2 SUMMARY OF MATERIAL ACCOUNTING
POLICIES
This note provides a list of the significant accounting
policies adopted in the preparation of these standalone
financial statements. These policies have been
consistently applied to all the years presented, unless
otherwise stated.
Significant accounting policies adopted by the
Company are as under:
2.1 Basis of Preparation
These standalone Ind AS financial statements ("Ind
AS financial statements") have been prepared in
accordance with Indian Accounting Standards ('Ind AS’)
notified under Section 133 of the Companies Act, 2013
('the Act’) read with the Companies (Indian Accounting
Standards) Rules, 2015 as amended by the Companies
(Indian Accounting Standards) Rules, 2016 and other
relevant provisions of the Act, to the extent applicable.
Accounting policies have been consistently applied
except where a newly issued accounting standard is
initially adopted or a revision to an existing accounting
standard requires a change in the accounting policy
hitherto in use.
As the year end figures are taken from the source and
rounded to the nearest digits, the figures reported for
the previous quarters might not always add up to the
year end figures reported in this statement.
(a) Functional and presentation currency
Items included in these standalone financial
statements of the Company are measured
using the currency of the primary economic
environment in which the Company operates
('the functional currency’). The standalone Ind
AS financial statements are presented in Indian
rupee ('), which is also the Company’s functional
currency. All amounts have been rounded-off to
the nearest Lakhs, up to two places of decimal,
unless otherwise indicated.
(b) Basis of measurement
The separate standalone financial statements of
the Company are prepared in accordance with
Indian Accounting Standards (Ind AS), under the
historical cost convention on the accrual basis
as per the provisions of the Companies Act, 2013
("the Act"), except for:
- Financial instruments - measured at fair
value;
- Plan assets under defined benefit plans -
measured at fair value;
- Asset & Liabilities recognised under Ind AS
116
In addition, for financial reporting purposes, fair
value measurements are categorised into Level 1,
2, or 3 based on the degree to which the inputs
to the fair value measurements are observable
and the significance of the inputs to the fair value
measurements in its entirety, which are described
as follows:
Level 1 inputs are quoted prices (unadjusted) in
active markets for identical assets or liabilities
that the entity can access at the measurement
date;
Level 2 inputs are inputs, other than quoted prices
included within level 1, that are observable for the
asset or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the
asset or liability.
(c) Classification into current and non-current:
The Company presents assets and liabilities in the
standalone balance sheet based on current / non¬
current classification.
An asset is classified as current when it satisfies
any of the following criteria:
• It is expected to be realised in, or is intended
for sale or consumption in, the Company's
normal operating cycle;
• It is held primarily for the purpose of being
traded;
• It is expected to be realised within 12 months
after the reporting date; or
• It is cash or cash equivalent unless it is
restricted from being exchanged or used to
settle a liability for at least 12 months after
the reporting date.
• All other assets are classified as non-current.
An liability is classified as current when it satisfies
any of the following criteria:
• It is expected to be settled in the Company’s
normal operating cycle;
• It is held primarily for the purpose of being
traded
• It is due to be settled within 12 months
after the reporting date; or the Company
does not have an unconditional right to
defer settlement of the liability for at least
12 months after the reporting date. Terms
of a liability that could, at the option of the
counterparty, result in its settlement by the
issue of equity instruments do not affect its
classification.
• All other liabilities are classified as non¬
current.
Deferred tax assets and liabilities are classified as
non-current only
2.2 Property, plant and equipment
Property, plant and equipment, are stated at cost
of acquisition or construction less accumulated
depreciation and impairment losses, if any. Cost
of property, plant and equipment comprises its
purchase price net of any discounts and rebates,
any import duties and other taxes (other than those
subsequently recovered from the tax authorities),
any directly attributable expenditure on making the
asset ready for its intended use, other incidental
expenses, decommissioning costs, if any, and interest
on borrowings attributable to acquisition of qualifying
asset up to the date the asset is ready for its intended
use.
Assets in the course of construction are capitalised in
the assets under construction account. At the point
when an asset is operating at management's intended
use, the cost of construction is transferred to the
appropriate category of property, plant and equipment
and depreciation commences. Costs associated with
the commissioning of an asset and any obligatory
decommissioning costs are capitalised where the
asset is available for use but incapable of operating at
normal levels until a year of commissioning has been
completed.
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 Statement of Profit and Loss during the year
in which they are incurred.
