actual usage of the assets. The Company provides
depreciation on its assets based on the basis of
single shift operation, unless otherwise stated. The
depreciation charge for each period is recognised in
the Statement of Profit and Loss, unless it is included
in the carrying amount of any other asset. The useful
life, residual value and the depreciation method are
reviewed atleast at each financial year end. If the
expectations differ from previous estimates, the
changes are accounted for prospectively as a change
in accounting estimate. The estimates of useful lives of
property, plant and equipment are as follows :
2.5 Material Accounting Policies
a. Property, Plant and Equipment
Property, plant and equipment are stated at
historical cost, net of accumulated depreciation and
accumulated impairment losses, if any. The cost
comprises the purchase price (Net of GST input credit
wherever applicable) and any directly attributable
cost of bringing the assets to its working condition
for its intended use. Such cost also includes the
cost of replacing part of the Property, plant and
equipment and borrowing costs for construction/
acquisition of qualifying assets if the recognition
criteria are met. When significant parts of Property,
plant and equipment are required to be replaced at
intervals, the Company depreciates them separately
based on their specific useful lives.
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 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 is provided on a pro-rata basis on
the straight-line method over the estimated useful
lives of the assets, based on technical evaluation
done by management’s expert in order to reflect the
Freehold land is not depreciated and leasehold
improvements are depreciated over the shorter of
their useful life or the lease term, unless the entity
expects to use the asset beyond lease term.
Gains and losses on disposal are determined by
comparing proceeds with carrying amount. These
are included in profit or loss within other income /
other expenses.
Capital work in progress is stated at cost, net of
accumulated impairment loss, if any. Depreciation
on Capital work in progress commences only when
the assets are ready for their intended use.
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 derecognition 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.
General and specific borrowing costs that are
directly attributable to the acquisition, construction
or production of a qualifying asset are capitalised
during the period of time that is required to complete
and prepare the asset for its intended use or sale.
Qualifying assets are assets that necessarily take
a substantial period of time to get ready for their
intended use or sale. Other borrowing costs are
expensed in the period in which they are incurred.
b. Intangible assets
Intangible assets acquired separately are
measured on initial recognition at cost. Following
initial recognition, intangible assets are carried
at cost less any accumulated amortisation and
accumulated impairment losses, if any.
Intangible assets are amortised over the useful
economic life of 4 years based on management
assessment. The amortisation period and the
amortisation method for an intangible asset with
a finite useful life are reviewed at least at the end
of each reporting period. Changes in the expected
useful life or the expected pattern of consumption
of future economic benefits embodied in the asset
are considered to modify the amortisation period or
method, as appropriate, and are treated as changes
in accounting estimates. The amortisation expense
on intangible assets is recognised in the statement
of profit and loss.
c. Impairment of non-financial assets
The carrying amount of assets are reviewed for
impairment at the end of each reporting date if
there is any indication of impairment based on
internal/external factors. An impairment loss is
recognised in the statement of profit and loss
wherever the carrying amount of an asset exceeds
its recoverable amount. The recoverable amount is
the greater of the asset’s or cash generating unit’s
fair value less cost of disposal 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 fair value,
recent market transactions are taken into account.
The business plans which are approved on an
annual basis by senior management are the primary
source of information for the determination of value
in use. Impairment losses are recognised in the
statement of profit and loss, except for previously
revalued assets, where the revaluation was taken
to revaluation reserve. In this case, the impairment
is also recognised in the revaluation reserve up
to the amount of any previous revaluation. After
impairment, depreciation is provided on the revised
carrying amount of the asset over its remaining
useful life. A previously recognised impairment loss
is increased or reversed depending on changes
in circumstances. However, the carrying value
after reversal is not increased beyond the carrying
value that would have prevailed by charging
usual depreciation if there was no impairment.
Such reversal is recognised in the statement of
profit and loss.
d. Revenue recognition
The Company is engaged in the business
of manufacturing, marketing and trading of
automotive, non automotive lubricants and other
synergy products. Revenue from contracts with
customers is recognised when control of the goods
or services are transferred to the customer at an
amount that reflects the consideration to which the
Company expects to be entitled in exchange for
those goods or services.
