3 Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these financial statements.
a. Foreign currency transactions
Transactions in foreign currencies are translated into functional currency of the Company at the rate prevailing at the dates of
the transactions or an average rate if the average rate approximates the actual rate at the date of the transaction.
- Foreign currency monetary items are translated in the functional currency at the exchange rate at the reporting date.
- Non-monetary items carried at fair value that are denominated in foreign currencies are translated into the functional
currency at the rate when the fair value was determined.
- Non-monetary items denominated in a foreign currency and measured at historical cost are translated at the exchange
rate prevalent at the date of the transaction.
- Exchange differences are recognised in profit or loss in the period in which they arise, except exchange differences
arising from the translation of the items which are recognised in OCI.
b. Financial instruments
i. Recognition and initial measurement
Financial instruments are initially recognised when they are originated. All other financial assets and financial liabilities
are initially recognised when the Company becomes a party to the contractual provisions of the instrument.
A financial asset or financial liability is initially measured at fair value plus, for an item not at fair value through profit and
loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue of financial assets or liabilities.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable
to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at
fair value through profit or loss and ancillary costs related to borrowings) are added to or deducted from the fair value of
the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to
the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in
Statement of Profit and Loss.
ii. Classification and subsequent measurement
Financial assets
On subsequent recognition, a financial asset is classified as measured at
- amortised cost;
- Fair value through other comprehensive income (FVOCI) - equity investment; or
- Fair value through profit or loss (FVTPL)
Financial assets are not reclassified subsequent to their initial recognition, except if and in the period the Company
changes its business model for managing financial assets and the contractual cash flow characteristics of the financial
asset.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at
FVTPL:
• the asset is held within a business model whose objective is to hold assets 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.
On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present
subsequent changes in the investment's fair value in OCI (designated as FVOCI - equity investment). This election is
made on an investmentbyinvestment basis.
If all financial assets are not measured at amortised cost or FVOCI as described above, to be measured at FVTPL. This
includes all derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset
that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates
or significantly reduces an accounting mismatch that would otherwise arise.
Financial liabilities
Financial liabilities are classified as either financial liabilities at FVTPL or ‘Other financial liabilities'. A financial liability is
classified as at FVTPL if it is classified as heldfortrading, or it is a derivative or it is designated as such on initial recognition.
Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are
recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective
interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss.
iii. De-recognition
Financial assets
The Company de-recognises a financial asset when the contractual rights to the cash flows from the financial asset
expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks
and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains
substantially all of the risks and rewards of ownership and does not retain control of the financial asset.
If the Company enters into transactions whereby it transfers assets recognised on its balance sheet, but retains either all
or substantially all of the risks and rewards of the transferred assets, the transferred assets are not de-recognised.
Financial liabilities
The Company derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.
The Company also derecognises a financial liability when its terms are modified and the cash flows under the modified
terms are substantially different. In this case, a new financial liability based on the modified terms is recognised at fair
value. The difference between the carrying amount of the financial liability extinguished and the new financial liability with
modified terms is recognised in profit or loss.
iv. Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the balance sheet when, and only
when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on
a net basis or to realise the asset and settle the liability simultaneously.
v. Derivative financial instruments
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re¬
measured to their fair value at each reporting date. Changes in the fair value of any derivative instrument are recognised
immediately in the statement of profit and loss and are included in other income or expenses.
c. Property, plant and equipment and capital work-in-progress
i. Recognition and measurement
Property, plant and equipment
Items of property, plant and equipment are measured at cost, which includes capitalised borrowing costs, less accumulated
depreciation and accumulated impairment losses, if any.
Cost of an item of property, plant and equipment comprises its purchase price, including import duties and non-refundable
purchase taxes, after deducting trade discounts and rebates, any directly attributable cost of bringing the item to its
working condition for its intended use and estimated costs of dismantling and removing the item and restoring the site on
which it is located.
The cost of a self-constructed item of property, plant and equipment comprises the cost of materials and direct labour, any
other costs directly attributable to bringing the item to working condition for its intended use, and estimated costs of
dismantling and removing the item and restoring the site on which it is located.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as
separate items (major components) of property, plant and equipment.
Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss.
