit and Loss.
The estimated useful lives are as follows:
- Computer software 5 years
Amortisation method, useful lives and residual values
are reviewed at the end of each financial year and
adjusted if appropriate.
f. Inventories
Inventories which comprise raw materials, work-in¬
progress, finished goods, packing materials, stores
and spares are measured at the lower of cost and net
realisable value. The cost of inventories is ascertained on
the 'weighted average' basis, and includes expenditure
incurred in acquiring the inventories, production or
conversion costs and other costs incurred in bringing
them to their present location and condition.
Raw materials, components and other supplies held for
use in the production of finished products are not written
down below cost except in cases where material prices
have declined and it is estimated that the cost of the
finished products will exceed their net realisable value.
The comparison of cost and net realisable value is
made on an item-by-item basis. The net realisable value
of work-in-progress is determined with reference to the
selling prices of related finished products. In the case
of manufactured inventories and work-in-progress,
cost includes an appropriate share of fixed 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. Assessment of net realisable value is
made at each subsequent reporting date. When the
circumstances that previously caused inventories to be
written down below cost no longer exist or when there
is clear evidence of an increase in net realisable value
because of changed economic circumstances, the
amount of the write-down is reversed.
g. Impairment
(i) Impairment of financial instruments: financial assets
Financial assets, other than those at FVTPL, are
assessed for indicators of impairment at the end of each
reporting period. A financial asset is ‘credit- impaired’
when one or more events that have a detrimental impact
on the estimated future cash flows of the financial
asset have occurred.
The Company recognises loss allowances using the
expected credit loss (ECL) model for the financial
assets which are not fair valued through profit or loss.
Loss allowance for trade receivable with no significant
financing component is measured at an amount equal
to lifetime of the ECL. For all other financial assets,
expected credit losses are measured unless there has
been a significant increase in credit risk from initial
recognition in which case those are measured at lifetime
of the ECL. The amount of expected credit losses (or
reversal) that is required to adjust the loss allowance at
the reporting date to the amount that is required to be
recognised is recognised as an impairment gain or loss
in Statement of Profit and Loss.
In case of trade receivables, the Company follows
the simplified approach permitted by Ind AS 109
Financial Instruments for recognition of impairment loss
allowance. The application of simplified approach does
not require the Company to track changes in credit risk.
The Company calculates the expected credit losses on
trade receivables using a provision matrix on the basis
of its historical credit loss experience.
When determining whether the credit risk of a financial
asset has increased significantly since initial recognition
and when estimating expected credit losses, the
Company considers reasonable and supportable
information that is relevant and available without
undue cost or effort. This includes both quantitative
and qualitative information and analysis, based on the
Company’s historical experience and informed credit
assessment and including subsequent information.
Loss allowances for financial assets measured at
amortised cost are deducted from the gross carrying
amount of the assets.
The gross carrying amount of a financial asset is written
off (either partially or in full) to the extent that there is no
realistic prospect of recovery. This is generally the case
when the Company determines that the debtor does not
have assets or sources of income that could generate
sufficient cash flows to repay the amounts subject to
the write-off. However, financial assets that are written
off could still be subject to enforcement activities in
order to comply with the Company’s procedures for
recovery of amounts due.
(ii) Impairment of non-financial assets
The Company’s non-financial assets, other than
inventories and deferred tax assets, are reviewed at
each reporting date to determine whether there is any
indication of impairment. If any such indication exists,
then the asset’s recoverable amount is estimated.
For impairment testing, assets that do not generate
independent cash inflows are grouped together into
cash-generating units (CGUs). Each CGU represents
the smallest group of assets that generates cash inflows
that are largely independent of the cash inflows of other
assets or CGUs. The recoverable amount of a CGU (or
an individual asset) is the higher of its value in use and
its fair value less costs to sell. Value in use is based
on the estimated future cash flows, 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 CGU (or the asset).
The Company’s corporate assets (e.g. corporate office
for providing support to various CGUs) do not generate
independent cash inflows. To determine impairment of
a corporate asset, recoverable amount is determined
for the CGUs to which the corporate asset belongs.
