3. Summary of material accounting policies
a. Current versus non-current classification
The Company presents assets and liabilities in the
standalone 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
All other liabilities are classified 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. Fair value measurement
The Company measures financial instruments 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.
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 standalone 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
standalone 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.
At each reporting date, the management analyses the
movements in the values of assets and liabilities which
are required to be re-measured or re-assessed as per
the Company’s accounting policies. For this analysis,
the management verifies the major inputs applied in
the latest valuation by agreeing the information in the
valuation computation to contracts and other relevant
documents.
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.
c. Revenue recognition
The Company derives revenues primarily from sale of
milk and dairy products. It is also engaged in generation
of power and trading of dairy and food commodities.
Revenue is recognized on satisfaction of performance
obligation upon transfer of control of promised products
or services to customers in an amount that reflects
the consideration the Company expects to receive in
exchange for those products or services (“transaction
price”).
Revenue is measured on the basis of transaction price,
after deduction of any discounts and any taxes or
duties collected on behalf of the Government such as
goods and services tax, etc. Discounts are recognised
in accordance with the schemes implemented by the
Company. Revenue is only recognised to the extent that
it is highly probable a significant reversal will not occur.
The Company does not expect to have any contracts
where the period between the transfer of the promised
goods or services to the customer and payment by the
customer exceeds one year. As a consequence, it does
not adjust any of the transaction prices for the time value
of money.
The Company satisfies a performance obligation and
recognises revenue over time, if one of the following
criteria is met:
• The customer simultaneously receives and
consumes the benefits provided by the Company’s
performance as the Company performs; or
• The Company’s performance creates or enhances
an asset that the customer controls as the asset is
created or enhanced; or
• The Company’s performance does not create an
asset with an alternative use to the Company and
an entity has an enforceable right to payment for
performance completed to date.
For performance obligations where one of the above
conditions are not met, revenue is recognised at the point
in time at which the performance obligation is satisfied.
Revenue from sale of products and services is recognised
at the time when performance obligation is satisfied.
d. Government grants
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.
On receipt of grants of non-monetary assets, the asset
and the grant are recorded at fair value amounts and
released to the standalone statement of profit and loss
over the expected useful life in a pattern of consumption
of the benefit of the underlying asset i.e. by equal
annual instalments. When loans or similar assistance
are provided by governments or related institutions,
with an interest rate below the current applicable market
rate, the effect of this favourable interest is regarded
as a government grant. 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. The loan is subsequently measured as per the
accounting policy applicable to financial liabilities.
e. Taxes
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 is recognised in the standalone
statement of profit and loss except to the extent that it
relates to items recognised directly in equity, in which
case it is recognised 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.
Deferred tax
Deferred tax is provided using the Balance Sheet
approach 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, except when the deferred tax
liability arises from the initial recognition of goodwill or
an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects
neither the accounting profit nor taxable profit or loss.
Deferred tax assets are recognised for all deductible
temporary differences, the carry forward of unused tax
credits 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 utilised, except
when the deferred tax asset relating to the deductible
temporary difference arises from the initial recognition of
an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects
neither the accounting profit nor taxable profit or loss.
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.
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 is recognised in the standalone statement
of profit and loss, except to the extent that it relates to
items recognised in other comprehensive income or
directly in equity. In this case, the deferred tax is also
recognised in other comprehensive income or directly in
equity, respectively.
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.
f. Property, plant and equipment and Capital work-in¬
progress
Freehold land is carried at historical cost. Property, plant
and equipment are stated at cost net of accumulated
depreciation and accumulated impairment losses, if any.
The cost comprises purchase price, the cost of replacing
the part of plant and equipment and borrowing costs if
capitalization criteria are met and any attributable cost of
bringing the asset to its working condition and location
for the intended use. Capital work in progress includes
cost of property, plant and equipment under installation/
under development as at the balance sheet date net of
accumulated impairment loss, if any. Property, plant and
equipment under installation or under construction as
at balance sheet are shown as capital work-in-progress
and the related advances are shown as capital advances.
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.
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 standalone statement of profit and loss
as incurred. The present value of the expected cost for
the decommissioning of an asset after its use is included
in the cost of the respective asset if the recognition
criteria for a provision are met.
Spare parts are capitalized when they meet the definition
of PPE, i.e., when the company intends to use these
during more than a period of 12 months.
Depreciation is provided on the basis of straight-line
method at the useful life and in the manner prescribed in
Schedule II of the Companies Act, 2013 except in respect
of the following assets, based on technical assessment
made by technical expert and /or internal evaluation.
Management believes that these estimated useful lives
are realistic and reflect fair approximation of the period
over which the assets are likely to be used.
The useful life provided for different asset classes under
schedule II of the Act and considered by the management
are as follows:
i) Depreciation on Improvements to leasehold
property is provided over the period of lease.
ii) Depreciation in respect of its Renewable Energy
business is provided on straight line method and at
rates/ methodology prescribed under the relevant
Central Electricity Regulatory Commission (CERC)
regulations.
