3 MATERIAL ACCOUNTING POLICIES
3.1 Revenue Recognition
Revenue is recognised upon transfer of control of
promised products or services to customers for an
amount that reflects the consideration which the
Company expects to receive in exchange for those
products or services. Revenue excludes taxes or duties
collected on behalf of the government.
• Revenue from sale of goods is recognised when
control of goods has been transferred to the buyer
and performance obligation has been achieved, as
per the terms of the sales.
• Revenue from providing services is recognised in the
accounting period in which services are rendered.
• The Company arranges transportation and insurance
at the time of dispatch of products and recover it
from the customers and accordingly recognises
it as revenues when the perfomance obligation is
satisfied which takes place upon arrangement of
transportation and dispatch of goods by the company.
• Revenue from service is based on number of services
provided to the end of reporting period as a proportion
of the total number of services to be provided.
Revenue is measured based on the transaction price,
which is the consideration, adjusted for volume
discounts, performance bonuses, price concessions
and incentives, if any, as specified in the contract with
the customer. Revenue also excludes taxes collected
from customers.
A liability is recognised where payments are received
from customers before transferring control of the goods
being sold or providing services to the customer.
The Company disaggregates revenue from contracts
with customers by nature of goods and service.
Dividend income is recorded when the right to receive
payment is established. Interest income is recognised
using the effective interest method.
Royalty income is recognised on accrual basis
in accordance with the substance of their
relevant agreements.
3.2 Leasing
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.
The Company as a lessee
The Company's lease asset classes primarily consist of
leases for land and buildings. 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 recognises a right-of-use asset ("ROU") and a
corresponding lease liability for all lease arrangements in
which it is a lessee, except for leases with a term of twelve
months or less (short-term leases) and low value leases.
For these short-term and low value leases, the Company
recognises the lease payments as an operating expense
on a straight-line basis over the term of the lease.
Certain lease arrangements includes 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 right-of-use assets are initially recognised 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.
Right-of-use assets are depreciated from the
commencement date on a straight-line basis over
the shorter of the lease term and useful life of the
underlying asset. Right-of-use 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 lease liability is initially measured at amortised cost
at the present value of the future lease payments. The
lease payments are discounted using the interest rate
implicit in the lease or, if not readily determinable, using
the incremental borrowing rates in the country of domicile
of these leases. Lease liabilities are remeasured with a
corresponding adjustment to the related right-of-use
asset if the Company changes its assessment if whether
it will exercise an extension or a termination option.
Lease liability and ROU asset have been separately
presented in the Balance Sheet and lease payments have
been classified as financing cash flows.
Refer Note 7A for other disclosures.
3.3 Foreign currencies
In preparing the standalone financial statements of
the Company, transactions in currencies other than the
Company's functional currency (foreign currencies) are
recognised at the rates of exchange prevailing at the
dates of the transactions. At the end of each reporting
period, monetary items denominated in foreign
currencies are translated at the rates prevailing at that
date. Non-monetary items that are measured in terms of
historical cost in a foreign currency are not translated.
Exchange differences on monetary items are recognised
in the Statement of profit and loss in the period in which
they arise.
3.4 Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets, which
are assets that necessarily take a substantial period of
time to get ready for their intended use or sale, are added
to the cost of those assets, until such time as the assets
are substantially ready for their intended use or sale.
All other borrowing costs are recognised in the
Statement of profit and loss in the period in which they
are incurred.
3.5 Government grants
Government grants are not recognised until there is
reasonable assurance that the Company will comply
with the conditions attached to them and that the grants
will be received.
Government grants are recognised in the Statement of
profit and loss on a systematic basis over the periods
in which the Company recognises the related costs
as expenses, if any, for which the grants are intended
to compensate.
3.6 Employee benefits
Defined contribution plans
A defined contribution plan is a post-employment
benefit plan under which the Company pays fixed
contributions into a separate entity and will have no
legal or constructive obligation to pay further amounts.
Payments to defined contribution plans are recognised
as an expense when employees have rendered service
entitling them to the contributions.
Defined benefit plans
For defined benefit plans, the cost of providing benefits is
determined using the projected unit credit method, with
actuarial valuations being carried out at the end of each
annual reporting period. Re-measurement, comprising
actuarial gains and losses and the return on plan assets
(excluding net interest), is reflected immediately in the
balance sheet with a charge or credit recognised in other
comprehensive income in the period in which they occur.
Re-measurement recognised in other comprehensive
income is reflected immediately in retained earnings and
is not reclassified to the Statement of profit and loss.
