2.2 MATERIAL ACCOUNTING POLICIES
(a) PROPERTY, PLANT AND EQUIPMENT
Recognition and measurement
The cost of an item of Property, Plant and Equipment shall
be recognised as an asset if, and only if it is probable that
future economic benefits associated with the item will flow
to the Group and the cost of the item can be measured
reliably.
Property, Plant and Equipment (PPE) are measured at
cost (which includes capitalised borrowing costs) less
accumulated depreciation and accumulated impairment
losses, if any.
The cost of an item of Property, Plant and Equipment
comprises:
a) Its purchase price, including import duties and non¬
refundable purchase taxes, after deducting trade
discounts and rebates.
b) Any costs directly attributable to bringing the asset
to the location and condition necessary for it to be
capable of operating in the manner intended by the
management.
c) The initial estimate of the 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 and depreciated
accordingly.
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.
Capital Work in Progress and Capital Advances
Assets under construction includes the cost of Property,
Plant and Equipment that are not ready to use at the
Balance Sheet date. Advances paid to acquire Property,
Plant and Equipment before the Balance Sheet date
are disclosed under other non-current assets. Assets
under construction are not depreciated as these assets
are not yet available for use.
Depreciation, Estimated useful life and Estimated
residual value
Depreciation is calculated using the Written Down
Value and SLM method, pro rata to the period of
use, taking into account useful lives and residual
value of the assets. The useful life of assets and the
estimated residual value taken from those prescribed
under Part C of Schedule II to the Companies Act,
2013 except in case of leasehold improvements which
are depreciated over primary lease period, which
in management's opinion is reflective of economic
useful lives of these assets. Useful life and residual
values are reviewed by management at every Balance
Sheet date and adjusted, if appropriate.
Depreciation is computed with reference to cost.
Depreciation on additions during the year is provided
on pro rata basis with reference to month of addition/
installation.
Derecognition
An item of Property, Plant and Equipment and any
significant part initially recognized is derecognised
upon disposal or when no future economic benefits
are expected from its use or disposal. Any gain or
loss arising on derecognition of the asset (calculated
as the difference between the net disposal proceeds
and the carrying amount of the asset) is included in
the Standalone Statement of Profit and Loss when the
asset is derecognised.
(b) INTANGIBLE ASSETS
Recognition and measurement
Intangible assets comprise primarily of
patent,computer software and product under
development. Intangible assets are initially recorded at
cost and subsequent to recognition, intangible assets
are stated at cost less accumulated amortisation.
Research and development
Expenditure on research activities is recognised in
profit or loss as incurred.
Development expenditure is capitalised as part of
the cost of the resulting intangible asset only if the
expenditure can be measured reliably, the product
or process is technically and commercially feasible,
future economic benefits are probable and the Group
intends to and has sufficient resources to complete
development and to use or sell the asset. Otherwise, it
is recognised in profit or loss as incurred. Subsequent
to initial recognition, development expenditure is
measured at cost less accumulated amortisation and
any accumulated impairment losses.
Subsequent expenditure
Subsequent expenditure is capitalised only when it
increases the future economic benefits embodied
in the specific asset to which it relates. All other
expenditure are recognised in the Standalone
Statement of Profit and Loss as incurred.
Amortisation
Amortisation is calculated to write off the cost of
intangible assets less their estimated residual values
using the Straight Line Method over their estimated
useful lives and is generally recognised in depreciation
and amortisation in Statement of Profit and Loss.
Amortisation methods, useful lives and residual values
are reviewed at each reporting date and adjusted, if
required.
(i) Product development : 3 Years
(ii) Software : 3 Years
(iii) Patent : 20-25 years, and in few
patents 100 years
Derecognition
An intangible asset is derecognised on disposal, or
when no future economic benefits are expected
from use or disposal. Gains or losses arising from
derecognition of an intangible asset, measured as the
difference between the net disposal proceeds and the
carrying amount of the asset, are recognised in the
Standalone Statement of Profit and Loss when the
asset is derecognised.
