Significant Accounting Policies
A summary of the significant accounting policies
applied in the preparation of the financial
statements is given below. These accounting
policies have been applied consistently to all the
periods presented in the financial statements.
1. Property, Plant and Equipment
The cost of property, plant and equipment
comprises its purchase price net of any
trade discounts and rebates, any import
duties and other taxes (other than those
subsequently recoverable from the tax
authorities), any directly attributable
expenditure on making the asset ready for its
intended use, including relevant borrowing
costs for qualifying assets and any expected
costs of decommissioning. Expenditure
incurred after the property, plant and
equipment have been put into operation,
such as repairs and maintenance, are
charged to the Statement of Profit and Loss
in the year in which the costs are incurred.
Major shutdown and overhaul expenditure
is capitalised as the activities undertaken
improves the economic benefits expected
to arise from the asset.
It includes professional fees and, for qualifying
assets, borrowing costs capitalised in
accordance with the Company's accounting
policy based on Ind AS 23 - Borrowing
costs. Such properties are classified to
the appropriate categories of PPE when
completed and ready for intended use.
Assets in the course of construction are
capitalised in the assets under construction
account. At the point when an asset is
operating at management's intended use,
the cost of construction is transferred
to the appropriate category of property,
plant and equipment and depreciation
commences. Costs associated with
the commissioning of an asset and any
obligatory decommissioning costs are
capitalised where the asset is available for
use but incapable of operating at normal
levels until a year of commissioning has
been completed. Revenue generated
from production during the trial period
is capitalised.
Property, plant and equipment except
freehold land held for use in the production,
supply or administrative purposes, are
stated in the balance sheet at cost less
accumulated depreciation and accumulated
impairment losses, if any.
The Company has elected to continue with
the carrying value for all of its property,
plant and equipment as recognised in the
financial statements on transition to Ind
AS, measured as per the previous GAAP
and use that as its deemed cost as at the
date of transition.
Subsequent expenditure and
componentisation
Parts of an item of PPE having different
useful lives and significant value and
subsequent expenditure on Property, Plant
and Equipment, arising on account of
capital improvement or other factors, are
accounted for as separate components 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. The carrying amount of
any component accounted for as a separate
asset is derecognised when replaced. All
other repairs and maintenance are charged
to profit or loss during the reporting period
in which they are incurred.
Depreciation and useful life
Depreciable amount for assets is the cost
of an asset, or other amount substituted
for cost, less its estimated residual value.
Depreciation is recognised so as to write
off the cost of assets (other than freehold
land and properties under construction)
less their residual values over their useful
lives, using straight-line method as per the
useful life prescribed in Schedule II to the
Companies Act, 2013 except in respect of
following categories of assets, in whose
case the life of the assets has been assessed
as under based on technical advice, taking
into account the nature of the asset, the
estimated usage of the asset, the operating
conditions of the asset, past history of
replacement, anticipated technological
changes, manufacturers warranties and
maintenance support, etc.
Major overhaul costs are depreciated over
the estimated life of the economic benefit
derived from the overhaul. The carrying
amount of the remaining previous overhaul
cost is charged to the Statement of Profit
and Loss if the next overhaul is undertaken
earlier than the previously estimated life of
the economic benefit.
The Company reviews the residual value,
useful lives and depreciation method
annually and, if expectations differ from
previous estimates, the change is accounted
for as a change in accounting estimate on a
prospective basis.
An asset's carrying amount is written down
immediately to its recoverable value if the
asset's carrying amount is greater than its
estimated recoverable value.
Derecognition
An item of PPE is de-recognised upon
disposal or when no future economic
benefits are expected to arise from the
continued use of the asset. Any gain or loss
arising on the disposal or retirement of an
item of property, plant and equipment is
determined as the difference between the
sales proceeds and the carrying amount of
the asset and is recognised in Statement of
Profit and Loss.
2. Impairment
At the end of each reporting year, the
Company reviews the carrying amounts of its
tangible and intangible assets to determine
whether there is any indication that those
assets have suffered an impairment loss. If
any such indication exists, the recoverable
value of the asset is estimated in order to
determine the extent of the impairment loss
(if any). Where it is not possible to estimate
the recoverable value of an individual asset,
the Company estimates the recoverable
value of the cash-generating unit to which
the asset belongs. Where a reasonable
and consistent basis of allocation can be
identified, corporate assets are also allocated
to individual cash-generating units, or
otherwise they are allocated to the smallest
group of cash-generating units for which a
reasonable and consistent allocation basis
can be identified.
