3 Summary of Significant Accounting Policies
This note provides a list of the significant accounting policies adopted in the preparation of
these standalone financial statements. These policies have been consistently applied to all
the years presented, unless otherwise stated.
A Use of Estimates
The preparation of financial statements in conformity with Ind AS requires management to
make certain estimates and assumptions that affect the reported amounts of revenues,
expenses, assets and liabilities (including contingent liabilities) and the accompanying
disclosures. The management believes that the estimates used in preparation of the financial
statements are prudent and reasonable. Future results could differ due to these estimates
and differences between the actual results and the estimates are recognised in the periods in
which the results are known / materialized.
B Significant Estimates and assumptions are required in particular for
(i) Recognition of deferred tax assets
A deferred tax asset is recognised for all the deductible temporary differences to the extent
that it is probable that taxable profit will be available against which the deductible
temporary difference can be utilised. The management assumes that taxable profits will be
available while recognising deferred tax assets.
(ii) Impairment of Non Financial Assets:
The Company assesses at each reporting date as to whether there is any indication that any
property, plant and equipment and intangible assets may be impaired. If any such
indication exists the recoverable amount of an asset is estimated to determine the extent of
impairment, if any. An impairment loss is recognised in the Statement of Profit and Loss to
the extent, asset's carrying amount exceeds its recoverable amount.
C Inventories
Inventories are valued at the lower of cost and the net realisable value estimated by the
management after providing for obsolescence and other losses, where considered necessary.
D Property, Plant and Equipment
Property, Plant and Equipments are stated at cost of acquisition less accumulated
depreciation and impairment in value, if any. Cost comprises the purchase price and any
other attributable cost of bringing the asset to its working condition for its intended use.
Subsequent costs have been included in the asset's carrying amount as recognised as a
separate asset, as a appropriate only when it is probable future benefits associated with the
item will flow to the entity and the cost can be measured reliably.
Depreciation is provided using straight line method, pro-rata for the period of use, based on
the respective useful lives as mentioned under Schedule II of the Act. Leasehold land and
improvements are depreciated over the estimated useful life, or the remaining period of
lease from the date of capitalisation, whichever is shorter.
Gains or losses arising from derecognition of a property, plant and equipment are measured
as the difference between the net disposal proceeds and the carrying amount of the asset
and are recognised in the Statement of Profit and Loss when the asset is derecognised.
E Foreign Currency Transactions:
The Company's financial statements are presented in Indian Rupees [Rs.], which is the
functional and presentation currency.
( The transactions in foreign currencies are translated into functional currency at the rates of
'' exchange prevailing on the dates of transactions.
Foreign Exchange gains and losses resulting from settlement of such transactions and from
the translation of monetary assets and liabilities denominated in foreign currencies at the
year end exchange rates are recognised in the Statement of Profit and Loss. However,
' ' foreign currency differences arising from the translation of certain equity instruments where
the Company had made an irrevocable election to present in OCI subsequent changes in the
fair value are recognised in OCI.
Foreign exchange differences regarded as adjustments to borrowing costs are presented in
(iii) 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.
F 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.
A. Financial Assets
i. Initial recognition and measurement
All financial assets and liabilities are initially recognized at fair value. Transaction costs that
are directly attributable to the acquisition or issue of financial assets and financial liabilities,
which are not at fair value through profit or loss, are adjusted to the fair value on initial
recognition. Purchase and sale of financial assets are recognised using trade date
accounting.
ii. Subsequent measurement
a) Financial assets carried at amortised cost (AC)
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.
b) Financial assets at fair value through other comprehensive income (FVTOCI)
A financial asset is measured at FVTOCI 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.
c) 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.
iii Impairment of financial assets
The impairment provisions for financial assets are based on assumptions about risk of
default and expected cash loss rates. The Company uses judgement in making these
assumptions and selecting the inputs to the impairment calculation, based on Company's
past history, existing market conditions as well as forward looking estimates at the end of
each reporting period.
B. Financial Liabilities
i) . Initial recognition and measurement
All financial liabilities are recognized at fair value and in case of loans, net of directly
attributable cost. Fees of recurring nature are directly recognised in the Statement of Profit
and Loss as finance cost.
ii) . Subsequent measurement
Financial liabilities are carried at amortized cost using the effective interest method.
C. Derecognition of financial instruments
The Company derecognizes a financial asset when the contractual rights to the cash flows
from the financial asset expire or it transfers the financial asset and the transfer qualifies for
derecognition under Ind AS 109. A financial liability (or a part of a financial liability) is
derecognized from the Company's Balance Sheet when the obligation specified in the
contract is discharged or cancelled or expires.
G Segment reporting
Operating segments are reported in a manner consistent with the internal reporting
provided to the chief operating decision maker. The company is reported at an overall level
and hence there are no reportable segment as per Ind AS 108.
H Leases
The Company assesses at contract inception whether a contract is, or contains, a lease. That
is, if the contract conveys the right to control the use of an identified asset for a period of
time in exchange for consideration.
