(a) Basis of preparation of Financial Statements:
(1) These financial statements have been prepared and comply in all material aspects
with Indian Accounting Standards (Ind AS) as notified by Ministry of Corporate
Affairs pursuant to section 133 of the Companies Act, 2013 read with Rule 3 of the
Companies (Indian Accounting Standards) Rules, 2015 and companies (Indian
Accounting Standards) Amended Rules, 2016.
The Financial statements have been prepared on accrual and going concern basis.
The accounting policies are applied consistently to all the periods presented in the
financial statements. All assets and liabilities have been classified as current and
non-current as per the company's normal operating cycle, paragraph 66 and 69 of
Ind AS 1 and other criteria as set out in the Division II of Schedule III to the
Companies Act, 2013 based on the nature of products/ services and the time
between the acquisition of assets for processing and their realization in cash and
cash equivalents, the Company has ascertained it's operating cycle as twelve
months for the purpose of current/non-current classification of assets and
liabilities.
(2) Basis of Measurement:
The Financial Statements have been prepared on an accrual basis under historical
cost convention or amortized cost.
(3) Recent accounting developments:
Ministry of Corporate Affairs (MCA) notifies new standards or amendments to the
existing. There is no such notification which would have been applicable from
April, 2021.
MCA issued notification dated 24th March, 2021 to amend Schedule III to the
Companies Act, 2013 to enhance the disclosure required to be made by the
company in its financial statements. These amendments are applicable to the
company for the financial year starting 01st April, 2021.
Use of Estimates and Judgment:
(i) The preparation of financial statement requires management to make judgments,
estimates and assumptions in the application of accounting policies that affect the
reported amounts of assets, liabilities, income, expenses. Actual results may differ from
these estimates. Continuous evaluation is done on the estimation and judgments based
on historical experience and other factors including expectations of future events that are
believed to be reasonable. Revisions of accounting estimates are recognized
prospectively.
Information about critical judgments in applying accounting policies, as well as estimates
and assumptions that have the most significant effect to the carrying amounts of assets
and liabilities within the next financial year, are included in the relevant notes.
(b) Foreign Currency Transaction:
(1) Effective April 1, 2018, the Company has adopted Appendix B to Ind AS 21, foreign
currency Transactions and advance consideration which clarifies the date of
transactions for the purpose of determining the exchange rate to use on initial asset
recognition of the related Asset, expense or income when an entity has received or
paid advance consideration in foreign currency. The effect on account of adoption
of this amendments was insignificant.
(2) Functional and Presentation Currency:
Items included in the financial statements of the company are measured using the
currency of the primary economic environment in which the entity operates ('the
functional currency'). These financial statements are presented in Indian Rupee
(INR), which is company's functional and presentation currency.
(3) Transactions and Balances:
Foreign currency transactions are translated into the functional currency using
exchange rates at the date of the transaction. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the translation of
monetary assets and liabilities denominated in foreign currencies at year end
exchange rates are generally recognized in Statement of Profit and Loss. Non¬
monetary items carried at fair value that are denominated in foreign currencies are
translated at the rates prevailing at the date when the fair value was determined.
Non-monetary items that are measured in terms of historical cost in a foreign
currency are not retranslated.
(d) Revenue Recognition:
The company recognizes revenue when the amount of revenue can be reliably measured,
it is probable that future economic benefit will flow to the entity and specific criteria has
been met for each of the Company's activities.
Revenue is measured at the fair value of the consideration received or receivable, after the
deduction of any discounts and any taxes collected on behalf of the government which
are levied on sales such as Goods and Service Tax (GST).
i) Revenue is recognized to the extent that it is probable that the economic benefits of
a transaction will flow to the Company and the revenue can be reliably measured,
regardless of when the payment is being made. Revenue is measured at the fair
value of the consideration received or receivable, taking into account contractually
defined terms of payment and excluding taxes or duties collected on behalf of the
government.
ii) Revenue from sale of goods is recognized upon transfer of significant risks and
rewards of ownership of the goods to the buyer, which is on dispatch of goods to
buyer.