Intangible Assets Under Development
Intangible Assets Under Development includes the
cost of patent, trademark and product development
costs that are not ready to use at the Balance Sheet
date. Product development costs includes employee
benefits expenses including employee stock option
expense incurred towards research and development
team, raw material consumed, testing charges,
other expenses like lease, electricity and other
administration and office expenses. Intangible Assets
Under Development are not depreciated as these
assets are not yet available for use.
(c) IMPAIRMENT
(i) Non-Financial Assets
Assessment for impairment is done at each
Balance Sheet date as to whether there is
any indication that a non-financial asset may
be impaired. For the purpose of assessing
impairment, the smallest identifiable group
of assets that generates cash inflows from
continuing use that are largely independent of
the cash inflows from other assets or groups of
assets is considered as a Cash Generating Unit
(CGU). If any indication of impairment exists,
an estimate of the recoverable amount of the
individual asset/Cash Generating Unit is made.
Asset/cash generating unit whose carrying
value exceeds their recoverable amount are
written down to the recoverable amount by
recognising the impairment loss as an expense
in the Standalone Statement of Profit and Loss.
Recoverable amount is higher of an asset's
or cash generating unit's value in use and its
fair value less cost of disposal. Value in use is
estimated future cash flows expected to arise
from the continuing use of an asset or cash
generating unit and from its disposal at the
end of its useful life discounted to their present
value using a post-tax discount rate that reflects
current market assessments of the time value
of money and the risks specific to the asset.
In determining fair value less costs of disposal,
recent market transactions are considered.
If no such transactions can be identified, an
appropriate valuation model is used.
An impairment loss is reversed in the Standalone
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
amortisation or depreciation) had no impairment
loss been recognised for the asset in prior years.
(ii) 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. The Company recognises loss
allowances using the Expected Credit Loss (ECL)
model as per Ind AS 109 for the Financial Assets
which are not fair valued through profit or loss.
Loss allowance for trade receivables with no
significant financing component is measured at
an amount equal to lifetime ECL. For all other
Financial Assets, expected credit losses are
measured at an amount equal to the 12-month
ECL, unless there has been a significant increase
in credit risk from initial recognition in which
case those are measured at lifetime ECL. The
amount of expected credit losses (or reversal)
that is required to adjust the loss allowance
at the reporting date to the amount that is
required to be recognised is recognised as an
impairment gain or loss in profit or loss.
ECL is the difference between all contractual
cash flows that are due to the Company in
accordance with the contract and all the cash
flows that the entity expects to receive (i.e.
all cash shortfalls), discounted at the original
effective interest rate. Lifetime ECL are the
expected credit losses resulting from all possible
defaults events over the expected life of a
financial asset. 12 month ECL are a portion of
the lifetime ECL which result from default events
that are possible within 12 months from the
reporting date.
The Company considers a financial asset to be
in default when:
- the counter party is unlikely to pay its credit
obligations to the Company in full, without
recourse by the Company to actions such
as realising security (if any is held); or
- the financial asset is 180 days or more past
due.
ECL are measured in a manner that they reflect
unbiased and probability weighted amounts
determined by a range of outcomes, taking
into account the time value of money and other
reasonable information available as a result of
past events, current conditions and forecasts of
future economic conditions.
The gross carrying amount of a financial
asset is written off when the Company has
no reasonable expectations of recovering a
financial asset in its entirety or a portion thereof.
The Company expects no significant recovery
from the amount written off during the year.
(d) FINANCIAL INSTRUMENTS
FINANCIAL ASSETS
Initial recognition and measurement
All Financial Assets are initially recognized at fair value.
Transaction Costs that are directly attributable to the
acquisition or issue of Financial Assets, which are not
at fair value through profit or loss, are adjusted to
the fair value on initial recognition. Financial Assets
are classified, at initial recognition, as Financial Assets
measured at fair value or as Financial Assets measured
at Amortised Cost.