Recoverable value is the higher of fair
value less costs to sell 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 the risks specific
to the asset for which the estimates of future
cash flows have not been adjusted.
An impairment loss is recognised immediately
in the Statement of Profit and Loss.
3. Inventories
Raw Materials
Raw materials are stated at cost, which
comprises cost of purchases. Where a
decline in the price of materials indicates
that the cost of the finished products
exceeds net realisable value, the materials
are written down to net realisable value. In
such circumstances, the replacement cost
of the materials may be the best available
measure of their net realisable value.
Work-in-Progress and Finished Goods
Cost of work-in-progress and finished
goods comprises direct materials, direct
labour and an appropriate proportion of
variable and fixed overhead expenditure.
Fixed overheads are allocated on the
basis of normal operating capacity. Cost
of inventories also include all other costs
incurred in bringing the inventories to
their present location and condition. Cost
includes the reclassification from equity
of any gains or losses on qualifying cash
flow hedges relating to purchases of raw
material. Costs are assigned to the individual
items in a group of inventories on the basis
of weighted average cost basis. Costs of
purchased inventory are determined after
deducting rebates and discounts. 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.
Costs of inventories are determined on
weighted average basis. Net realisable
value represents the estimated selling
price for inventories less all estimated
costs of completion and costs necessary
to make the sale.
Stores and Spares
Inventory of stores and spare parts is valued
at weighted average cost or net realisable
value, whichever is lower. Provisions
are made for obsolete and non-moving
inventories. Unserviceable and scrap items,
when determined, are valued at estimated
net realisable value.
4. Non-current Assets held-for-sale and
Discontinued Operations
Non-current Assets held-for-sale.
Non-current assets or disposal groups are
classified as held for sale if their carrying
amounts will be recovered principally
through a sale transaction rather than
through continuing use.
Such assets or disposal groups are classified
only when both the conditions are satisfied:
• The sale is highly probable; and
• The asset or disposal group is available
for immediate sale in its present
condition, subject only to terms that
are usual and customary for sale
of such assets.
Management must be committed to the
sale, which should be expected to qualify
for recognition as a completed sale within
one year from the date of classification
as held for sale, and actions required to
complete the plan of sale should indicate
that it is unlikely that significant changes to
the plan will be made or that the plan will be
withdrawn. Non-current assets or disposal
group are presented separately from the
other assets in the balance sheet. The
liabilities of a disposal group classified as
held for sale are presented separately from
other liabilities in the balance sheet.
Upon classification, non-current assets or
disposal group held for sale are measured
at the lower of carrying amount and fair
value less costs to sell. Non-current assets
which are subject to depreciation are not
depreciated or amortized once those
classified as held for sale.
Discontinued Operations
A discontinued operation is a component
of the entity that has been disposed of
or is classified as held for sale and that
represents a separate major line of business
or geographical area of operations, is part
of a single co-ordinated plan to dispose of
such a line of business or area of operations,
or is a subsidiary acquired exclusively with a
view to resale. The results of discontinued
operations are presented separately in the
statement of profit and loss.
5. Revenue Recognition
Sale of Goods
Revenue is measured at the fair value of the
consideration received or receivable. The
Company recognises revenues on sale of
products, net of discounts, sales incentives,
rebates granted, returns, sales taxes/GST
and duties when the products are delivered
to customer or when delivered to a carrier
for export sale, which is when title and
risk and rewards of ownership pass to the
customer. Export incentives are recognised
as income as per the terms of the scheme in
respect of the exports made and included
as part of export turnover.
Revenue from sales is recognised when
control of the products has transferred,
being when the products are delivered
to the customer, the customer has full
discretion over the channel and price to
sell / consume the products, and there is
no unfulfilled obligation that could affect
the customer's acceptance of the products.
Delivery occurs when the products have
been shipped to the specific location, the
risks of obsolescence and loss have been
transferred to the customer, and either the
customer has accepted the products in
accordance with the sales contract or the
acceptance provisions have lapsed.
Interest Income
Interest income from a financial asset is
recognised when it is probable that the
economic benefits will flow to the Company
and the amount of income can be measured
reliably. Interest income is accrued on a
time basis, by reference to the principal
outstanding and at the effective interest
rate applicable, which is the rate that exactly
discounts estimated future cash receipts
through the expected life of the financial
asset to that asset's net carrying amount on
initial recognition.