Capital work-in-progress
Cost of assets not ready for intended use, as on the balance sheet date, is shown as capital work-in-progress. Advances
given towards acquisition of fixed assets outstanding at each balance sheet date are disclosed as other non-current
assets.
ii. Transition to Ind AS
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its property, plant and
equipment recognised and, measured as per the previous GAAP, and use that carrying value as the deemed cost of such
property, plant and equipment .
iii. Subsequent expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure
will flow to the Company otherwise charged in statement of profit & loss for the period in which the costs are incurred.
iv. Depreciation
a) Depreciation is calculated on cost of items of property, plant and equipment less their estimated residual values over
their estimated useful lives using the straight-line method for Plant & Machinery , ETP, Fire & Pollution and Electric
Installation and the written down value method for Building, Office Equipment , Air conditioner, Furniture & Fixtures,
computers and vehicles and is generally recognised in the statement of profit and loss.
b) Freehold land is not depreciated.
c) The estimated useful lives of items of property, plant and equipment are estimated by the Management, which are
equal to the life prescribed under the Schedule II of the Act.
d) Depreciation on additions (disposals) is provided on a pro-rata basis i.e. from (up to) the date on which asset is ready
for use (disposed of).
d. Inventories
Inventories are valued as follows:
i. Raw materials, stores and spares are valued at lower of cost and net realisable value. However, these items are considered
to be realisable at cost, if the finished products, in which they will be used, are expected to be sold at or above cost. Cost
is determined on First in First out Basis (FIFO).
ii. Work-in-progress and finished goods are valued at lower of cost and net realisable value. Cost includes direct materials
and labour and a proportion of manufacturing overheads based on normal operating capacity. Cost is determined on a
weighted average basis.
iii. Scraps / rejected materials are valued at estimated net realisable value. 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.
The comparison of cost and net realisable value is made on an item by item basis.
iv. Material in Transit are valued at lower of cost and net realisable value.Cost is determined on First in First out Basis
(FIFO).
e. Impairment of non-financial assets
The Company's non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to
determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is
estimated.
For impairment testing, assets that do not generate independent cash inflows are grouped together into cash-generating units
(CGUs). Each CGU represents the smallest group of assets that generates cash inflows that are largely independent of the
cash inflows of other assets or CGUs.
The recoverable amount of a CGU (or an individual asset) is the higher of its value in use and its fair value less costs to sell.
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 CGU (or the asset).
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its estimated recoverable amount.
Impairment losses are recognised in the statement of profit and loss.
f. Employee benefits
i. Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed during the period as
the related service is provided. A liability is recognised for the amount expected to be paid, if the Company has a present
legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the amount
of obligation can be estimated reliably.
ii. Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate
entity and will have no legal or constructive obligation to pay further amounts.
Company providing retirement benefit in the form of provident fund is a defined contribution scheme. The contributions
payable to the provident fund are recognised as expenses, when an employee renders the related services. The Company
has no obligation, other than the contribution payable to the funds.
iii. Defined benefit plans
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company's net
obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future
benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value
of any plan assets.
Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit
credit method made at the end of each financial year. The Company accounts for gratuity liability of its employees on the
basis of actuarial valuation carried out at the year end by an independent actuary.
Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets
(excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised in OCI. The Company
determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the
discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined
benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a
result of benefit payments. Net interest expense and other expenses related to defined benefit plans are recognised in
profit or loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past
service (‘past service cost' or ‘past service gain') or the gain or loss on curtailment is recognised immediately in profit or
loss. The Company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.
iv. Other long-term employee benefits
Company treats accumulated leave, as long-term employee benefit for measurement purposes. Such long-term
compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the
year-end. Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred.
g. Revenue
Revenue recognised sale of goods
Revenue from the sale of goods is recognised when control of the goods is transferred to the customer, which typically occurs
when the significant risks and rewards of ownership have been transferred. The amount of revenue recognised is the transaction
price, which is the amount of consideration to which the entity expects to be entitled in exchange for the goods. The transaction
price is measured at the fair value of the consideration received or receivable, taking into account the effects of any variable
consideration, significant financing components, and any consideration payable to the customer. If payment extends beyond
normal credit terms, the consideration is discounted to its present value, recovery of the consideration is probable, the associated
costs and possible return of goods can be estimated reliably,there is no continuing effective control over, or managerial
involvement with, the goods, and the amount of revenue.
h. Recognition of dividend income, interest income or expense
Dividend income is recognised in profit or loss on the date on which the Company's right to receive payment is established.
Difference between the sale price and carrying value of investment is recognised as profit or loss on sale / redemption on
investment on trade date of transaction.
Interest income or expense is recognised using the effective interest method.
i. Government grants
Government grants are recognised initially as deferred income at fair value when there is reasonable assurance that they will
be received and the Group will comply with the conditions associated with the grant; they are then recognised in profit or loss
as other income on a systematic basis.
j. Leases
i. Determining whether an arrangement contains a lease
At inception of an arrangement, it is determined whether the arrangement contains a lease.