Subsequent Measurement
Financial Assets measured at Amortised Cost
(AC)
A Financial Asset is measured at Amortised Cost if
it is held within a business model whose objective
is to hold the asset in order to collect contractual
cash flows and the contractual terms of the Financial
Asset give rise on specified dates to cash flows that
represent solely payments of principal and interest on
the principal amount outstanding.
Financial Assets measured at Fair Value Through
Other Comprehensive Income (FVTOCI)
A Financial Asset is measured at FVTOCI if it is held
within a business model whose objective is achieved
by both collecting contractual cash flows and selling
Financial Assets and the contractual terms of the
Financial Asset give rise on specified dates to cash
flows that represents solely payments of principal and
interest on the principal amount outstanding.
Financial Assets measured at Fair Value Through
Profit or Loss (FVTPL)
A Financial Asset which is not classified in any of
the above categories are measured at FVTPL.
Financial Assets are reclassified subsequent to their
recognition, if the Company changes its business
model for managing those Financial Assets. Changes
in business model are made and applied prospectively
from the reclassification date which is the first day
of immediately next reporting period following
the changes in business model in accordance with
principles laid down under Ind AS 109 - Financial
Instruments.
I n case of investments In mutual fund and bonds-
Measured at Fair Value through Profit and Loss
(FVTPL).
Derecognition of Financial Assets
The Company derecognises a Financial Asset
when the contractual rights to cash flows from the
asset expire, or it transfers the rights to receive the
contractual cash flows on the Financial Asset in a
transaction in which substantially all the risks and
rewards of ownership of the Financial Assets are
transferred.
FINANCIAL LIABILITIES
Classification
The Company classifies its Financial Liabilities in the
following measurement categories:
- those to be measured subsequently at Fair Value
Through Profit and Loss-[FVTPL]; and
- those measured at Amortised Cost. [AC]
Initial recognition and measurement
Financial Liabilities are classified, at initial recognition,
as Financial Liabilities at Fair value Through Profit and
Loss or at Amortised Cost.
All Financial Liabilities are recognised initially at fair
value and, in the case of loans and borrowings and
payables, net of directly attributable transaction costs.
The Company's Financial Liabilities include trade and
other payables, lease liabilities, loans and borrowings
including bank overdrafts and liability component of
convertible instruments.
Subsequent measurement
The measurement of Financial Liabilities depends on
their classification, as described below:
Financial Liabilities at Fair Value Through Profit
and Loss [FVTPL]
Financial Liabilities at Fair Value Through Profit and
Loss [FVTPL] include Financial Liabilities designated
upon initial recognition as at Fair Value Through
Profit and Loss. Financial Liabilities are classified as
held for trading if they are incurred for the purpose
of repurchasing in the near term. This category also
includes derivative financial instruments entered into
by the Company that are not designated as hedging
instruments in hedge relationships as defined by
Ind AS 109. Separated embedded derivatives are
also classified as held for trading unless they are
designated as effective hedging instruments.
Gains or losses on liabilities held for trading are
recognised in Standalone Statement of Profit and
Loss.
Financial Liabilities designated upon initial recognition
at Fair Value Through Profit and Loss are designated
at the initial date of recognition, only if the criteria in
Ind-AS 109 are satisfied. For liabilities designated as
FVTPL, fair value gains/ losses attributable to changes
in own credit risk are recognized in OCI. These gains/
loss are not subsequently transferred to Statement of
Profit and Loss. However, the Company may transfer
the cumulative gain or loss within equity. All other
changes in fair value of such liability are recognised in
the Standalone Statement of Profit and Loss.
Financial Liabilities at Amortised Cost (Loans and
borrowings)
After initial recognition, interest-bearing loans and
borrowings are subsequently measured at amortised
cost using the EIR method. Gains and losses are
recognised in profit or loss when the liabilities are
derecognised as well as through the EIR amortisation
process.
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 amortisation is included as finance costs in
the Standalone Statement of Profit and Loss. This
category generally applies to borrowings.