Property, plant and equipment's residual values
and useful lives are reviewed at each Balance Sheet
date and changes, if any, are treated as changes in
accounting estimate.
Depreciation methods, estimated useful lives
The estimate of the useful life of the assets has been
assessed based on technical advice which considers
the nature of the asset, the usage of the asset, expected
physical wear and tear, the operating conditions
of the asset, anticipated technological changes,
manufacturers warranties and maintenance support,
etc. Based on management's evaluation, the Company
uses straight-line method and has used following
useful lives to provide depreciation of different class of
its property, plant and equipment:
Based on the management's assessment of useful
life, certain items of property, plant and equipment
are being depreciated over useful lives different from
the prescribed useful lives under Schedule II to the
Companies Act, 2013. Management believes that
such estimated useful lives are realistic and reflect fair
approximation of the period over which the assets are
likely to be used.
Depreciation on addition to property, plant and
equipment is provided on pro-rata basis from the date
of put to use. Depreciation on sale/deduction, from
property, plant and equipment is provided up to the
date preceding the date of sale, deduction as the case
may be. Gains and losses on disposals are determined
by comparing proceeds with carrying amount. These
are included in Statement of Profit and Loss under
'Other Income'. The cost and related accumulated
depreciation are eliminated from the standalone
financial statements upon sale or retirement of the
asset.
Depreciation methods, useful lives and residual values
are reviewed periodically at each financial year end and
adjusted prospectively, as appropriate.
Residual value of Property, Plant & Equipment is
considered as 5% of the cost.
Advances paid towards the acquisition of property,
plant and equipment outstanding at each Balance
Sheet date is classified as capital advances under other
non - current assets and the cost of assets not ready to
use before such date are disclosed under 'Capital work-
in-progress'.
Intangible Assets
Intangible assets are stated at cost less accumulated
amortisation and impairment. Intangible assets are
amortised over the irrespective individual estimated
useful lives on a straight-line basis, from the date that
they are available for use. The estimated useful life of
an identifiable intangible asset is based on a number of
factors including the effects of obsolescence, demand,
competition, and other economic factors (such as
the stability of the industry, and known technological
advances), and the level of maintenance expenditures
required to obtain the expected future cash flows from
the asset. Amortisation methods and useful lives are
reviewed periodically including at each financial year
end.
The estimated useful lives of intangible assets are as
follows:
Intangible assets with finite lives are assessed for
impairment whenever there is an indication that the
intangible asset may be impaired. The amortisation
period and the amortisation method for an intangible
asset with a finite useful life are reviewed at least at
each financial year end.
2.3 Leases
The Company assesses at contract inception whether
a contract is, or contains, a lease. That is, if the contract
conveys the right to control the use of an identified
asset for a period in exchange for consideration.
Company as a lessee
The Company applies a single recognition and
measurement approach for all leases, except for
short-term leases and leases of low-value assets. The
Company recognises lease liabilities to make lease
payments and right-of-use assets representing the
right to use the underlying assets.
I) Right to use of assets
The Company recognises right-of-use assets
at the commencement date of the lease (i.e., the
date the underlying asset is available for use).
Right-of-use assets are measured at cost, less
any accumulated depreciation and impairment
losses, and adjusted for any re-measurement of
lease liabilities. The cost of right-of-use assets
includes the amount of lease liabilities recognised,
initial direct costs incurred, and lease payments
made at or before the commencement date less
any lease incentives received. Right-of-use assets
are depreciated on a straight-line basis over the
shorter of the lease term and the estimated useful
lives of the assets.
I f ownership of the leased asset transfers to the
Company at the end of the lease term or the
cost reflects the exercise of a purchase option,
depreciation is calculated using the estimated
useful life of the asset.
Right-of-use assets are tested for impairment
whenever there is any indication that their carrying
amounts may not be recoverable. Impairment
loss, if any, is recognised in the Statement of Profit
and Loss.
ii) Lease liabilities
At the commencement date of the lease, the
Company recognises lease liabilities measured at
the present value of lease payments to be made
over the lease term. The lease payments include
fixed payments (including in substance fixed
payments) less any lease incentives receivable,
variable lease payments that depend on an index
or a rate, and amounts expected to be paid under
residual value guarantees. The lease payments
also include the exercise price of a purchase
option reasonably certain to be exercised by
the Company and payments of penalties for
terminating the lease, if the lease term reflects
the Company exercising the option to terminate.