At inception or on reassessment of the arrangement that contains a lease, the payments and other consideration required
by such an arrangement are separated into those for the lease and those for other elements on the basis of their relative
fair values. If it is concluded for a finance lease that it is impracticable to separate the payments reliably, then an asset and
a liability are recognised at an amount equal to the fair value of the underlying asset. The liability is reduced as payments
are made and an imputed finance cost on the liability is recognised using the incremental borrowing rate.
ii. Assets held under leases
Leases of property, plant and equipment that transfer to the Company substantially all the risks and rewards of ownership
are classified as finance leases. The leased assets are measured initially at an amount equal to the lower of their fair
value and the present value of the minimum lease payments. Subsequent to initial recognition, the assets are accounted
for in accordance with the accounting policy applicable to similar owned assets.
Assets held under leases that do not transfer to the Company substantially all the risks and rewards of ownership (i.e.
operating leases) are not recognised in the Company's balance sheet.
iii. Lease payments
Payments made under operating leases are generally recognised in profit or loss on a straight-line basis over the term of
the lease unless such payments are structured to increase in line with expected general inflation to compensate for the
lessor's expected inflationary cost increases. Lease incentives received are recognised as an integral part of the total
lease expense over the term of the lease.
Minimum lease payments made under finance leases are apportioned between the finance charge and the reduction of
the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant
periodic rate of interest on the remaining balance of the liability.
iv. Right of use :Lease Assets
The Indian Accounting Standard on leases (Ind AS 116) requires entity to determine whether a contract is or contains a
lease at the inception of the contract.
Ind AS 116 requires lessee to recognise a liability to make lease payments and an asset representing the right-of-use
asset during the lease term for all leases except for short term leases, if they choose to apply such exemptions.
Payments associated with short-term leases are recognized as expenses in profit or loss. Short-term leases are leases
with a lease term of 12 months or less
At the commencement date, Company recognise a right-of-use asset measured at cost and a lease liability measured at
the present value of thelease payments that are not paid at that date. The lease payments shall be discounted using the
interest rate implicit in the lease, if that rate canbe readily determined. If that rate cannot be readily determined, the lessee
shall use the lessee's incremental borrowing rate.
The cost of the right-of-use asset comprise of, the amount of the initial measurement of the lease liability, any lease
payments made at or before the commencement date, less any lease incentives received.
Depreciation on Right-of-use asset is recognised in Statement of Profit and Loss on a straight line basis over the period of
lease and the Company separately recognises interest on lease liability as a component of finance cost in statement of
profit and Loss.
k. Income-tax
Income Tax expenses comprise current and deferred tax charge or credit. It is recognised in profit or loss except to the extent
that it relates to an item recognised directly in equity or in other comprehensive income.
i. Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment
to the tax payable or receivable in respect of previous years. The amount of current tax reflects the best estimate of the tax
amount expected to be paid or received after considering the uncertainty, if any, related to income taxes. It is measured
using tax rates (and tax laws) enacted or substantively enacted by the reporting date.
Current tax assets and current tax 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.
ii. Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the corresponding amounts used for taxation purposes. Deferred tax is also recognised
in respect of carried forward tax losses and tax credits. Deferred tax is not recognised for the temporary differences
arising on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects
neither accounting nor taxable profit or loss at the time of the transaction;
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against
which they can be used. The existence of unused tax losses is strong evidence that future taxable profit may not be
available. Therefore, in case of a history of recent losses, the Company recognises a deferred tax asset only to the extent
that it has sufficient taxable temporary differences or there is convincing other evidence that sufficient taxable profit will be
available against which such deferred tax asset can be realised. Deferred tax assets - unrecognised or recognised, are
reviewed at each reporting date and are recognised/ reduced to the extent that it is probable/ no longer probable respectively
that the related tax benefit will be realised.
Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realised or the liability
is settled, based on the laws that have been enacted or substantively enacted by the reporting date.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company
expects, at the reporting date, 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 relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but
they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised
simultaneously.
l. Borrowing cost
Borrowing costs are interest and other costs (including exchange differences relating to foreign currency borrowings to the
extent that they are regarded as an adjustment to interest costs) incurred in connection with the borrowing of funds. Borrowing
costs directly attributable to acquisition or construction of an asset which necessarily take a substantial period of time to get
ready for their intended use are capitalised as part of the cost of that asset. Other borrowing costs are recognised as an
expense in the period in which they are incurred.
|