Derecognition
A Financial Liabilities is derecognised when the
obligation under the liability is discharged or cancelled
or expires. When an existing Financial Liabilities
is replaced by another from the same lender on
substantially different terms or the terms of an existing
liability are substantially modified such exchange or
modification is treated as the derecognition of the
original liability and the recognition of a new liability.
The difference in the respective carrying amounts is
recognised in the Standalone Statement of Profit and
Loss.
Offsetting of financial instruments
Financial Assets and Financial Liabilities are offset and
the net amount is reported in the Balance Sheet if
there is a currently enforceable legal right to offset
the recognised amounts and there is an intention to
settle on a net basis, to realise the assets and settle
the liabilities 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.
Derivative financial instruments
The Company uses derivative financial instruments,
such as forward currency contracts, interest rate
swaps and forward commodity contracts to hedge
its foreign currency risks, interest rate risks and
commodity price risks respectively. Such derivative
financial instruments are initially recognised at fair
value on the date on which a derivative contract is
entered into and are subsequently re-measured at fair
value. Derivatives are carried as Financial Assets when
the fair value is positive and as Financial Liabilities
when the fair value is negative.
Financial guarantee contracts
Financial guarantee contracts issued by the Company
are those contracts that require a payment to be
made to reimburse the holder for a loss it incurs
because the specified debtor fails to make a
payment when due in accordance with the terms of
a debt instrument. Financial guarantee contracts are
recognised initially as a liability at fair value, adjusted
for transaction costs that are directly attributable to
the issuance of the guarantee. Subsequently, the
liability is measured at the higher of the amount of loss
allowance determined and the amount recognised
less cumulative amortisation.
Compound Financial Instruments
Compound Financial Instruments are separated into
liability and equity components based on the terms of
the contract. On issuance of the Compound Financial
Instruments, the fair value of the liability component
is determined using a market rate for an equivalent
non- convertible instrument.This amount is classified
as an Financial Liability measured at FVTPL (net of
transaction costs) until it is extinguished on conversion
or redemption. The remainder of the proceeds is
allocated to the conversion option that is recognised
and included in equity since conversion option meets
Ind AS 32 criteria for fixed to fixed classification.
Transaction Costs are deducted from equity, net of
associated income tax. The carrying amount of the
conversion option is remeasured at each reporting
date. Transaction Costs are apportioned between the
liability and equity components of the compound
financial instruments based on the allocation of
proceeds to the liability and equity components when
the instruments are initially recognised.
Compulsorily Convertible Preference Shares
(CCPS) :
Compulsory Convertible Preference Shares (CCPS)
are those shares which are issued with the terms that
it can be converted into certain number of equity
shares after a period of time. CCPS offer fixed income
to the investors and compulsorily convert into Equity
Shares of the issuing company after a predetermined
period. The terms of conversion are also pre-decided
at the time of issue.
CCPS are particularly offered to fill the gap between
the valuation expectations of the founder and the
investors that are generally linked to the performance
of the Company. These offer investors the opportunity
to participate in the growth of companies while
mitigating the risk of lower valuation of companies
that underachieve the targets. Issuing CCPS further
benefits the Company's promoters to raise funds
without diluting the ownership at the initial period.
(e) LOANS AND BORROWINGS
Borrowings are initially recognised at fair value, net
of transaction costs incurred. Any difference between
the proceeds (net of transaction costs) and the
redemption amount is recognised in profit or loss
over the period of borrowings using the effective
interest method. Processing/Upfront fee are treated
as prepaid expenses and same is amortised over the
period of the facility to which it relates.
After initial recognition, interest-bearing loans and
borrowings are subsequently measured at amortised
cost. Gains and losses are recognised in Standalone
Statement of Profit and Loss when the liabilities are
derecognised as well as through the EIR amortisation
process.
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 amortisation is included as finance costs in the
Standalone Statement of Profit and Loss.
This category generally applies to interest-bearing
loans and borrowings.