Net interest is calculated by applying the discount rate
at the beginning of the period to the net defined benefit
liability or asset. Defined benefit costs are categorised
as follows:
• service cost (including current service cost,
past service cost, as well as gains and losses or
curtailments and settlements);
• net interest expense or income; and
• re-measurement
The Company presents the first two components of
defined benefit costs in the statement of profit and
loss in the line item Employee benefit expense and third
component is present in other comprehensive income.
The retirement benefit obligation recognised in the
balance sheet represents the actual deficit or surplus
in the Company's defined benefit plans. Any surplus
resulting from this calculation is limited to the present
value of any economic benefits available in the form
of refunds from the plan or reductions in future
contributions to the plans.
Short-term employee benefits
Liabilities recognised in respect of wages and salaries
and other short-term employee benefits are measured
at the undiscounted amount of the benefits expected
to be paid in exchange for the related service and are
expensed as the related services are provided.
Other long-term employee benefits
Liabilities recognised in respect of other long-term
employee benefits such as long term service awards and
compensated absences are measured at the present
value of the estimated future cash outflows expected
to be made by the Company in respect of services
provided by employees up to the reporting date based
on the actuarial valuation using the projected unit credit
method carried out at the year-end. Re measurement
gain or losses are recognised in the statement of profit
and loss in the period in which they arise.
3.7 Share-based payment arrangements
Equity-settled share-based payments to employees are
measured at the fair value of the equity instruments at
the grant date. Details regarding the determination of the
fair value of equity-settled share-based transactions are
set out in Note 40.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on
a straight-line basis over the vesting period, based on
the Company's estimate of equity instruments that
will eventually vest, with a corresponding increase in
equity. At the end of each reporting period, the Company
revises its estimate of the number of equity instruments
expected to vest. The impact of the revision of the original
estimates, if any, is recognised in the Statement of profit
and loss such that the cumulative expense reflects the
revised estimate, with a corresponding adjustment to
the Share option's outstanding account.
3.8 Taxation
Income tax expense represents the sum of the tax
currently payable and deferred tax.
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 that have been enacted by the end of the
reporting period.
Deferred tax
Deferred tax is recognised on temporary differences
between the carrying amounts of assets and liabilities
in the standalone 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.
The carrying amount of deferred tax assets is reviewed
at the end of each reporting period and reduced to the
extent that it is no longer probable that sufficient taxable
profits will be available to allow all or part of the asset to
be recovered.
Deferred tax liabilities and assets are measured at the
tax rates that are expected to apply in the period in
which the liability is settled or the asset realised, based
on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets
reflects the tax consequences that would follow from
the manner in which the Company expects, at the end
of the reporting period, to recover or settle the carrying
amount of its assets and liabilities.
Deferred tax assets and liabilities are offset if there is a
legally enforceable right to offset current tax liabilities
and assets and they are related to income taxes levied
by the same tax authority
Current and deferred tax are recognised in the Statement
of profit and loss, except when they relate to items that
are recognised in other comprehensive income or
directly in equity, in which case, the current and deferred
tax are also recognised in other comprehensive income
or directly in equity respectively.
3.9 Property, plant and equipment
Property, plant and equipment (including furniture,
fixtures, vehicles, etc.) held for use in the production
or supply of goods or services, or for administrative
purposes, are stated in the balance sheet at cost less
accumulated depreciation and accumulated impairment
losses, if any. Cost of acquisition is inclusive of freight,
duties, taxes and other incidental expenses. Freehold
land is not depreciated.
Property, plant and equipment in the course of
construction for production, supply or administrative
purposes are carried at cost, less any recognised
impairment loss. Cost includes items directly
attributable to the construction or acquisition of the
item of property, plant and equipment and capitalised
borrowing cost. Such properties are classified to
the appropriate categories of property, plant and
equipment when completed and ready for intended use.
Depreciation of these assets, on the same basis as other
property assets, commences when the assets are ready
for their intended use.
Subsequent costs are included in the assets carrying
amount or recognised as a separate asset, as appropriate
only if it is probable that the future economic benefits
associated with the item will flow to the Company and
that the cost of the item can be reliably measured. The
carrying amount of any component accounted for as a
separate asset is derecognised when replaced. All other
repairs and maintenance are charged to statement of
profit and loss during the reporting period in which they
are incurred.
Depreciation of these assets, on the same basis as other
property assets, commences when the assets are ready
for their intended use.