Revenue towards satisfaction of a performance
obligation is measured at the amount of transaction
price (net of variable consideration) allocated to
that performance obligation. The customer has
full discretion over the channel and price to sell
the products, and there is no unfulfilled obligation
that could affect the customer’s acceptance of
the products. Revenue from sale of goods is
recognised based on transaction price agreed
with customer as per the contract and are stated
net of estimated rebates and discounts and Goods
and Service Tax. Accumulated experience is used
to estimate and provide for the discounts and
rebates using expected value method. Revenue
is only recognised to the extent that it is highly
probable that significant reversal will not occur.
The company does not expect to have any contract
where the period between the transfer of the
promised goods or services to the customer and
payment by the customer exceed one year. As a
consequence, the company does not adjust any of
the transaction prices for the time value of money.
A rebate liability is recognised for expected rebate
and discount payable to customers in relation to
sales made until the end of the reporting period. No
significant element of financing is deemed present
as the sales are made with a credit term, which is
consistent with market practice.
Contract Balances
Trade receivables
A receivable is recognised if an amount of
consideration that is unconditional (i.e., only the
passage of time is required before payment of the
consideration is due). Refer to accounting policies of
financial assets in section (g) Financial instruments.
Contract liabilities
A contract liability is recognised if a payment is
received or a payment is due (whichever is earlier)
from a customer before the Company transfers
the related goods or services. Contract liabilities
are recognised as revenue when the Company
performs under the contract (i.e., transfers control
of the related goods or services to the customer).
e. Leases
Leases are recognised as a right-of-use asset and
a corresponding liability at the date at which the
leased asset is available for use by the Company.
The Company allocates the consideration in the
contract to the lease and non-lease components
based on their relative stand-alone prices.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities
include the net present value of the following
lease payments:
• fixed payments (including in-substance fixed
payments), less any lease incentives receivable
• variable lease payment that are based on an
index or a rate, initially measured using the
index or rate as at the commencement date
• amounts expected to be payable by the
company under residual value guarantees
• the exercise price of a purchase option if the
company is reasonably certain to exercise
that option, and
• payments of penalties for terminating the
lease, if the lease term reflects the company
exercising that option
Lease payments to be made under reasonably
certain extension options are also included in the
measurement of the liability. The lease payments
are discounted using the interest rate implicit in
the lease. If that rate cannot be readily determined,
which is generally the case for leases in the
company, the lessee’s incremental borrowing rate
is used, being the rate that the individual lessee
would have to pay to borrow the funds necessary
to obtain an asset of similar value to the right-of-
use asset in a similar economic environment with
similar terms, security and conditions.
To determine the incremental borrowing
rate, the company:
• where possible, uses recent third-party
financing received by the individual lessee as
a starting point, adjusted to reflect changes
in financing conditions since third party
financing was received
• makes adjustments specific to the lease.
Lease payments are allocated between principal
and finance cost. The finance cost is charged to
profit or loss over the lease period so as to produce
a constant periodic rate of interest on the remaining
balance of the liability for each period. If a readily
observable amortising loan rate is available to the
individual lessee (through recent financing or market
data) which has a similar payment profile to the
lease, then the company use that rate as a starting
point to determine the incremental borrowing rate.
Variable lease payments that depend on sales are
recognised in profit or loss in the period in which
the condition that triggers those payments occurs.
Right-of-use assets are measured at cost
comprising the following:
• the amount of the initial measurement of
lease liability
• any lease payments made at or before
the commencement date less any lease
incentives received
• any initial direct costs, and
• restoration costs.
Right-of-use assets are generally depreciated over
the shorter of the asset’s useful life and the lease
term on a straight-line basis. If the Company is
reasonably certain to exercise a purchase option,
the right-of-use asset is depreciated over the
underlying asset’s useful life.
Payments associated with short-term leases of
equipment and all leases of low-value assets are
recognised on a straight-line basis as an expense
in profit or loss. Short-term leases are leases with a
lease term of 12 months or less.
f. Current versus 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:
• It is expected to be settled in normal
operating cycle
• It is held primarily for the purpose of trading
• It is 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.
The operating cycle is the 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.
g. 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) Non-derivative financial instruments:
Initial recognition and measurement
All financial assets and liabilities are initially
recognised at fair value. Transaction costs
that are directly attributable to the acquisition
or issue of financial assets and liabilities,
which are not at fair value through profit or
loss, are adjusted to the fair value on initial
recognition. Trade receivables that do not
contain a significant financing component are
measured at transaction price. Purchase and
sale of financial assets are recognised using
trade date accounting.