Borrowings are derecognised from the Balance
Sheet when the obligation specified in the contract
is discharged, cancelled or expired. The difference
between the carrying amount of the financial liability
that has been extinguished or transferred to another
party and the consideration paid including any
non cash assets transferred or liability assumed, is
recognised in Standalone Statement of Profit and
Loss as other gains or (losses).
Borrowings are classified as current liabilities unless
the Company has an unconditional right to defer the
settlement of liabilities for at least twelve months after
the reporting year.
Where there is a breach of a material provision of a
long term loan arrangement on or before the end of
the reporting period with the effect that the liability
becomes payable on demand on the reporting date,
the same is classified as current unless the lender
agreed, after the reporting year and before the
approval of Standalone Ind AS Financial Statements
for issue, not to demand payment as a consequence
of the breach.
(f) CASH AND CASH EQUIVALENT
Cash and Cash Equivalent includes cash on hand,
other short-term, highly liquid investments with
original maturities of three months or less that are
readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in
value, and bank overdrafts.
Statement of Cash Flows
Cash Flows are reported using the indirect method,
whereby net profit before taxes for the period is
adjusted for the effects of transactions of a non¬
cash nature, any deferrals or accruals of past or
future operating cash receipts or payments and item
of income or expenses associated with investing or
financing cash flows. The Cash Flow from Operating,
Investing and Financing activities of the Company are
segregated.
(g) INVENTORIES
Inventories comprises of raw material, work in
progress and finished goods. Inventories are valued
at lower of cost and net realisable value. Cost of
inventories comprises of all costs of purchase and
other costs incurred in bringing the inventories to
their present location and condition.
Inventories are valued at lower of cost and net
realisable value; cost is determined on FIFO basis. 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.
Net realisable value is the estimated selling price in
the ordinary course of business, less estimated costs
of completion and the estimated costs necessary to
make the sale. The net realizable value of work-in¬
progress is determined with reference to the selling
prices of related finished products. Raw materials and
other supplies held for use in production of finished
products are not written down below cost except in
cases where material prices have declined and it is
estimated that the cost of the finished products will
exceed their net realizable value.
The comparison of cost and net realisable value is
made on an item-by-Item basis
(h) EARNINGS PER SHARE
Basic earnings per share
Basic earnings per shares is calculated by dividing
Profit/(Loss) attributable to Equity holders (adjusted
for amounts directly charged to Reserves) before/
after Exceptional Items (net of tax) by Weighted
average number of Equity Shares, (excluding treasury
shares).
Diluted earnings per share
Diluted earnings per share is computed using the
net profit or loss for the year attributable to the
shareholders' and weighted average number of
equity and potential equity shares outstanding
during the year including share options, Convertible
Preference Shares and Debentures, except where the
result would be anti-dilutive. Potential Equity Shares
that are converted during the year are included in
the calculation of diluted earnings per share, from
the beginning of the year or date of issuance of such
potential Equity Shares, to the date of conversion.
(i) FOREIGN CURRENCY TRANSACTIONS AND
TRANSLATIONS
Foreign currency are translated into the functional
currency using the exchange rates at the dates of
the transactions. Foreign currency denominated
monetary assets and liabilities are translated into
relevant functional currency at exchange rates in
effect at the Balance Sheet date. 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 Standalone Statement of Profit and Loss. Non¬
monetary assets and non-monetary liabilities
denominated in foreign currency and measured at fair
value are translated at the exchange rate prevalent
at the date when the fair value was determined.
Non-monetary assets and non-monetary liabilities
denominated in a foreign currency and measured
at historical cost are translated at the exchange
rate prevalent at the date of transaction. Translation
differences on assets and liabilities carried at fair value
are reported as part of the fair value gain or loss and
are generally recognised in Standalone Statement of
Profit and Loss, except exchange differences arising
from the translation of the following items which are
recognised in OCI:
• Equity investments at Fair Value through OCI
(FVOCI)
• A financial liability designated as a hedge of
the net investment in a foreign operation to the
extent that the hedge is effective; and
• Qualifying cash flow hedges to the extent that
the hedges are effective.