Depreciation on assets which are commissioned
during the year is charged on pro-rata basis
from the date of commissioning. The company
depreciates general spares over the life of the
spare from the date it is available for 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. Gains or
losses arising from de-recognition of a tangible
asset are measured as the difference between the
net disposal proceeds and the carrying amount
of the asset and are recognised in the standalone
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.
g. Borrowing cost
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.
h. Leases
The Company as a lessee
The Company’s lease asset classes primarily consist of
leases for land, buildings and plant and equipment. The
Company assesses whether a contract contains a lease,
at inception of a contract. A contract is, or contains, a
lease if the contract conveys the right to control the use
of an identified asset for a period of time in exchange for
consideration. To assess whether a contract conveys the
right to control the use of an identified asset, the Company
assesses whether: (i) the contract involves the use of an
identified asset (ii) the Company has substantially all of
the economic benefits from use of the asset through the
period of the lease and (iii) the Company has the right to
direct the use of the asset.
At the date of commencement of the lease, the
Company recognizes a right-of-use (ROU) asset and a
corresponding lease liability for all lease arrangements in
which it is a lessee, except for leases with a term of 12
months or less (short-term leases) and low value leases.
For these short-term and low-value leases, the Company
recognizes the lease payments as an operating expense
on a straight-line basis over the term of the lease.
Certain lease arrangements include the options to extend
or terminate the lease before the end of the lease term.
ROU assets and lease liabilities includes these options
when it is reasonably certain that they will be exercised.
The ROU assets are initially recognized at cost, which
comprises the initial amount of the lease liability
adjusted for any lease payments made at or prior to the
commencement date of the lease plus any initial direct
costs less any lease incentives. They are subsequently
measured at cost less accumulated depreciation and
impairment losses. The right-of-use asset is depreciated
using the straight-line method from the commencement
date to the earlier of the end of the useful life of the right-
of-use asset or the end of the lease term, unless the
lease transfers ownership of the underlying asset to the
Company by the end of the lease term or the cost of the
right-of-use asset reflects that the Company will exercise
a purchase option. In that case the right-of-use asset
will be depreciated over the useful life of the underlying
asset, which is determined on the same basis as those
of property, plant and equipment. ROU assets are
evaluated for recoverability whenever events or changes
in circumstances indicate that their carrying amounts
may not be recoverable. For the purpose of impairment
testing, the recoverable amount (i.e. the higher of the fair
value less cost to sell and the value-in-use) is determined
on an individual asset basis unless the asset does not
generate cash flows that are largely independent of
those from other assets. In such cases, the recoverable
amount is determined for the Cash Generating Unit
(CGU) to which the asset belongs.
The Company measures the lease liability at the present
value of the lease payments that are not paid at the
commencement date of the lease. The lease payments
are discounted using the interest rate implicit in the
lease, if that rate can be readily determined. If that
rate cannot be readily determined, the Company uses
incremental borrowing rate. For leases with reasonably
similar characteristics, the Company, on a lease by
lease basis, may adopt either the incremental borrowing
rate specific to the lease or the incremental borrowing
rate for the portfolio as a whole. The lease payments
shall include fixed payments, variable lease payments,
residual value guarantees, exercise price of a purchase
option where the Company is reasonably certain to
exercise that option and payments of penalties for
terminating the lease, if the lease term reflects the
lessee exercising an option to terminate the lease. The
lease liability is subsequently remeasured by increasing
the carrying amount to reflect interest on the lease
liability, reducing the carrying amount to reflect the lease
payments made and remeasuring the carrying amount
to reflect any reassessment or lease modifications or to
reflect revised in-substance fixed lease payments. The
Company recognises the amount of the re-measurement
of lease liability due to modification as an adjustment
to the Right-of-use asset and Standalone Statement
of Profit and Loss depending upon the nature of
modification. Where the carrying amount of the Right-
of-use asset is reduced to zero and there is a further
reduction in the measurement of the lease liability, the
Company recognises any remaining amount of the re¬
measurement in the Standalone Statement of Profit and
Loss.
The Company as a lessor
Leases for which the Company is a lessor is classified
as a finance or operating lease. Whenever the terms of
the lease transfer substantially all the risks and rewards
of ownership to the lessee, the contract is classified as a
finance lease. All other leases are classified as operating
leases. For operating leases, rental income is recognized
on a straight-line basis over the term of the relevant
lease.
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.
i. Inventories
All inventories except stores, spares, consumables, semi¬
finished goods and packaging material, are valued at
lower of cost and net realisable value. Stores, spares and
consumables, semi-finished goods and packing material
held for use in the production of finished products are not
written down below cost except in cases where material
prices have declined and it is estimated that the cost
of the finished products will exceed their net realisable
value. Costs for all categories of inventories have been
ascertained using weighted average cost method.
Cost of inventories comprises of the following:
• Raw material, stock-in-trade, semi-finished goods,
packaging materials and stores, spares and
consumables: Cost includes purchase price, import
duties and other taxes excluding taxes those are
subsequently recoverable from the concerned
authorities, freight inwards and other expenditure
incurred in bringing such inventories to their present
location and condition.
• Finished goods and work in progress: Cost
comprises cost of direct material, direct labour
and appropriate proportion of variable and fixed
overhead expenditure, the latter being allocated
on the basis of normal operating capacity, but
excluding borrowing costs.
Net realisable value is the estimated selling price in the
ordinary course of business, less estimated costs of
completion and the estimated costs necessary to make
the sale.
j. 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 groups of assets. Value in use is based on the
estimated future cash flows, 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 or CGU.
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. Impairment
losses of continuing operations, including impairment on
inventories, are recognised in the standalone statement
of profit and loss.
For assets excluding goodwill, 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.
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