1 MATERIAL ACCOUNTING POLICIES
(a) BASIS OF PREPARATION
The financial statements have been prepared as a going concern on an accrual basis in accordance with Indian
Accounting Standards (Ind AS) prescribed under section 133 of the Companies Act,2013 ("the Act") [Companies
(Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules,
2016, as amended] and Other applicable provisions of the Act, to the extent applicable.
The financial statements have been prepared under historical cost convention and presented in Indian Rupees
(INR) which is the Company's functional currency. All financial information presented in INR has been rounded off
to the nearest lakhs.
However, the following financial assets and financial liabilities are measured at fair value:
i) Certain financial assets and liabilities measured at fair value.
ii) Plan assets of defined employee benefit plans.
(b) PROPERTY, PLANT AND EQUIPMENT
The Company has elected to avail the exemption granted by IND AS-101"First time adoption of IND AS" and
regarded the Previous GAAP carrying value for all of its property, plant and equipment as deemed cost at the
transition date, viz., 1st April, 2016. Freehold land is carried at historical cost. All other items of property, plant
and equipment are stated at historical cost less accumulated depreciation, net of impairment, if any. 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. All other repairs and maintenance are charged to profit or loss during the reporting
period in which they are incurred.
Depreciation methods, estimated useful lives and residual value
Depreciation on property, plant and equipment is provided on 'Straight Line Method', over the estimated useful
lives of the respective assets as prescribed under Schedule II of the Companies Act, 2013 except for vehicles
used for Research and development purpose, which are depreciated @20% p.a. which was higher than the rates
prescribed under Schedule II of the Companies act, 2013. Leasehold land (other than perpetual lease) is amortised
over the respective lease period. Depreciation on addition to property, plant and equipment is provided on pro¬
rata basis with reference to the month of addition. The assets' residual values and useful lives are reviewed, and
adjusted if appropriate, at the end of each reporting period.
Derecognition
The carrying amount of an item of property, plant and equipment is derecognised on disposal or when no future
benefits are expected from its use or disposal. Depreciation on disposal of property, plant and equipment
is provided on pro-rata basis with reference to the month of disposal. Gains and losses on disposals are
determined by comparing proceeds with carrying amount. These are included in profit or loss within other
gains/(losses).
(c) INTANGIBLE ASSETS
The Company has elected to avail the exemption granted by IND AS-101"First time adoption of IND AS" and
regarded the Previous GAAP carrying value for all of its intangible assets as deemed cost at the transition date,
viz., 1st April, 2016. Intangible assets are stated at cost less accumulated amortisation and net of impairments,
if any. An intangible asset is recognised if it is probable that the expected future economic benefits that are
attributable to the asset will flow to the company and its cost can be measured reliably. Intangible assets is
being amortised on straight line basis over a period of 5 years.
Derecognition:
The carrying amount of an intangible asset is derecognized on disposal or when no future economic benefits
are expected from its use or disposal. Gains or losses arising from the retirement or disposal of an intangible
asset are determined as the difference between the net disposal proceeds and the carrying amount of the asset
and recognised as income or expense in profit or loss.
(d) INVENTORIES
a) Inventories are valued at lower of cost, computed on annual weighted average basis, and net realisable
value.
b) The closing stock of materials inter-transferred from one unit to another is valued at cost or net realisable
value whichever is lower.
c) Net realisable value is the selling price in the ordinary course of business, less costs of completion and
costs necessary to make the sale.
d) Cost of finished goods and work in progress include direct materials, labour and an appropriate proportion
of manufacturing overheads based on normal operating capacity. Cost of finished goods includes excise
duty.
(e) FAIR VALUE MEASUREMENT
Fair value is the price that would be received on sale of asset or paid to transfer a liability in an ordinary
transaction between market participants at the measurement date. Normally at initial recognition the
transaction price is the best evidence of fair value.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities based
on the nature, characteristics and the risks of the asset or liability and at the level of the fair value hierarchy.