(j) REVENUE RECOGNITION
Revenue is recognised to depict the transfer of control
of promised goods or services to customers upon
the satisfaction of performance obligation under the
contract in an amount that reflects the consideration
to which the entity expects to be entitled in exchange
for those goods or services. Consideration includes
goods or services contributed by the customer, as
non-cash consideration, over which the company has
control.
Where performance obligation is satisfied over time,
Company recognizes revenue over the contract year.
Where performance obligation is satisfied at a point
in time, Company recognizes revenue when customer
obtains control of promised goods and services in the
contract.
Revenue is recognised net of any taxes collected
from customers, which are remitted to governmental
authorities.
(i) Sale of goods
Revenue from sale of goods is recognised
when control or substantial risks and rewards of
ownership are transferred to the buyer under
the terms of the contract.
Revenue is measured at the amount of
consideration which the Company expects
to be entitled to in exchange for transferring
distinct services to a customer as specified in
the contract, excluding amounts collected on
behalf of third parties (for example taxes and
duties collected on behalf of the government).
Consideration is generally due upon satisfaction
of performance obligations and receivable is
recognized when it becomes unconditional.
Revenue is measured based on the transaction
price, which is the consideration, adjusted for
discounts and claims, if any, as specified in
the contract with the customer. Revenue also
excludes taxes collected from customers.
The specific recognition criteria described below
must also be met before revenue is recognized.
The Company has a Two stream of revenue i.e.
Sale of products & Sale of services.
The Company recognises revenue at a point
in time when the performance obligation
is satisfied, i.e. when 'control' of the goods
underlying the particular performance
obligation are transferred to the customer.
Customers obtain control of the good when
the goods are delivered at the agreed point of
delivery which generally is the premises of the
customer.
Further, revenue from sale of goods is recognised
based on a 5-Step Methodology which is as
follows:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligation in
contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the
performance obligations in the contract
Step 5: Recognise revenue when (or as) the
entity satisfies a performance obligation
(ii) Sale of service
The Company assesses the services promised
in a contract and identifies distinct performance
obligations in the contract. Identification of
distinct performance obligations to determine
the deliverables and the ability of the customer
to benefit independently from such deliverables,
and allocation of transaction price to these
distinct performance obligations involves
significant judgment.
Sale of service includes maintenance services,
training services and other services.The
Company recognises revenue at a period of time
when the performance obligation is satisfied.
(iii) Warranty
The Company provides warranties for general
repairs of defects as per terms of the contract
with ultimate customers. These warranties are
considered as assurance type warranties and
are accounted for under Ind AS 37 - Provisions,
Contingent Liabilities and Contingent Assets.
(iv) Variable consideration (Liquidated damages)
The Company estimate the amount of
consideration to which the Company will
be entitled in exchange for transferring the
promised goods or services to a customer, if the
consideration promised in a contract includes a
variable amount.
An amount of consideration can vary because
of discounts, rebates, refunds, credits,
price concessions, incentives, performance
bonuses, or other similar items. The promised
consideration can also vary if company's
entitlement to the consideration is contingent
on the occurrence or non-occurrence of a
future event.
The Company recognises liquidated damages
net of sale of products for respective year.
(v) Contract Balances
Trade Receivables : A receivable represents the
Company's right to an amount of consideration
that is unconditional.
Contract Liabilities
A contract liability is the obligation to transfer
goods or services to a customer for which
the Company has received consideration (or
an amount of consideration is due) from the
customer. If a customer pays consideration
before the Company transfers goods or services
to the customer, a contract liability is recognised
when the payment is made. Contract liabilities
are recognised as revenue when the Company
performs under the contract.
Contract Assets
A contract asset is a right to receive
consideration in exchange for services already
transferred to the customer (which consists
of unbilled revenue). By transferring services
to the customer before the customer pays
consideration or before the payment is due,
a contract asset is recognised for the earned
consideration that is unconditional.