6. Foreign Exchange Translation
The functional currency of the Company is
Indian Rupees which represents the currency
of the primary economic environment in
which it operates.
Foreign currency transactions are
translated into the functional currency
using the exchange rates at the dates of
the transactions. Foreign exchange gains
and losses resulting from the settlement of
such transactions are generally recognised
in profit or loss. Monetary balances arising
from the transactions denominated in
foreign currency are translated to functional
currency using the exchange rate as on the
reporting date. Any gains or loss on such
translation, are generally recognised in
profit or loss.
Exchange differences on monetary items
are recognised in Statement of Profit and
Loss in the year in which they arise except
for exchange differences on foreign
currency borrowings relating to assets
under construction for future productive
use, which are included in the cost of
those assets when they are regarded as
an adjustment to interest costs on those
foreign currency borrowings.
Foreign exchange differences regarded
as an adjustment to borrowing costs are
presented in the Statement of Profit and
Loss, within finance costs. All other foreign
exchange gains and losses are presented in
the Statement of Profit and Loss on a net
basis within other gains/dosses).
7. Income Taxes
The income tax expense or credit for
the period is the tax payable on the
current period's taxable income based
on the applicable income tax rate for
each jurisdiction adjusted by changes
in deferred tax assets and liabilities
attributable to temporary differences and to
unused tax losses.
Current Tax
The tax currently payable is based on
taxable profit for the year. Taxable profit
differs from 'profit before tax' as reported in
the Statement of Profit and Loss because of
items of income or expense that are taxable
or deductible in other years and items
that are never taxable or deductible. The
Company's current tax is calculated using
tax rates and laws that have been enacted
or substantively enacted by the end of the
reporting period.
In respect of the provisions relating to
Minimum Alternate Tax (MAT), the company
has availed of the benefit of reduced tax rate
u/s 115BAA of the Income Tax Act, 1961,
pursuant to which, the company is no longer
required to pay the MAT on its income.
Deferred Tax
Deferred tax is recognised on temporary
differences between the carrying amounts
of assets and liabilities in the Financial
Statements and the corresponding tax
bases used in the computation of taxable
profit. Deferred tax liabilities are generally
recognised for all taxable temporary
differences. Deferred tax assets are
generally recognised for all deductible
temporary differences to the extent that it is
probable that taxable profits will be available
against which those deductible temporary
differences can be utilised. Such deferred
tax assets and liabilities are not recognised
if the temporary difference arises from the
initial recognition (other than in a business
combination) of assets and liabilities in a
transaction that affects neither the taxable
profit nor the accounting profit. In addition,
deferred tax liabilities are not recognised if
the temporary difference arises from the
initial recognition of goodwill.
The carrying amount of deferred tax assets
is reviewed at each reporting date and
reduced to the extent that it is no longer
probable that sufficient taxable profit will be
available to allow all or part of the deferred
tax asset to be utilised. 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 profit or loss is recognised outside
profit or loss (either in other comprehensive
income or in equity). Deferred tax items are
recognised in correlation to the underlying
transaction either in Other Comprehensive
Income or directly in equity.
Deferred tax assets and liabilities are offset
when there is a legally enforceable right to
offset current tax assets and liabilities and
when the deferred tax balances relate to the
same taxation authority. Current tax assets
and tax liabilities are offset where the entity
has a legally enforceable right to offset and
intends either to settle on a net basis, or
to realise the asset and settle the liability
simultaneously.
8. Borrowing Costs
Borrowing costs, general or specific, that
are directly attributable to the acquisition
or construction of qualifying assets is
capitalized as part of such assets. A
qualifying asset is one that necessarily
takes substantial period of time to get
ready for intended use. AH other borrowing
costs are charged to the Statement of
Profit and Loss.
The Company determines the amount of
borrowing costs eligible for capitalisation
as the actual borrowing costs incurred on
that borrowing during the year less any
interest income earned on temporary
investment of specific borrowings pending
their expenditure on qualifying assets, to
the extent that an entity borrows funds
specifically for the purpose of obtaining
a qualifying asset. In case if the Company
borrows generally and uses the funds for
obtaining a qualifying asset, borrowing costs
eligible for capitalisation are determined
by applying a capitalisation rate to the
expenditures on that asset.
Borrowing cost includes exchange
differences arising from foreign currency
borrowings to the extent they are regarded
as an adjustment to the finance cost.
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