2.1 Summary of material accounting policies
a) Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ 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.
b) Foreign currency
Functional currency
The functional currency of the company is Indian rupee.
Transactions and Translations
Foreign currency denominated monetary assets and liabilities are translated in to relevant functional currency at
exchange rates in effect at the balance sheet date. The gain or losses resulting from such translations are included in net
profit in the statement of profit and loss. Non-monetary assets and non- monetary liabilities denominated in foreign
currency and measured at fair value are translated at the exchange rate prevalent at the date when the fair value is
determined.
Non-monetary assets and non- monetary liabilities denominated in foreign currency and measured at historical cost are
translated at the exchange rate prevalent at the date of transaction.
Transaction gain or loss realized upon settlement of foreign currency transactions are included in determining net profit
for the period in which the transaction is settled. Revenue, expenses and cash flow items denominated in foreign
currencies are translated in to the relevant functional currencies using the exchange rate in effect on the date of
transaction.
c) Fair Value measurement
The Company measures financial instruments, such as, derivatives at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The fair value measurement is based on the presumption that the
transaction to sell the asset or transfer the liability takes place either:
• In the principal market for the asset or liability, or
• In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when
pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic
benefits by using the asset in its highest and best use or by selling it to another market participant that would use the
asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are
available to measure fair value, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the
fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement
as a whole:
• Level 1- Quoted (unadjusted) market prices in active markets for identical assets or liabilities
• Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is
directly or indirectly observable
• Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is
unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the company determines
whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest
level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the
nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
d) Revenue recognition
Revenue is recognised on the basis of approved contracts regarding the transfer of goods or services to a customer for
an amount that refects the consideration to which the entity expects to be entitled in exchange for those goods or
services.
Sale of goods
Revenue from sale of the Company’s core products i.e Cement is recognised when delivery has taken place and control
of the goods has been transferred to the customer, and when there are no longer any unfulfilled obligations.
The customer obtains control of the goods when the significant risks and rewards of products sold are transferred to the
customer, being at the point the goods are delivered to and accepted by the customer, according to the specific delivery
terms that have been agreed with the customer.
Revenue is measured at fair value of the consideration received or receivable, after deduction of any discounts, price
concessions, volume rebates and any taxes or duties collected on behalf of the government such as goods and services
tax, etc. Accumulated experience is used to estimate the provision for such discounts, price concessions and rebates.
Revenue is only recognised to the extent that it is highly probable a significant reversal will not occur.
No element of financing is deemed present as the sales are made with credit terms largely ranging between 30 days and
60 days depending on the specific terms agreed to with the customer concerned, which is consistent with market
practice.
Contract Balances
Trade receivables
A trade receivable is recognised when the products are delivered to a customer as this is the point in time that the
consideration becomes unconditional because only a passage of time is required before the payment is due.
Contract assets, which is a company’s right to consideration that is conditional on something other than the passage of
time. Currently there are no contract assets.
Contract liabilities
Contract liabilities, which is a company’s obligation to transfer goods or services to a customer for which the entity has
already received consideration, relates mainly to advance payments from customers which are disclosed in Note no.21.
Contract liabilities are recognised as revenue when the Company performs under the contract.
Sale of Services
Income from services rendered is recognised based on agreements/arrangements with the customers as the service is
performed and there are no unfulfilled obligations.
Interest
Interest income is included under the head “Other income” in the statement of profit and loss if such interest income is
recognized using the effective interest rate. The Company estimates the expected cash flows by considering all the
contractual terms of the financial instrument but does not consider the expected credit losses.
e) Government grants and subsidies
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached
conditions will be complied with.
When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the
related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised
as income in equal amounts over the expected useful life of the related asset.
When the Company receives grants of non-monetary assets, the asset and the grant are recorded at fair value amounts
and released to profit or loss over the expected useful life in a pattern of consumption of the benefit of the underlying
asset i.e., by equal annual instalments.
Government grants related to income under state investment promotion scheme linked with VAT/SGST payment are
recognised in the Statement of Profit and Loss in the period in which they become receivable.
When loans or similar assistance are provided by governments or related institutions, with an interest rate below the
current applicable market rate, the loan or assistance is initially recognised and measured at fair value and the
government grant is measured as the difference between the initial carrying value of the loan and the proceeds received.
Government grants is recognised in profit or loss on a systematic basis over the periods in which the entity recognises
the related costs for which the grants are intended to compensate.
f) Income taxes
Tax expense comprises current tax expense and deferred tax.
Current income tax
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.
Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other
comprehensive income or in equity). Current tax items 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.
Current tax assets and liabilities are offset only if there is a legally enforceable right to set off the recognised amounts, and
it is intended to realise the asset and settle the liability on a net basis or simultaneously.
Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences.
Deferred tax assets are recognised for all deductible temporary differences and any unused tax losses. Deferred tax
assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible
temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized.
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 OCI or directly in equity.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets
against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
g) Property, Plant and Equipment (‘PPE’)
The initial cost of PPE, including Capital work in progress, comprises its purchase price, including import duties and
non-refundable purchase taxes, and any directly attributable costs of bringing an asset to working condition and
location for its intended use, including relevant borrowing costs and any expected costs of decommissioning, less
accumulated depreciation and accumulated impairment losses, if any.
Advances given towards acquisition or construction of PPE outstanding at each reporting date are disclosed as Capital
Advances under “Other non-current Assets”.
Capital work in progress is stated at cost, net of accumulated impairment loss, if any.
Expenditure incurred after the PPE have been put into operation, such as repairs and maintenance, are charged to the
Statement of Profit and Loss in the period in which the costs are incurred. If significant parts of an item of PPE have
different useful lives, then they are accounted for as separate items (major components) of PPE.
An item of PPE 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.
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.
h) Depreciation on property, plant and equipment
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Projects from the date of commencement of commercial production. Depreciation on deductions/disposals is provided
on a pro-rata basis up to the month preceding the month of deduction/disposal.
i) 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 amortization and accumulated impairment losses, if any. The
amortization period and the amortization method are reviewed at each financial year end. If the expected useful life of the
asset is significantly different from previous estimates, the amortization period is changed accordingly. If there has been
a significant change in the expected pattern of economic benefits from the asset, the amortization method is changed to
reflect the changed pattern.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net
disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the
asset is derecognized.
Costs incurred on acquisition of intangible assets are capitalized and amortized on a straight-line basis over useful lives,
as mentioned below:
j) Non-current assets neia Tor sale
Non-current assets are classified as held for sale if their carrying amounts will be recovered principally through a sale
transaction rather than through continuing use and a sale is considered highly probable. Non-current assets held for
sale are measured at the lower of their carrying amount and the fair value less costs to sell.
Non-current assets are not depreciated or amortised while they are classified as held for sale.
Non-current assets classified as held for sale are presented separately from the other assets in the balance sheet.
k) Impairment of non-financial 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 other assets or groups of assets. When the carrying
amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its
recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that refects current market assessments of the time value of money and the risks specific to the asset. In
determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions
can be identified, an appropriate valuation model is used.
For assets, an assessment is made at each reporting date to determine whether there is an indication that previously
recognised impairment losses no longer exist or have decreased. If such indication exists, the Company estimates the
asset’s or CGU’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a
change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was
recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor
exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been
recognised for the asset in prior years. Such reversal is recognised in the statement of profit or loss.
l) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a
substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other
borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that
an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the
extent regarded as an adjustment to the borrowing costs.
m) 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
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if ownership of the leased asset transfers to the company at the end of the lease term or the cost rejects the
exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.
The right-of-use assets are also subject to impairment. Refer to the accounting policies in section (k) Impairment of
non-financial assets.
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 include fixed payments (including
insubstance fixed payments) less any lease incentives receivable, variable lease payments that depend on an
index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also
include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments
of penalties for terminating the lease, if the lease term reflects the Company exercising the option to terminate.
Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are
incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.
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 refect 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.
The Company’s lease liabilities are included in Interest-bearing loans and borrowings (refer note 39).
iii) Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases of machinery and
equipment (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 to leases of office
equipment 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.
Company as a lessor
Leases in which the Company does not transfer substantially all the risks and rewards incidental to ownership of an asset
are classified as operating leases. Rental income arising is accounted for on a straight-line basis over the lease terms.
Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the
leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as
revenue in the period in which they are earned.
n) Inventories
• Raw materials, stores and spares and packing materials
Valued at lower of cost and net realisable value. However, materials and other items held for use in the production of
inventories are not written down below cost if the finished products in which they will be incorporated are expected to be
sold at or above cost.
Cost is determined on a weighted average basis and includes cost incurred in bringing the material to its present location
and condition.
• Work-in-progress and finished goods
Valued at lower of cost and net realisable value. Cost includes direct materials and labour and a proportion ol
manufacturing overheads based on normal operating capacity. Cost is determined on a weighted average basis.
• Traded goods
Valued at lower of cost and net realisable value. Cost includes cost of purchase and other costs incurred in bringing the
inventories to their present location and condition. Cost is determined on weighted average basis.
Net realisable value is the estimated selling price in the ordinary course of business less estimated costs of completion
and estimated costs necessary to make the sale.
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