2. MATERIAL ACCOUNTING POLICY INFORMATION
A) Basis of Preparation
The financial statements of the Company have been prepared in accordance with the relevant provisions of the Companies
Act, 2013, Indian Accounting Standards (Ind AS) prescribed under section 133 of the Companies Act, 2013
All assets and liabilities have been classified as current or non-current as per Company's operating cycle and other criteria
set out in Schedule-III (Revised) of the Companies Act, 2013. Based on the nature of business, the Company has ascertained
its operating cycle as 12 months for the purpose of Current or non-current classification of assets and liabilities.
The financial statements have been prepared on historical cost basis, except for financial instruments that are measured
at fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally
based on the fair value of the consideration given in exchange for goods and services.
B) Fair Value Measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, regardless of whether that price is directly observable or estimated using
another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the
characteristics of the asset or liability if market participants would take those characteristics into account when pricing the
asset or liability at the measurement date.
Fair value for measurement and/ or disclosures in these financial statements is determined on such a basis, and
measurements that have some similarities to fair value but are not fair value, such as net realisable value in Ind AS 2 -
Inventories or value in use in Ind AS 36 - Impairment of Assets.
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 measurement 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 Company 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) Use of estimates and critical accounting judgements
In preparation of the financial statements, the Company makes judgements, estimates and assumptions about the
carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and the associated
assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may
differ from these estimates.
The estimates and the underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised and future periods affected.
Significant judgements and estimates relating to the carrying values of assets and liabilities include useful lives of
property, plant and equipment and intangible assets, impairment of property, plant and equipment, intangible assets and
investments, provision for employee benefits and other provisions, recoverability of deferred tax assets, commitments and
contingencies.
D) Property, Plant and Equipment
An item of property, plant and equipment is recognised as an asset if it is probable that the future economic benefits
associated with the item will flow to the Company and its cost can be measured reliably. This recognition principle is
applied to the costs incurred initially to acquire an item of property, plant and equipment and also to costs incurred
subsequently to add to, replace part of, or service it. All other repair and maintenance costs, including regular servicing, are
recognised in the statement of profit and loss as incurred. When a replacement occurs, the carrying value of the replaced
part is de-recognised. Where an item of property, plant and equipment comprises major components having different
useful lives, these components are accounted for as separate items.
Property, plant and equipment are stated at cost, less accumulated depreciation and impairment. Cost includes all direct
costs and expenditures incurred to bring the asset to its working condition and location for its intended use. Trial run
expenses (net of revenue) are capitalised. Borrowing costs incurred during the period of construction is capitalised as part
of cost of the qualifying assets.
The gain or loss arising on disposal of an asset is determined as the difference between the sale proceeds and the carrying
value of the asset, and is recognised in the statement of profit and loss.
E) Intangible Assets
Intangible assets are capitalized on the basis of costs incurred to bring the specific intangibles to its intended use. These
costs are amortized on a straight line basis over their estimated useful life of three years.
F) Depreciation and amortisation of property, plant and equipment and intangible assets
(i) Depreciation is provided prorata basis on straight line method at the rates determined based on estimated useful
lives of tangible assets where applicable, specified in Schedule II to the Act. These charges are commenced from
the dates the assets are available for their intended use and are spread over their estimated useful economic lives or,
in the case of leased assets, over the lease period, if shorter. The estimated useful lives of assets and residual values
are reviewed regularly and, when necessary, revised. No further charge is provided in respect of assets that are fully
written down but are still in use. Depreciation on assets under construction commences only when the assets are
ready for their intended use.
(ii) Freehold land is not depreciated.
(iii) Leasehold Land is amortised over the tenure of respective leases.
(iv) Company do not have any intangible assets.
G) Impairment of tangible and intangible assets
At each balance sheet date, the Company reviews the carrying values of its property, plant and equipment and intangible
assets to determine whether there is any indication that the carrying value of those assets may not be recoverable through
continuing use. If any such indication exists, the recoverable amount of the asset is reviewed in order to determine the
extent of impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets,
the Company estimates the recoverable amount of the cash generating unit to which the asset belongs.
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. An impairment loss is recognised in the statement of profit and loss as and when the carrying value of an asset
exceeds its recoverable amount.