An impairment loss is recognised if the carrying
amount of an asset or CGU exceeds its estimated
recoverable amount. Impairment losses are recognised
in the Statement of Profit and Loss. Impairment loss
recognised in respect of a CGU is allocated first to
reduce the carrying amount of any goodwill allocated
to the CGU, and then to reduce the carrying amounts
of the other assets of the CGU (or group of CGUs) on a
pro rata basis.
An impairment loss in respect of other 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.
Intangible assets with indefinite useful lives and
intangible assets not yet available for use are tested for
impairment at least annually, and whenever there is an
indication that the asset may be impaired.
h. Employee benefits
(i) Short-term employee benefits
Short-term employee benefit obligations are measured
on an undiscounted basis and are expensed as the
related service is provided. A liability is recognised for
the amount expected to be paid e.g., under short-term
cash bonus, if the Company has a present legal or
constructive obligation to pay this amount as a result of
past service provided by the employee, and the amount
of obligation can be estimated reliably.
(ii) Defined contribution plans
A defined contribution plan is a post-employment benefit
plan under which an entity pays fixed contributions
into Employees’ Provident Fund established under
The Employees' Provident Fund and Miscellaneous
Provisions Act 1952 and will have no legal or constructive
obligation to pay further amounts. The Company
makes specified monthly contributions under employee
provident fund to Government administered provident
fund scheme. Obligations for contributions to defined
contribution plans are recognised as an employee
benefit expense in Statement of Profit and Loss in the
periods during which the related services are rendered
by employees. Prepaid contributions are recognised as
an asset to the extent that a cash refund or a reduction
in future payments is available.
(iii) Defined benefit plans
A defined benefit plan is a post-employment benefit plan
other than a defined contribution plan. The Company’s
gratuity benefit scheme is a defined benefit plan.
The Company’s net obligation in respect of defined
benefit plans is calculated by estimating the amount
of future benefit that employees have earned in the
current and prior periods, discounting that amount and
deducting the fair value of any plan assets. The calculation
of defined benefit obligation is performed quarterly by
an independent qualified actuary using the projected
unit credit method. When the calculation results in a
potential asset for the Company, the recognised asset
is limited to the present value of economic benefits
available in the form of any future refunds from the
plan or reductions in future contributions to the plan
(‘the asset ceiling’). In order to calculate the present
value of economic benefits, consideration is given to
any minimum funding requirements. The Company
recognises all actuarial gains and losses arising from
defined benefit plan immediately in the Statement of
Profit and Loss.
Remeasurements of the net defined benefit liability,
which comprise actuarial gains and losses, the return
on plan assets (excluding interest) and the effect of the
asset ceiling (if any, excluding interest), are recognised
in Other comprehensive income (OCI). The Company
determines the net interest expense (income) on the net
defined benefit liability (asset) for the period by applying
the discount rate used to measure the defined benefit
obligation at the beginning of the annual period to the
then-net defined benefit liability (asset), taking into
account any changes in the net defined benefit liability
(asset) during the period as a result of contributions
and benefit payments. Net interest expense and other
expenses related to defined benefit plans are recognised
in Statement of Profit and Loss.
When the benefits of a plan are changed or when a
plan is curtailed, the resulting change in benefit that
relates to past service (‘past service cost’ or ‘past
service gain’) or the gain or loss on curtailment is
recognised immediately in Statement of Profit and
Loss. The Company recognises gains and losses
on the settlement of a defined benefit plan when the
settlement occurs.
(iv) Other long-term employee benefits
The Company’s net obligation in respect of long-term
employee benefits other than post-employment
benefits is the amount of future benefit that employees
have earned in return for their service in the current and
prior periods; that benefit is discounted to determine
its present value. Such benefits are in form of leave
encashment that accrue to employees in return of their
service. The calculation of other long term employee
benefits is performed quarterly by an independent
qualified actuary using the projected unit credit method.
Remeasurements of the net defined benefit liability,
which comprise actuarial gains and losses, the return
on plan assets (excluding interest) and the effect of the
asset ceiling (if any, excluding interest), are recognised
in Other comprehensive income (OCI). Net interest
expense and other expenses related to defined benefit
plans are recognised in Statement of Profit and Loss.
(v) Termination benefits
Termination benefits are expensed at the earlier of when
the Company can no longer withdraw the offer of those
benefits and when the Company recognises costs for a
restructuring. If benefits are not expected to be settled
wholly within 12 months of the reporting date, then they
are discounted.
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