Variable lease payments that do not depend on an
index or a rate are recognised as expenses (unless
they are incurred to produce inventories) in the
period in which the event or condition that triggers
the payment occurs.
In calculating the present value of lease payments,
the Company uses its incremental borrowing rate
at the lease commencement date because the
interest rate implicit in the lease is not readily
determinable. After the commencement date, the
amount of lease liabilities is increased to reflect
the accretion of interest and reduced for the lease
payments made. In addition, the carrying amount
of lease liabilities is re-measured if there is a
modification, a change in the lease term, a change
in the lease payments (e.g., changes to future
payments resulting from a change in an index
or rate used to determine such lease payments)
or a change in the assessment of an option to
purchase the underlying asset.
The Company’s lease liabilities are included in
financial liabilities.
iii) Short term lease and leases of low value assets
The Company applies the short-term lease
recognition exemption to its short-term leases
contracts including lease of residential premises
and offices (i.e., those leases that have a lease term
of 12 months or less from the commencement
date and do not contain a purchase option). It also
applies the lease of low-value assets recognition
exemption to leases of office equipment that are
considered to be low value. Lease payments on
short-term leases and leases of low-value assets
are recognised as expense on a straight-line basis
over the lease term.
iv) Single discount rate
The Company has applied the available practical
expedient with respect to single discount rate
wherein single discount rate is used for portfolio
of leases with reasonably similar characteristics.
Lease liability and ROU asset have been
separately presented in the Balance Sheet and
lease payments have been classified as financing
cash flows.
2.4 Capital work in progress
Properties in the course of construction for production,
supply or administrative purposes are carried at cost,
less any recognised impairment loss. Cost includes
professional fees and, for qualifying assets, borrowing
costs capitalised in accordance with the Company’s
accounting policy. Such properties are classified and
capitalised 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.
During the year management has identified
proportionate capitalisation of Building CWIP based
on report issued by independent Civil Engineer
considering the level of completion which justifies the
recognition criteria as per Ind AS 16 - Property, Plant
and Equipment, specifically in relation to said operating
area of production which is ready for intended use and
has started generating revenue, while the balance floors
of building is under final stage of completion. Value of
capitalisation is based on the above report as per actual
expenditure incurred towards the building.
2.5 Impairment
At the end of each reporting year, 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). 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.
Where 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.
Intangible 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.
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.
2.6 Inventories
Integration of Inventory and Financial module is carried
out by management in accordance with Ind AS 2
standard and same is applied consistently.
Raw materials, packing materials, Promotional items
and Trading Goods :
Valued at lower of cost and net realisable value (NRV).
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 (FIFO) basis. The cost of
inventory comprises its purchase price, including non¬
refundable purchase taxes, and any directly attributable
costs related to the inventories.
Consumable Stores & Spares are expensed off at the
time of Purchase itself.
Work-in- progress (WIP) & Finished goods
Valued at lower of cost and NRV Cost of Finished goods
and WIP includes cost of raw materials, direct labour,
other direct costs and related production overheads up
to the relevant stage of completion. Net realisable value
is the estimated selling price in the ordinary course
of business, less the estimated costs of completion
and the estimated costs necessary to make the sale.
Costs are assigned to the individual item basis in a
group of inventories on Weighted Average Cost basis.
Comparison of cost and net realisable value is made on
item-by item basis. Costs of purchased inventory are
determined after deducting rebates and discounts.
2.7 Revenue recognition
The Company recognises revenue from sale of goods,
based on the terms of contract and as per the business
practice; the Company determines transaction price
considering the amount it expects to be entitled in
exchange of transferring promised goods to the
customer. Revenue is recognised when it is realised or
is realisable and has been earned after the deduction
of variable components such as discounts, rebates,
incentives, promotional couponing and schemes.
The Company estimates the amount of variable
components based on historical, current and forecast
information available and either expected value method
or most likely method, as appropriate ; Revenue (net of
variable consideration) is recognised only to the extent
that it is highly probable that the amount will not be
subject to significant reversal when uncertainty relating
to its recognition is resolved.
Sale of Goods :
Revenue from sale of products is recognised when
the control on the goods have been transferred to the
customer. The performance obligation in case of sale
of product is satisfied at a point in time i.e., when the
material is shipped to the customer or on delivery to the
customer, as may be specified in the contract.
Revenue from sales is measured net of taxes/duties,
discounts, incentives, rebates etc. The Company’s
presence across different marketing regions within
the country and the competitive business makes the
assessment of various type of turn over discounts,
discounts, incentives and rebates as complex and
judgemental.