(vi) Other operating income
Duty drawback income is recognised in the
Standalone Statement of Profit and Loss of the
company under other operating revenue of the
company
(k) RECOGNITION OF DIVIDEND INCOME, INTEREST
INCOME OR EXPENSE
I nterest income or expense is recognised using the
effective interest method.
The 'effective interest rate' is the rate that exactly
discounts estimated future cash payments or receipts
through the expected life of the financial instrument
to:
- The gross carrying amount of the financial asset;
or
- The amortised cost of the financial liability.
In calculating interest income and expense, the
effective interest rate is applied to the gross carrying
amount of the asset (when the asset is not credit-
impaired) or to the amortised cost of the liability.
However, for Financial Assets that have become
credit-impaired subsequent to initial recognition,
interest income is calculated by applying the effective
interest rate to the amortised cost of the financial
asset.
If the asset is no longer credit-impaired, then the
calculation of interest income reverts to the gross
basis.
Dividend income is recognised in the Standalone
Statement of Profit and Loss on the date on which the
Company's right to receive payment is established.
(l) EMPLOYEE BENEFITS
(i) During Employment Benefits
(a) Short term Employee Benefits
Short term Employee Benefits are expensed
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 obligation can be estimated reliably.
(ii) Post Employment Benefits
(a) Defined contribution plans
A defined contribution plan is a post employment
benefit plan under which a Company pays fixed
contribution into a separate entity and will have
no legal or constructive obligation to pay further
amounts.
Obligations for contributions to defined
contribution plans are expensed as the related
service is provided. Prepaid contributions are
recognised as an asset to the extent that a cash
refund or a reduction in future payments is
available.
(b) Defined Benefit Plans
The Company pays gratuity to the employees
who have has completed five years of service
with the Company at the time when employee
leaves the Company.
The gratuity liability amount is funded and
formed exclusively for gratuity payment to the
employees.
The liability in respect of gratuity and other post¬
employment benefits is calculated using the
Projected Unit Credit Method and spread over
the periods during which the benefit is expected
to be derived from employees' services.
Re-measurement of defined benefit plans in
respect of post employment are charged to
Other Comprehensive Income.
Compensated Absences : Accumulated
compensated absences, which are expected to
be availed or encashed within 12 months from
the end of the year are treated as short term
employee benefits. The obligation towards
the same is measured at the expected cost of
accumulated compensated absences as the
additional amount expected to be paid as a result
of the unused entitlement as at the year end.
(iii) Termination Benefits
Termination Benefits are payable when
employment is terminated by the Company
before the normal retirement date or when
an employee accepts voluntary redundancy in
exchange for these benefits. In case of an offer
made to encourage voluntary redundancy, the
termination benefits are measured based on the
number of employees expected to accept the
offer.
(iv) Equity settled Share Based Payments
Employees of the Company receive
remuneration in the form of Share Based
Payments transactions, whereby employees
render services as consideration for Equity
instruments (Equity settled transactions). In
accordance with the Ind AS 102 Share based
payment, the cost of Equity- settled transactions
is measured using the fair value method. The
cumulative expense recognised for Equity
settled transactions at each reporting date until
the vesting date reflects the extent to which the
vesting year has expired and the Company's best
estimate of the number of Equity instruments
that will ultimately vest. The expense or credit
recognised in the Standalone Statement of Profit
and Loss for the year represents the movement
in cumulative expense recognised as at the
beginning and end of that year is recognised in
Employee Benefits Expense.
(m) INCOME TAXES
Income tax expense comprises current and deferred
tax. Tax is recognised in Standalone Statement of Profit
and Loss, except to the extent that it relates to items
recognised in the Other Comprehensive Income or in
Equity. In which case, the tax is also recognised in the
Other Comprehensive Income or in Equity.
(i) Current Tax
Current Tax Asset and Liabilities are measured
at the amount expected to be recovered from
or paid to the taxation authorities, based on tax
rates and laws that are enacted or subsequently
enacted at the Balance Sheet date.