(e) Interest and Dividend Income Recognition:
Interest income from a financial asset is recognized when its probable that the economic
benefits will flow to the Company and the amount of income can be measured reliably.
Interest income is accrued on a time basis, by reference to the principal outstanding and at
the effective interest rate applicable.
Dividends are recognized in the Statement of Profit and Loss only when the right to receive
payment is established, it is probable that the economic benefits associated with the
dividend will flow to the Company and the amount of the dividend can be measured
reliably.
(f) Income Taxes:
Amendments to Ind AS 12 Income Taxes regarding recognition of deferred tax assets on
unrealized losses clarify the accounting for deferred taxes where an asset is measured at
fair value and that the fair value is below the asset's tax base. They also clarify certain other
aspects of accounting for deferred tax assets.
The income tax expense or credit for the period is the tax payable on the current period's
taxable income based on the applicable income tax rate adjusted by changes in deferred
tax assets and liabilities attributable to temporary differences and to unused tax losses, if
any.
The current income tax charge is calculated on the basis of the tax laws enacted or
substantively enacted at the end of the reporting period in the country where the Company
generates taxable income. Management periodically evaluates positions taken in tax
returns with respect to situations in which applicable tax regulation is subject to
interpretation. It establishes provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary
differences arising between the tax base of assets and liabilities and their carrying amounts
in the financial statements. Deferred income tax is determined using tax rates (and laws)
that have been enacted or substantially enacted by the end of the reporting period and are
expected to apply when the related deferred income tax asset is realized or the deferred
income tax liability is settled.
Deferred tax assets are recognized for all deductible temporary differences and unused tax
losses only if it is probable that future taxable amounts will be available to utilize those
temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to
offset current tax assets and liabilities and when the deferred tax balance relate to the same
taxation authority. Current tax assets and tax liabilities are offset where the entity 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.
Current and deferred tax is recognized in the Statement of Profit and Loss, except to the
extent that it relates to items recognized in other comprehensive income or directly in
equity if any. In this case, the tax is also recognized in other comprehensive income or
directly in equity, respectively if any.
(g) Statement of Cash Flows:
Cash flows are reported using the indirect method, whereby net profit/ (loss) for the year
is adjusted for the effects of transactions of non-cash nature, any deferrals or accruals of
past or future operating cash receipts or payments and items of income or expenses
associated with investing or financing cash flows. The cash flows from operating, investing
and financing activities of the company are segregated.
For the purpose of presentation in the statement of cash flows, cash and cash equivalents
include cash in hand, cash at banks, other short term deposits and highly liquid
investments with original maturity of three months or less that are readily convertible into
cash and which are subject to an insignificant risk of changes in value.
The above statement of cash flows has been prepared under the 'indirect method' as set
out in Ind AS 7 statement of cash flows.
(h) Cash & Cash Equivalents:
Cash and cash equivalents includes cash on hand and bank balances. For the purpose of
Cash Flow Statement, Cash and cash equivalents are considered net of outstanding
overdrafts as they are considered an integral part of Company's cash management.
(i) Inventories:
The Company's Inventories of WIP- nature to mention here is valued at cost as certified by
the management of the company.
(j) Trade receivables:
Trade receivables are recognized initially at fair value and subsequently measured at
amortised cost less provision for impairment.
(k) Financial Instruments:
(i) Financial Assets.
Classification:
The Company classifies its financial assets in the following measurement
categories:
(a) Those to be measured subsequently at fair value (either through other
comprehensive income or through profit or loss) and
(b) Those measured at amortised cost.
The classification depends on the entity's business model for managing the
financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in
Statement of Profit and Loss or Other Comprehensive Income.
(c) There are no transactions in respect of classification of financial assets to be
measured at fair value through Other Comprehensive Income (FVOCI) and
measured at Fair Value through Profit or Loss (FVTPL).
Measurements:
At initial recognition, the Company measures a financial asset at its fair value plus,
in the case of a financial asset not at fair value through profit or loss, transaction
costs that are directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at fair value through profit or loss are
expensed in Statement of Profit and 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. The impairment methodology
applied depends on whether there has been a significant increase in credit risk.