Advance from customers is recognised under
other Current liabilities and released to revenue on
satisfaction of performance obligation.
Other Income
Other income is comprised primarily of interest income
- Interest income is recognised using the effective
interest rate method, other Export benefits - recognised
in the statement of profit and loss when the right to
receive credit as per terms of the scheme is established
in respect of sale and when there is no significant
uncertainty regarding the ultimate collection, dividend
if any, Gain/loss on short term investments and
Exchange gain/loss on forward and on translation of
foreign currency assets and liabilities. Dividend income
is recognised when the right to receive payment is
established.
2.8 Foreign exchange translation
The functional currency of the Company is Indian
Rupees which represents the currency of the primary
economic environment in which it operates.
Foreign currency transactions are translated into the
functional currency using the exchange rates at the
dates of the transactions. Foreign exchange gains
and losses resulting from the settlement of such
transactions are generally recognised in profit or loss.
Monetary balances arising from the transactions
denominated in foreign currency are translated to
functional currency using the exchange rate as on the
reporting date. Any gains or loss on such translation,
are generally recognised in profit or loss.
Foreign exchange differences regarded as an
adjustment to borrowing costs are presented in the
Statement of Profit and Loss, within finance costs. All
other foreign exchange gains and losses are presented
in the Statement of Profit and Loss on a net basis within
other gains/(losses).
Non-monetary items that are measured at fair value in
a foreign currency are translated using the exchange
rates at the date when the fair value was determined.
2.9 Taxes
Income tax comprises current and deferred tax. It is
recognised in the Standalone Statement of Profit and
Loss except to the extent that it relates to a business
combination or to an item recognised directly in equity
or in other comprehensive income. Section 115 BAA
of the Income Tax Act 1961, introduced by Taxation
Laws (Amendment) Ordinance, 2019 gives a one-time
irreversible option to Domestic Companies for payment
of corporate tax at reduced rates. The Company has
opted to recognise tax expense at the new income tax
rate as applicable to the Company.
The income tax expense or credit for the year is the tax
payable on the current year’s taxable income based
on the applicable income tax rate for each jurisdiction
adjusted by changes in deferred tax assets and
liabilities attributable to temporary differences and to
unused tax losses.
(a) Current tax
Current tax assets and liabilities are measured
at the amount expected to be recovered from or
paid to the taxation authorities in accordance with
relevant tax regulations. Current tax is determined
as the tax payable in respect of taxable income
for the year and is computed in accordance with
relevant tax regulations. Current tax is recognised
in Statement of Profit and Loss except to the extent
it relates to items recognised outside profit or loss
in which case it is recognised outside profit or
loss (either in other comprehensive income ('OCI')
or in equity). Current tax items are recognised
in relation to the underlying transaction either in
OCI or directly 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 current tax payable where appropriate.
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.
Provision for Current Tax for the year comprises
of:
a) estimated tax expense which has accrued on
the profit for the year.
(b) 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. Such deferred tax assets and liabilities
are not recognised if the temporary difference
arises from the initial recognition (other than in a
business combination) of assets and liabilities in
a transaction that affects neither the taxable profit
nor the accounting profit. In addition, deferred
tax liabilities are not recognised if the temporary
difference arises from the initial recognition of
goodwill.
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 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.
Deferred tax relating to items recognised outside
profit or loss is recognised outside profit or loss
(either in other comprehensive income or in
equity). Deferred tax items are recognised in
correlation to the underlying transaction either in
Other Comprehensive Income or directly in equity.
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. 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.
2.10 Borrowing costs
Borrowing costs, if any, general or specific, that are
directly attributable to the acquisition or construction
of qualifying assets is capitalised as part of such
assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use.
All other borrowing costs are charged to the Statement
of Profit and Loss.
The Company determines the amount of borrowing
costs eligible for capitalisation as the actual borrowing
costs incurred on that borrowing during the year less
any interest income earned on temporary investment
of specific borrowings pending their expenditure on
qualifying assets, to the extent that an entity borrows
funds specifically for the purpose of obtaining a
qualifying asset. In case if the Company borrows
generally and uses the funds for obtaining a qualifying
asset, borrowing costs eligible for capitalisation are
determined by applying a capitalisation rate to the
expenditures on that asset.
Borrowing cost includes exchange differences arising
from foreign currency borrowings to the extent they are
regarded as an adjustment to the finance cost.
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