Where an impairment loss subsequently reverses, the carrying value of the asset (or cash generating unit) is increased to
the revised estimate of its recoverable amount so that the increased carrying value does not exceed the carrying value
that would have been determined had no impairment loss been recognised for the asset (or cash generating unit) in prior
years. A reversal of an impairment loss is recognised in the statement of profit and loss immediately.
H) Leases
Ind AS 116 requires lessees to determine the lease term as the non-cancellable period of a lease adjusted with any option
to extend or terminate the lease, if the use of such option is reasonably certain. The Company makes an assessment on
the expected lease term on a lease-by-lease basis and thereby assesses whether it is reasonably certain that any options to
extend or terminate the contract will be exercised. In evaluating the lease term, the Company considers factors such as any
significant leasehold improvements undertaken over the lease term, costs relating to the termination of the lease and the
importance of the underlying asset taking into account the location of the underlying asset and the availability of suitable
alternatives. The lease term in future periods is reassessed to ensure that the lease term reflects the current economic
circumstances. After considering current and future economic conditions, the Company has concluded that no changes
are required to lease period relating to the existing lease contracts.
The Company as a Lessee
The Company's lease asset classes primarily consist of leases for buildings. The Company assesses whether a contract
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.
At the date of commencement of the lease, the Company recognizes a right-of-use (ROU) asset and a corresponding lease
liability for all lease arrangements in which it is a lessee, except for leases with a term of 12 months or less (short-term
leases) and low value leases. For these short-term and low-value leases, the Company recognizes the lease payments as an
operating expense on a straight-line basis over the term of the lease
Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU
assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
The ROU assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease
payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives.
They are subsequently measured at cost less accumulated depreciation and impairment losses.
ROU assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and
useful life of the underlying asset. ROU assets are evaluated for recoverability whenever events or changes in circumstances
indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable
amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis
unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the
recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease
payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental
borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment
to the related ROU asset if the Company changes its assessment of whether it will exercise an extension or a termination
option.
Lease liability and ROU assets have been separately presented in the Balance Sheet and lease payments have been classified
as financing cash flows.
I) Financial instruments
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions
of the instrument. Financial assets and 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 and loss) are added to or deducted from the fair value measured on initial recognition
of financial asset or financial liability. The transaction costs directly attributable to the acquisition of financial assets and
financial liabilities at fair value through profit and loss are immediately recognised in the statement of profit and loss.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial instrument and of allocating
interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts future cash
receipts or payments through the expected life of the financial instrument, or where appropriate, a shorter period.
a) Financial assets
Cash and bank balances
Cash and bank balances consist of:
(i) Cash and cash equivalents - which includes cash in hand, deposits held at call with banks and other short term
deposits which are readily convertible into known amounts of cash, are subject to an insignificant risk of change
in value and have maturities of less than one year from the date of such deposits. These balances with banks are
unrestricted for withdrawal and usage.
(ii) Other bank balances - which includes balances and deposits with banks that are restricted for withdrawal and
usage.
Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost if these financial assets are held within a business model
whose objective is to hold these assets in order 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.
Financial assets measured at fair value
Financial assets are measured at fair value through other comprehensive income if these financial assets are held within a
business model whose objective is to hold these assets in order to collect contractual cash flows or to sell these financial
assets 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. The Company in respect of equity investments (other than
in subsidiaries, associates and joint ventures) which are not held for trading has made an irrevocable election to present
in other comprehensive income subsequent changes in the fair value of such equity instruments. Such an election is
made by the Company on an instrument by instrument basis at the time of initial recognition of such equity investments.
Financial asset not measured at amortised cost or at fair value through other comprehensive income is carried at fair value
through the statement of profit and loss.
Impairment of financial assets
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition
of impairment loss on the following financial assets:
• Financial assets that are debt instruments, and are measured at amortised cost e.g., loans, debt securities, deposits and
trade receivables
• Financial assets that are debt instruments and are measured as at FVTOCI
• Trade receivables or any contractual right to receive cash or another financial asset that result from transactions that
are within the scope of Ind AS 18.
The Company follows 'simplified approach' for recognition of impairment loss allowance on trade receivables. The
application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises
impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines that whether
there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly,
12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used.