This categorization is 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.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data
are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use
of unobservable inputs.
(f) FINANCIAL INSTRUMENTS
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or
equity instrument of another entity.
FINANCIAL ASSETS:
Initial recognition and measurement
All financial assets except trade receivables are recognized initially at fair value plus, in the case of financial
assets not recorded at fair value through profit or loss, then at transaction costs that are attributable to the
acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss
are expressed in the Statement of Profit and Loss.
The Company measures the trade receivables at their transaction price, if the trade receivables do not contain
a significant financing component.
Subsequent measurement
Subsequent measurement of financial assets is described below-
(i) Debt instruments :
A 'debt instrument' is measured at the amortised cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual
cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of
principal and interest (SPPI) on the principal amount outstanding.
(ii) Equity investments :
The Company subsequently measures all equity investments in companies other than equity investments
in subsidiaries, joint ventures and associates at fair value. As per management, as sufficient recent
information is not available to measure the fair value, cost represents best estimate of the fair value
within that range.
Derecognition :
A financial asset (or, where applicable, a part of a financial asset or part of a Company of similar financial
assets) is primarily derecognised (i.e. removed from the Company's balance sheet) when
• The rights to receive cash flows from the asset have expired, or the Company has transferred its
rights to receive cash flows from the asset or
• The Company has transferred its right to receive cash flows from the asset or has assumed an
obligation to pay the received cash flows in full without material delay to a third party under a 'pass¬
through' arrangement; and either (a) the Company has transferred substantially all the risks and
rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the
risks and rewards of the asset, but has transferred control of the asset.
Financial Liabilities :
Financial liabilities of the Company are contractual obligations to deliver cash or another financial asset
to another entity.
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value minus transaction
costs that are directly attributable and subsequently measured at amortised cost. Any difference between
the proceeds (net of transaction costs) and the fair value at initial recognition is recognised through profit
or loss and loans and borrowings, payables, or as derivatives designated as hedging instruments in an
effective hedge, as appropriate.
All financial liabilities are recognized initially at fair value, and, in the case of loans and borrowings and
payables, net of directly attributable transaction costs.
Subsequent measurement
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised
cost using the Effective Interest Rate (EIR) method. Gains and losses are recognized in the Statement of
Profit and Loss when the liabilities are derecognized.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees
or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the
Statement of Profit and Loss.
Derecognition:
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or
expires. When an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as the derecognition of the original liability and the recognition of a new liability.
The differences in the respective carrying amounts are recognized in the Statement of Profit and Loss.
(g) IMPAIRMENT
1. Property, plant and equipment and other intangible assets
At each balance sheet date, the Company assesses whether there is any indication that any property,
plant and equipment and intangible assets with finite lives may be impaired. If any such impairment
exists the recoverable amount of an asset is estimated to determine the extent of impairment, if any.
Where 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. Intangible assets with
indefinite useful lives and intangible assets not yet available for use, are tested for impairment annually
at each balance sheet date, or earlier, if there is an indication that the asset may be impaired. Recoverable
amount is the higher of fair value less costs to sell and value in use. 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. 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.
2. Financial assets
The Company recognises loss allowances using the expected credit loss (ECL) model for the financial
assets which are not fair valued through profit or loss. The Company tests for impairment using the
ECL model for financial assets such as trade receivables, loans and advances to be settled in cash and
deposits.
Loss allowance for trade receivables with no significant financing component is measured at an amount
equal to lifetime ECL. Life time ECL are the expected credit losses resulting from all possible default
events over the expected life of a financial instrument. The 12 month ECL is a portion of the lifetime ECL
which results from default events on a financial instrument that are possible within 12 months after the
reporting date.