Company as a lessee
The Company applies a single recognition and measurement approach for all leases, except
for short-term leases and leases of low-value assets. The Company recognises lease
liabilities to make lease payments and right-of-use assets representing the right to use the
underlying assets.
i) Right of use assets
The Company recognises right-of-use assets at the commencement date of the lease (i.e., the
date the underlying asset is available for use). Right-of-use assets are measured at cost, less
any accumulated depreciation and impairment losses, and adjusted for any remeasurement
of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities
recognised, initial direct costs incurred, and lease payments made at or before the
commencement date less any lease incentives received. Right-of-use assets are depreciated
on a straight-line basis over the lease term. The right of use assets are also subject to
impairment.
ii) Lease liabilities
At the commencement date of the lease, the Company recognises lease liabilities measured
at the present value of lease payments to be made over the lease term. The lease payments
are fixed payments. In calculating the present value of lease payments, the Company uses
its incremental borrowing rate at the lease commencement date because the interest rate
implicit in the lease is not readily determinable. After the commencement date, the amount
of lease liabilities is increased to reflect the accretion of interest and reduced for the lease
payments made. In addition, the carrying amount of lease liabilities is remeasured if there is
a modification, a change in the lease term, a change in the lease payments (e.g., changes to
future payments resulting from a change in an index or rate used to determine such lease
payments) or a change in the assessment of an option to purchase the underlying asset.
iii) Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases
(i.e., those leases that have a lease term of 12 months or less from the commencement date
and do not contain a purchase option). It also applies the lease of low-value assets
recognition exemption that are considered to be low value.
Lease payments on short-term leases and leases of low value assets are recognised as
expense on a straight-line basis over the lease term.
I Borrowing Costs
Borrowing costs consist of interest and other borrowing costs that are incurred in
(i) connection with the borrowing of funds. Other borrowing costs include ancillary charges at
the time of acquisition of a financial liability, which is recognised as per EIR method.
Borrowing costs also include exchange differences to the extent regarded as an adjustment
to the borrowing costs.
Borrowing costs that are directly attributable to the acquisition/ construction of a qualifying
.... asset are capitalised as part of the cost of such assets, up to the date the assets are ready for
' ' their intended use. All other borrowing costs are recognised in profit or loss in the period in
which they are incurred.
J Revenue Recognition
Revenue from sale of products is recognised when the control on the goods have been
transferred to the customer. The performance obligation in case of sale of product is
satisfied at a point in time i.e., when the material is shipped to the customer or on delivery
to the customer, as may be specified in the contract.
Other Income is accounted on accrual basis except Dividend Income, Interest on
Government Bonds and Interest on Income Tax Refunds which are accounted on cash basis.
K Earnings Per Share
Basic earnings per share is calculated by dividing the net profit or loss attributable to equity
holders of the company .after deducting preference dividends and attributable taxes. by the
weighted average number of equity shares outstanding during the period.
Partly paid equity shares are treated as a fraction of an equity share to the extent that they
are entitled to participate in dividends relative to a fully paid equity share during the
reporting period. The weighted average number of equity shares outstanding during the
period is adjusted for events such as bonus issue, bonus element in a rights issue, share
split, and reverse share split .consolidation of shares. that have changed the number of
equity shares outstanding, without a corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period
attributable to equity shareholders of the parent company and the weighted average
number of shares outstanding during the period are adjusted for the effects of all dilutive
potential equity shares.
L Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and
short-term deposits with an original maturity of three months or less, that are readily
convertible to a known amount of cash and subject to an insignificant risk of changes in
value.
M Trade and other payables
These amounts represent liabilities for goods and services provided to the company prior to
the end of the financial year which are unpaid. The amounts are unsecured and are usually
paid within 30 days of recognition. Trade and other payables are presented as current
liabilities unless payment is not due within 12 months after the reporting period. They are
recognised initially at their fair value and subsequently measured at amortised cost using
the effective interest (EIR) method.
N Taxes on Income
Tax expense comprises of current income tax and deferred tax.
(i) Current Taxation
Current income tax assets and liabilities 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, at the reporting
date where the Company operates and generates taxable income.
Current tax items, relating to items recognised outside the statement of profit and loss, are
recognised in correlation to the underlying transaction either in 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. Provision for current tax is recognised based on the
estimated tax liability computed after taking credit for allowances and exemption in
accordance with the Income Tax Act, 1961.
Current tax assets and liabilities are offset where the Company has a legally enforceable
right to offset and intends either to settle on a net basis, or to realize the asset and settle the
liability simultaneously.
(ii) Deferred Taxation
Deferred tax is provided using the balance sheet approach on temporary differences
between the tax bases of assets and liabilities and their carrying amounts in the financial
statements 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 assets are recognised for all deductible temporary differences, the carry
forward of unused tax credits and any unused tax losses to the extent it is probable that
these assets can be realised in future.
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 assets
and liabilities are offset where a legally enforceable right exists to offset current tax assets
and liabilities and the deferred taxes relate to the same taxable entity and the same taxation
authority.
Deferred tax includes MAT tax credit. the Company reviews such tax credit asset at each
reporting date to assess its recoverability.
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