If, in a subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in
credit risk since initial recognition, the Company reverts to recognising impairment loss allowance based on 12-month
ECL."
Lifetime 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 that are possible within 12
months after the reporting date. ECL is the difference between all contractual cash flows that are due to the Company in
accordance with the contract and all the cashflows that the entity expects to receive (i.e., all cash shortfalls), discounted at
the original EIR.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/expense in the
statement of profit and loss. This amount is reflected under the head 'other expenses' in the statementof profit and loss.
The balance sheet resentation for various financial instruments is described below:
Financial assets measured as at amortised cost: ECL is presented as an allowance, i.e., as an integral part of the measurement
of those assets in the balance sheet. The allowance reduces the net carrying amount. Until the asset meets write-off
criteria, the Company does not reduce impairment allowance from the gross carrying amount.
Debt instruments measured at FVTOCI: Since financial assets are already reflected at fair value, impairment allowance is not
further reduced from its value. Rather, ECL amount is presented as 'accumulated impairment amount' in the OCI.
For assessing increase in credit risk and impairment loss, the Company combines financial instruments on the basis of
shared credit risk characteristics with the objective of facilitating an analysis that is designed to enable signifi cant increases
in credit risk to be identified on a timely basis.
Derecognition of financial assets
The Company de-recognises a financial asset only when the contractual rights to the cash flows from the asset expire, or it
transfers the financial asset and substantially all risks and rewards of ownership of the asset to another entity.
If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control
the transferred asset, the Company recognises its retained interest in the assets and an associated liability for amounts it
may have to pay.
If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company
continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
b) Financial liabilities and equity instruments
Classification as debt or equity
Financial liabilities and equity instruments issued by the Company are classified according to the substance of the
contractual arrangements entered into and the definitions of a financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of
its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs.
Financial Liabilities
Trade and other payables are initially measured at fair value, net of transaction costs, and are subsequently measured at
amortised cost, using the effective interest rate method where the time value of money is significant.
Interest bearing bank loans, overdrafts and issued debt are measured at fair value.
Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Company's obligations are discharged, cancelled
or they expire
Derivative financial instruments
In the ordinary course of business, the Company uses certain derivative financial instruments to reduce business risks
which arise from its exposure to foreign exchange and interest rate fluctuations. The instruments are confined principally
to forward foreign exchange contracts and interest rate swaps. The instruments are employed as hedges of transactions
included in the financial statements or for highly probable forecast transactions/firm contractual commitments. These
derivatives contracts do not generally extend beyond six months except for interest rate derivatives.
Derivatives are initially accounted for and measured at fair value from the date the derivative contract is entered into and
are subsequently re-measured to their fair value at the end of each reporting period.
J) Employee benefits
Defined contribution plans
Payments to defined contribution plans are charged as an expense as they fall due. Payments made to state managed
retirement benefit schemes are dealt with as payments to defined contribution schemes where the Company's obligations
under the schemes are equivalent to those arising in a defined contribution retirement benefit scheme.
Defined benefit plans
For defined benefit retirement schemes the cost of providing benefits is determined using the Projected Unit Credit
Method, with actuarial valuation being carried out at each balance sheet date. Re-measurement gains and losses of the
net defined benefit liability/(asset) are recognised immediately in other comprehensive income. The service cost and net
interest on the net defined benefit liability/(asset) is treated as a net expense within employment costs.
Past service cost is recognised as an expense when the plan amendment or curtailment occurs or when any related
restructuring costs or termination benefits are recognised, whichever is earlier.
The retirement benefit obligation recognised in the balance sheet represents the present value of the defined-benefit
obligation as reduced by the fair value plan assets.
Compensated absences
Compensated absences which are not expected to occur within twelve months after the end of the period in which the
employee renders the related service are recognised based on actuarial valuation at the present value of the obligation as
on the reporting date.
K) Inventories
(a) Raw Materials, Stores & Spares & Packing Materials are valued at lower of cost computed on FIFO basis and net
realizable value.
(b) Finished Goods are valued at lower of cost computed on weighted average basis or net realizable value. Cost of
finished goods includes direct materials and labour and a proportion of manufacturing overheads based on normal
operating capacity.
(c) By-products are valued at net realizable value.
(d) Net realizable 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.
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