Current Tax Asset and Liabilities are offset only if,
the Company:
a) Has a legally enforceable right to set off
the recognised amounts; and
b) I ntends either to settle on a net basis, or
to realise the asset and settle the liability
simultaneously.
Current Tax Provision is computed for income
calculated after considering allowances and
exemptions under the provisions of the
applicable Income Tax Laws. Current Tax Assets
and Current Tax Liabilities are off set, and
presented as net.
(ii) Deferred Tax
Deferred Tax is recognised on temporary
differences between the carrying amounts of
assets and liabilities in the Standalone Ind AS
Financial Statements and the corresponding tax
bases used in the computation of taxable profit.
Deferred Tax Liabilities and Assets are measured
at the tax rates that are expected to apply in the
year in which the liability is settled or the asset
realised, based on tax rates (and tax laws) that
have enacted or substantively enacted by the
end of the reporting year. The carrying amount
of Deferred Tax Liabilities and Assets are reviewed
at the end of each reporting year. Deferred Tax
are recognised for unused tax losses, unused tax
credits and deductable temporary differences to
the extent that it is probable that future taxable
profit will be available against which they can be
used.
Future taxable profits are determined based
on the reversal of relevant taxable temporary
differences. If the amount of taxable temporary
differences is insufficient to recognise a deferred
tax asset in full, then future taxable profits,
adjusted for reversals of existing temporary
differences, are considered, based on the
business plans for the Company
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 only
if:
a) The Company has a legally enforceable
right to set off Current Tax Assets against
current tax liabilities; and
b) The Deferred Tax Assets and the deferred
tax liabilities relate to income taxes levied
by the same taxation authority on the
same taxable Company.
(n) BORROWING COSTS
Borrowing costs include:
(i) Interest expense calculated using the effective
interest rate method;
(ii) Finance charges in respect of leases; and
(iii) Exchange differences arising from foreign
currency borrowings to the extent that they are
regarded as an adjustment to interest 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.
Interest income earned on the temporary investment
of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing
costs eligible for capitalisation.
All other borrowing costs are recognised in the
Standalone Statement of Profit and Loss in the period
in which they are incurred.
(o) LEASES
Ministry of Corporate Affairs ("MCA") through
Companies (Indian Accounting Standards)
Amendment Rules, 2019 and Companies (Indian
Accounting Standards) Second Amendment Rules,
has notified Ind AS 116 Leases which replaces the
existing lease standard, Ind AS 17 Leases and other
interpretations. Ind AS 116 sets out the principles
for the recognition, measurement, presentation and
disclosure of leases for both lessees and lessors.
It introduces a single, on-Balance Sheet lease
accounting model for lessees.
The Company adopted Ind AS 116 "Leases" and applied
the standard to all lease contracts existing on April 1,
2021 using the full retrospective method and has taken
the cumulative adjustment to retained earnings, on the
date of initial application. Consequently, the Company
recorded the lease liability at the present value of
the lease payments discounted at the incremental
borrowing rate and the right of use asset at its carrying
amount as if the standard had been applied since the
commencement date of the lease, but discounted at
the Company's incremental borrowing rate at the date
of initial application.
The Company assesses whether a contract is or
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.
The Company also applied the available practical
expedients wherein it:
• Used a single discount rate to a portfolio of
leases with reasonably similar characteristics.
• Relied on its assessment of whether leases are
onerous immediately before the date of initial
application.
• Excluded the initial direct costs from the
measurement of the right-of-use asset at the
date of initial application.
• Used hindsight in determining the lease term
where the contract contained options to extend
or terminate the lease.
Right-of-use assets
The Company recognizes 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 remeasurement of lease liabilities. The cost
of right-of-use assets includes the amount of lease
liabilities recognized, 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.
Lease Liability
At the commencement date of the lease, the Company
recognizes 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 recognized 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 when 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 remeasured 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.
Short-term leases and leases of low-value assets
The Company has applied the short-term lease
recognition exemption to its short-term leases (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) and low-value assets
recognition exemption.
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