For trade receivables, the Company applies the simplified approach permitted by
Ind AS 109 financial instruments, which requires expected lifetime losses to be
recognized from initial recognition of the receivables.
De-recognition of Financial Assets:
A financial asset is de-recognized only when -
- The Company has transferred the right to receive cash flows from the financial
asset or
- Obligation to pay the cash flows to one or more recipients.
Where the company has transferred an asset, it evaluates whether it has transferred
substantially all risks and rewards of ownership of the financial asset. In such
cases, the financial asset is derecognized. Where the company has not transferred
substantially all risks and rewards of ownership of the financial assets, the financial
asset is not derecognized.
Where the Company has neither transferred a financial asset nor retains
substantially all risks and rewards of ownership of the financial asset, the financial
asset is de-recognised 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 recognized to the extent of continuing involvement in the financial asset.
(ii) Financial Liabilities:
Classification as debt or equity:
Financial liabilities and equity instruments issued by the Company are classified
according to the substance of the contractual arrangements entered into and the
definitions of a financial liability and an equity instrument.
Initial recognition and measurement:
Financial liabilities are recognized when the Company becomes a party to the
contractual provisions of the instrument. Financial liabilities are initially measured
at the fair value.
Subsequent measurement:
Financial liabilities are subsequently measured at amortised cost using the effective
interest rate method. Financial liabilities carried at fair value through profit or loss
are measured at fair value with all changes in fair value recognized in the Statement
of Profit and Loss.
Derecognition:
A financial liability is derecognized when the obligation specified in the contract is
discharged, cancelled or expires.
(l) Offsetting 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 recognized amounts and there is an
intention to settle on a net basis or realize 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.
(m) Property, Plant and Equipment:
All property, plant and equipment are stated at historical cost less accumulated
depreciation and accumulated impairment losses, if any. Historical cost includes
expenditure that is directly attributable to the acquisition of the asset. Subsequent costs are
included in the asset's carrying amount or recognized as a separate asset, as appropriate,
only when it is probably 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 derecognized when replaced. All other
repairs and maintenance expenses are charged to Statement of Profit and Loss during the
reporting period in which they are incurred.
(n) Intangible Assets:
Intangible assets purchased are initially measured at cost.
The cost of an intangible asset comprises of its purchase price including duties and taxes
and any costs directly attributable to making the asset ready for their intended use.
Intangible asset acquired in business combination are recognized at fair value at the
acquisition date. Subsequently, intangible assets are carried at cost less any accumulated
amortization and accumulated impairment losses, if any. Subsequent expenditure is
capitalized only when it increases the future economic benefits embodied in the specific
asset to which it relates. All other expenditure is recognized in statement of profit or loss
as incurred.
Depreciation methods, estimated useful lives and residual value:
Depreciation is calculated using the written down value method to allocate the cost of the
asset, net of their residual values, if any, over their estimated useful lives which are in
accordance with the useful lives prescribed under Schedule II to the Companies Act, 2013.
Gains or losses arising from the retirement or disposal of a tangible asset are determined
as the difference between the net disposal proceeds and the carrying amount of the asset
and recognized as income or expense in the Statement of Profit and Loss.
(o) Impairment of assets:
Non-Financial assets are tested for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment
loss is recognized for the amount by which the asset's carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset's fair value less costs
of disposal and value in use. For the purposes of assessing impairment, assets are grouped
at the lowest levels for which there are separately identifiable cash inflows which are
largely independent of the cash inflows from other assets or groups of assets (cash¬
generating units). Non-financial assets that suffered impairment are reviewed for possible
reversal of the impairment at the end of each reporting period.
When an impairment loss subsequently reverses, the carrying amount of the asset (or a
cash-generating unit) is increased to the revised estimate of its recoverable amount, but so
that the increased carrying amount does not exceed the carrying amount that would have
been determined had no impairment loss is recognized immediately in the Statement of
Profit or Loss.
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