3. SIGNIFICANT ACCOUNTING POLICIES:
A. Property, Plant and Equipment
The Company has applied Ind AS 16 with retrospective effect for all of its property, plant and
equipment as at the transition date, viz., 1 April 2016.
The initial cost of property, plant and equipment comprises its purchase price, including
import duties and non-refundable purchase taxes, attributable borrowing cost and any other
directly attributable costs of bringing an asset to working condition and location for its
intended use. It also includes the present value of the expected cost for the decommissioning
and removing of an asset and restoring the site after its use, if the recognition criteria for a
provision are met.
Expenditure incurred after the property, plant and equipment have been put into operation,
such as repairs and maintenance, are normally charged to the statements of profit and loss in
the period in which the costs are incurred. Major inspection and overhaul expenditure is
capitalized if the recognition criteria are met.
When significant parts of plant and equipment are required to be replaced at intervals, the
Company depreciates them separately based on their specific useful lives. Likewise, when a
major inspection is performed, its cost is recognised in the carrying amount of the plant and
equipment as a replacement if the recognition criteria are satisfied. All other repair and
maintenance costs are recognised in the statement of profit and loss as incurred.
Gains and losses on disposal of an item of property, plant and equipment are determined by
comparing the proceeds from disposal with the carrying amount of property, plant and
equipment, and are recognized net within other income/other expenses in statement of profit
and loss.
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
statement of profit and loss, when the asset is derecognised.
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.
B. Capital work in progress
Assets in the course of construction are capitalized in capital work in progress account. At
the point when an asset is capable of operating in the manner intended by management, the
cost of construction is transferred to the appropriate category of property, plant and
equipment. Costs associated with the commissioning of an asset are capitalised when the
asset is available for use but incapable of operating at normal levels until the period of
commissioning has been completed. Revenue generated from production during the trial
period is credited to capital work in progress.
C. Depreciation
Depreciation on tangible Assets has been provided on the WDV method over the useful life
of assets in accordance with Schedule II of the Companies Act, 2013.Depreciation for assets
purchased /sold during a period is proportionately charged. Assets are amortized over their
respective individual estimated useful lives on a written down basis, commencing from the
date the asset is available to the Company for its use.
The estimated useful lives for the fixed assets as per Schedule II of the Act are as follows:
Office Equipment : 5 years
Computer System & Peripherals : 3 years
Furniture & Fixtures : 10 years
Electrical Installations : 10 years
D. Intangible assets
Intangible assets acquired are measured on initial recognition at cost. Following initial
recognition, intangible assets are carried at cost less any accumulated amortisation and
accumulated impairment losses.
E. Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a
financial liability or equity instrument of another entity.
(I) Financial assets
Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets
not recorded at fair value through profit or loss, transaction costs that are attributable to the
acquisition of the financial asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in three categories:
Debt instruments and investment in Preference Shares at amortised cost.
Debt instruments and investment in Preference Shares at fair value through profit or loss
(FVTPL).
Equity instruments measured at fair value through other comprehensive income (FVTOCI).
(a) Debt instruments and Investment in Preference Shares at amortised cost
A 'debt instrument' is measured at the amortised cost if both the following conditions are
met:
The asset is held within a business model whose objective is to hold assets for collecting
contractual cash flows, and
Contractual terms of the asset give rise on specified dates to cash flows that are solely
payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised
cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking
into account any discount or premium on acquisition and fees or costs that are an integral
part of the EIR. The EIR amortisation is included in interest income in the profit or loss.
(b) Debt instruments and investment in Preference Shares at fair value through profit or loss
(FVTPL):
Instruments which are held for trading are classified as at FVTPL. Preference instruments
included within the FVTPL category are measured at fair value with all changes recognized
in the P&L.
(c) Equity instruments measured at fair value through other comprehensive income
(FVTOCI):
For all equity instruments other than the ones classified as at FVTPL, the Company may
make an irrevocable election to present in other comprehensive income subsequent changes
in the fair value. The Company makes such election on an instrument-by-instrument basis.
The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value
changes on the instrument, excluding dividends, are recognized in the OCI. There is no
recycling of the amounts from OCI to P&L, even on sale of investment. However, the
Company may transfer the cumulative gain or loss within equity.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar
financial assets) is primarily derecognised (i.e. removed from the balance sheet) when the
rights to receive cash flows from the asset have expired.
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 on the Trade receivables or any contractual
right to receive cash or another financial asset that result from transactions that are within
the scope of Ind-AS 11 and Ind-AS 18. 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 entity expects to receive (i.e., all cash shortfalls), discounted at the original EIR.
(II) Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value
through profit or loss, loans and borrowings, financial guarantee contract payables, or
derivative instruments.
All financial liabilities are recognised initially at fair value and, in the case of loans and
borrowings and payables, net of directly attributable transaction costs.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for
trading and financial liabilities designated upon initial recognition as at fair value through
profit or loss. Financial liabilities are classified as held for trading if they are incurred for the
purpose of repurchasing in the near term.
F. Revenue Recognition :
All incomes and expenditure are accounted for on accrual basis unless otherwise stated.
Dividend on shares and securities is recognized when the right to receive the dividend is
established.
The Company follows the prudential norms for income recognition and provides for / writes
off Non-performing Assets as per the prudential norms prescribed by the Reserve Bank of
India or earlier as ascertained by the management.
Other items of revenue are recognised in accordance with the Ind-AS 18 Revenue.
Accordingly, wherever there are uncertainties in the ascertainment / realisation of income
such as interest from parties (including the financial condition of the party from whom the
same is to be realized), the same are not accounted for.
G. Earnings per Share (EPS) :
The earnings considered in ascertaining the Company's EPS comprises the net profit after tax
(after providing the post tax effect of any extra ordinary items). The number of shares used in
computing Basic EPS is the weighted average number of equity shares outstanding during
the year.
H. Taxation :
Current Tax: A provision for current income tax is made on the taxable income using the
applicable tax rates and tax laws.
Deferred Tax: Deferred tax arising on account of timing differences and which are capable of
reversal in one or more subsequent periods is recognized using the tax rates and tax laws
that have been enacted or substantively enacted. Deferred tax assets are not recognized
unless there is a virtual certainty with respect to the reversal of the same in future.
Deferred Tax on Comprehensive Income: Deferred tax arising on account of difference
between fair value and cost of Financial Assets which are capable of reversal in one or more
subsequent periods is recognized using the tax rates and tax laws that have been enacted or
substantively enacted.
I. Impairment of 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 Company 's assets. When the carrying amount of an asset or CGU exceeds its
recoverable amount, the asset is considered as impaired and is written down to its
recoverable amount.
Impairment losses are recognised in the statement of profit and loss.
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