ECL impairment loss allowance (or reversal) recognised during the period is recognised as income/
expense in the statement of profit and loss (P&L). This amount is reflected in a separate line in the P&L
as an impairment gain or loss. For financial assets measured at amortised cost, ECL is presented as an
allowance which reduces the net carrying amount of the financial asset.
(h) REVENUE RECOGNITION
(i) Amounts disclosed as revenue are net of rebate, discount if any.
(ii) Insurance and other claims, to the extent considered recoverable, are accounted for in the year of claim.
However, claims and refunds whose recovery cannot be ascertained with reasonable certainty are
accounted for on acceptance basis.
(iii) Revenue from interest is recognized on accrual basis and determined by contractual rate of interest.
(iv) Dividend income is stated at gross and is recognized when right to receive payment is established.
The company recognizes revenue when the amount of revenue can be reliably measured, it is probable that
future economic benefits will flow to the entity after dispatch of goods and passing of title to the customer.
(i) EMPLOYEE BENEFITS
(i) Short term obligations:
Short term employee benefits are accrued in the year services are rendered by the employees.
(ii) Post employment benefit obligations:
Contributions to defined contribution plans such as Provident Fund etc. are being made in accordance
with the statute and are recognized as and when incurred.
Contribution to defined benefit plans consisting of contribution to gratuity are determined at close of
the year at present value of the amount payable using actuarial valuation techniques. Actuarial gain
and losses arising from experience adjustments and changes in actuarial assumptions are recognized in
other comprehensive income. Other costs are recognized in the Statement of Profit and Loss.
Other long term employee benefits consisting of Leave encashment are determined at close of the year
at present value of the amount payable using actuarial valuation techniques. The changes in the amount
payable including actuarial gain or loss are recognized in the Statement of Profit or Loss.
Contribution to Superannuation Fund, a defined contribution plan is made in accordance with the Company
Policy and is recognized in the Statement of Profit and Loss.
(j) FOREIGN CURRENCY TRANSACTION
(i) Transactions and balances
At each Balance Sheet date, monetary items denominated in foreign currency are translated at the
functional currency exchange rates prevailing on that date and exchange difference has been recognized
in the Statement of Profit and Loss. The company classifies all its foreign operations as integral in nature.
Non-monetary items that are measured in terms of historical cost in foreign currency are translated
using the exchange rate at the date of transaction.
(ii) Forward Exchange contracts not intended for trading or speculation purpose
The premium or discount arising at the inception of forward exchange contracts is amortised as expenses
or income over the life of respective contracts. Exchange differences on such contracts are recognised in
the Statement of Profit and Loss in the year in which the exchange rates change. Any profit or loss arising
on cancellation or renewal of forward exchange contract is recognised as income or as expense for the
year.
(k) INCOME TAXES
Current income tax is recognized based on the amount expected to be paid to the tax authorities, using tax rates
and tax laws that have been enacted or substantially enacted on the date of Balance Sheet.
Current tax is recognised in profit or loss, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive
income or directly in equity, respectively.
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 realise the asset and settle the liability simultaneously.
(l) DEFERRED TAX
Deferred tax is recognised, using the Balance Sheet- liability method, on temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts in the separate financial statements.
Deferred tax assets are recognised for all deductible temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to utilise those temporary differences and losses. If the
Company has carry forward unabsorbed depreciation and tax losses, all deferred tax assets are recognised only
to the extent there is virtual certainty supported by convincing evidence that sufficient taxable income will be
available against which such deferred tax assets can be realised.
At each Balance Sheet date, the Company re-assesses unrecognised deferred tax assets. It recognises,
unrecognised deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the
case may be, that sufficient future taxable income will be available against which such deferred tax assets can
be realised.
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 balances relate to the same taxation authority.
(m) EARNINGS PER SHARE
Basic earnings per share is computed using the weighted average number of equity shares outstanding during
the period. Diluted earnings per share is computed using the weighted average number of shares and dilutive
equity equivalent shares outstanding during the period, except when results will be anti-dilutive.
|