Subsequent measurement
Financial assets carried at amortised cost
A financial asset is measured at amortised
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.
Financial assets at fair value through other
comprehensive income (FVOCI)
A financial asset is measured at FVOCI if it is
held within a business model whose objective
is achieved by both collecting contractual
cash flows and selling financial assets 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 and which are
not held for trading.
For equity instrument, the Company may
make irrevocable election to present such
investments at FVOCI. The Company makes
such election on an instrument by instrument
basis. Pursuant to such irrevocable option,
changes in fair value are recognised in the
OCI and is subsequently not reclassified to
the statement of profit and loss.
Financial assets at fair value through profit
or loss (FVTPL)
A financial asset which is not classified in any of
the above categories are measured at FVTPL.
Financial liabilities
All financial liabilities are subsequently
measured at amortised cost using the
effective interest method or at FVTPL
(ii) Derivative financial instruments
The Company enters into foreign exchange
forward contracts to manage its foreign
exchange rate risks.
Derivatives are initially recognised at fair value
at the date the derivative contracts are entered
into and are subsequently remeasured to their
fair value at the end of each reporting period.
The resulting gain or loss is recognised in
statement of profit and loss immediately.
Derivatives are presented as financial assets
when the fair value is positive and as financial
liabilities when the fair value is negative.
As the Company does not apply hedge
accounting, gains or losses arising from
changes in the fair value of forward contracts
are recognised in profit or loss in the period in
which they arise.
Derecognition of financial instruments
Financial assets
A financial asset is derecognised only when
• The Company has transferred the
rights to receive cash flows from the
financial asset or
• retains the contractual rights to receive
the cash flows of the financial asset, but
assumes a contractual obligation to pay
the cash flows to one or more recipients.
Where the entity has transferred an asset, the
Company evaluates whether it has transferred
substantially all risks and rewards of ownership
of the financial asset. In such cases, the
financial asset is derecognised. Where the
entity has not transferred substantially all
risks and rewards of ownership of the financial
asset, the financial asset is not derecognised.
Where the entity has neither transferred a
financial asset nor retains substantially all
risks and rewards of ownership of the financial
asset, the financial asset is derecognised if
the Company has not retained control of the
financial asset. Where the Company retains
control of the financial asset, the asset is
continued to be recognised to the extent of
continuing involvement in the financial asset.
Financial liabilities
A financial liability is derecognised 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 or loss.
Impairment of financial assets
The Company assesses on a forward looking
basis the expected credit losses associated with
its assets carried at amortised cost and FVOCI
debt instruments. The impairment methodology
applied depends on whether there has been a
significant increase in credit risk.
For trade receivables only, the Company
applies the simplified approach required by Ind
AS 109 Financial Instruments, which requires
expected lifetime losses to be recognised
from initial recognition of the receivables.
The impairment provisions for trade receivable
are based on expected credit loss method.
The Company uses judgement in making the
assumptions in calculating the default rate
required for identifying the provision as per
the expected credit loss method at the end of
each reporting period. ( Refer Note 9)
Offsetting of financial instruments
Financial assets and liabilities are offset and
the net amount is reported in the balance sheet
where there is a legally enforceable right to
offset the recognised amounts and there is an
intention to settle on a net basis or realise the
asset and settle the liability simultaneously. The
legally enforceable right must not be contingent
on future events and must be enforceable in
the normal course of business and in the event
of default, insolvency or bankruptcy of the
Company or the counterparty.
h. Inventories
Inventories consist of raw and packing materials,
stock-in-trade, work in progress, finished goods
and stores, spares and fuel. Inventories are valued
at lower of cost and net realisable value. Cost of
inventories is determined on weighted average
basis. Cost of manufactured finished goods and
work-in-progress includes material cost determined
on weighted average basis and also includes an
appropriate portion of allocable overheads and
other costs incurred in bringing the inventories
to their present location and condition. Cost of
stock-in-trade includes cost of purchase and other
cost incurred in bringing the inventories to the
present location and condition. Due allowances
are made in respect of slow moving, non-moving
and obsolete inventories based on estimate
made by management.
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.
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