Depreciation is recognised on the cost of assets (other
than freehold land and properties under construction)
less their residual values over their useful lives, using the
straight-line method. The estimated useful lives, residual
values and depreciation method are reviewed at the end
of each reporting period, with the effect of any changes
in estimate accounted for on a prospective basis.
Depreciation is charged on a pro-rata basis at the
straight line method based on the estimated useful
life and residual value determined by the management
based on a technical evaluation considering nature of
asset, past experience, estimated usage of the asset,
vendor's advice etc., which coincides with the useful life
as prescribed under Schedule II of the Companies Act
2013 other than moulds and dies which are depreciated
over a period of 3-8 years grouped under property, plant
and equipment.
An item of property, plant and equipment is derecognised
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 the
Statement of Profit and loss.
3.10 Intangible assets
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired
separately are carried at cost less accumulated
amortisation and accumulated impairment losses, if
any. Amortisation is recognised on a straight-line basis
over their estimated useful lives. The estimated useful
life and amortisation method are reviewed at the end of
each reporting period, with the effect of any changes in
estimate being accounted for on a prospective basis.
Intangible assets with indefinite useful lives that are
acquired separately are carried at cost less accumulated
impairment losses, if any.
Internally-generated intangible assets - research
and development expenditure
Expenditure on research activities is recognised as an
expense in the period in which it is incurred.
An internally-generated intangible asset arising from
development (or from the development phase of an
internal project) is recognised if, and only if, all of the
following have been demonstrated:
• the technical feasibility of completing the intangible
asset so that it will be available for use or sale;
• the intention to complete the intangible asset and use
or sell it;
• the ability to use or sell the intangible asset;
• how the intangible asset will generate probable future
economic benefits;
• the availability of adequate technical, financial and
other resources to complete the development and to
use or sell the intangible asset; and
• the ability to measure reliably the expenditure
attributable to the intangible asset during
its development.
The amount initially recognised for internally-generated
intangible assets is the sum of the expenditure
incurred from the date when the intangible asset first
meets the recognition criteria listed above. Where no
internally-generated intangible asset can be recognised,
development expenditure is recognised in the Statement
of profit and loss in the period in which it is incurred.
Subsequent to initial recognition, internally-generated
intangible assets are reported at cost less accumulated
amortisation and accumulated impairment losses,
on the same basis as intangible assets that are
acquired separately.
An intangible asset is derecognised on disposal, or when
no future economic benefits are expected from use or
disposal. Gains or losses arising from de-recognition of
an intangible asset, 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.
Useful lives of intangible assets
Intangible assets such as expenditure on model fee etc.
are amortised on a straight line method over a period
of 5 years and computer software are amortised on a
straight line method over a period of 6 years.
3.11 Impairment of tangible and intangible
assets
At the end of each reporting period, 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 amount of the
asset is estimated in order to determine the extent of
the impairment loss (if any). Recoverable amount is
the higher of fair value less costs of disposal and value
in use.
I ntangible assets with indefinite useful lives and
intangible assets not yet available for use are tested
for impairment at least annually, and whenever there
is an indication that the asset may be impaired. 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.
For impairment testing, assets that don't generate
independent cash flows are grouped together into cash
generating units (CGU's). Each CGU represents the
smallest group of assets that generate cash inflows
that are largely independent of the cash inflows of other
assets or CGU's.
When it is not possible to estimate the recoverable
amount of an individual asset, the Company estimates
the recoverable amount of the cash-generating unit
to which the asset belongs. When 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.
If the recoverable amount of an asset (or cash-generating
unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (or cash-generating unit) is
reduced to its recoverable amount. An impairment loss
is recognised immediately in the Statement of profit and
loss. An impairment loss is reversed in the Statement
of Profit and Loss if there has been a change in the
estimates used to determine the recoverable amount.
The carrying amount of the asset is increased to its
revised recoverable amount, provided that this amount
does not exceed the carrying amount that would have
been determined (net of any accumulated depreciation)
had no impairment loss been recognised for the asset in
prior years.
3.12 Inventories
I nventories are stated at the lower of cost and net
realisable value. Cost of inventories includes expenditure
incurred in acquiring the inventories, production or
conversion costs and other costs incurred in bringing
them to their present location and condition. Costs
of inventories are determined on a moving weighted
average. Finished goods and work-in-progress include
appropriate proportion of overheads. Net realisable
value represents the estimated selling price for
inventories less all estimated costs of completion and
costs necessary to make the sale.
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