NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Accounting:
These Financial statements are the separate financial statements of the Company ( also called standalone financial statements) prepared in accordance with Indian Accounting standards ( Ind AS), notified under Section 133 of the Companies Act, 2013, read together with the Companies ( Indian Accounting Standard) Rules, 2015.
The financial statements have been prepared and presented under the historical cost convention, on the accrual basis of accounting except certain financial assets and financial liabilities that are measured at fair values at the end of each reporting period, as stated in the accounting policies set out below. The accounting policies have been applied consistently over all the periods presented in these financial statements.
Defined benefit plans assets are measured at fair value.
Functional and Presentation Currency
The financial statements are presented in Indian Rupees ('INR') which is the functional currency for company.
Rounding of Amounts
All amounts disclosed in the financial statements and notes have been rounded off to nearest lakhs ( INR 00,000) except otherwise stated.
B. Use of Estimates:
The preparation of financial statements requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of financial statements and the reported amount of revenues and expenses during the reporting period. Difference between actual results and estimates are recognized in the period in which these are materialized.
C. Current/Non Current Classification:
The assets and liabilities in the balance sheet are presented based on current / non- current classification.
An asset is current when it is:
• Expected to be realized or intended to be sold or consumed in normal operating cycle or
• Held primarily for the purpose of trading or
• Expected to be realised within twelve months after reporting period, or
• Cash or Cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
An liability is current when it is:
• Expected to be settled in normal operating cycle or
• Held primarily for the purpose of trading or
• Due to be settled within twelve months after reporting period, or
• There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. All other liabilities are treated as non -current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities respectively.
All assets and liabilities have been classified as current or non-current as per Company's normal operating cycle and other criteria set out in schedule III to the Companies Act., 2013. Based on the nature of products and time between acquisition of asset for processing and their realization in cash and cash equivalents, the company has ascertained its operating cycle as 12 months for the purpose of current / non-current classification of assets and liabilities.
D. Inventories (IND AS-2)
Inventories are stated at lower of cost and net realizable value. The cost of inventories are arrived at as follows:
Raw Materials, Packing Material & fuel :- Valued on Weighted Average Basis.
Work In Progress :- At Raw Material Cost plus appropriate allocation of overheads
Finished Goods :- At Raw Material Cost plus appropriate allocation of overheads or net realisable value whicherver is lower Traded Finished Goods :- At lower of Cost or net realizable value.
E. Depreciation (IND AS 16)
Depreciation on Property , Plant & Equipment is provided on Straight Line method considering the useful life of assets as specified in Scheduled II to the Companies Act ,2013.
F. Property, Plant and Equipment: ( Ind AS 16)
Items of Property, plant and equipment are carried at historical value less accumulated depreciation and amortisation. Cost of acquisition is net of recoverable taxes but is inclusive of all expenditure attributable to bringing the asset to its working condition.
Freehold land is carried at cost of acquisition.
Leasehold land is amortised over the period of lease.
Property, plant and equipment acquired in a business combination are recognised at fair value at the acquisition date.
G. Intangible Assets:
Measurement at recognition:
Intangible assets acquired separately are measured on initial recognition at cost. Intangible assets arising on acquisition of business combination are measured at fair value as at date of acquisition. Internally generated intangibles including research cost are not capitalized and the related expenditure is recognized in the Statement of Profit and Loss in the period in which the expenditure is incurred. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment loss, if any.
The Company had elected to consider the carrying value of all its intangible assets appearing in the Financial Statements prepared in accordance with Accounting Standards notified under the section 133 of the Companies Act, 2013, read together with Rule 7 of the Companies (Accounts) Rules, 2014 and used the same as deemed cost in the opening Ind AS Balance Sheet prepared on 1st April, 2015.
Amortization: Intangible Assets with finite lives are amortized on a Straight Line basis over the estimated useful economic life. The amortization expense on intangible assets with finite lives is recognized in the Statement of Profit and Loss. The estimated useful life of intangible assets is mentioned below:
The amortization period and the amortization method for an intangible asset with finite useful life is reviewed at the end of each financial year. If any of these expectations differ from previous estimates, such change is accounted for as a change in an accounting estimate.
Derecognition: The carrying amount of an intangible asset is derecognized on disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising from the Derecognition of an intangible asset is measured as the difference between the net disposal proceeds and the carrying amount of the intangible asset and is recognized in the Statement of Profit and Loss when the asset is derecognized.
Goodwill
Goodwill is initially recognised based on the accounting policy for business combinations and is tested for impairment annually. Goodwill is tested for impairment at the end of each reporting period and whenever there is an indication that the recoverable amount of cash generating unit (CGU) is less than its carrying amount based on a number of factors including operating results, business plans, future cash flows and economic conditions, provision for such shortfall is made. The recoverable amount of CGU is determined based on higher of value-in-use and fair value less cost to sell.
H. Revenue recognition (IND AS 115)
Revenue towards satisfaction of a performance obligation is measured at the amount of transaction price (net of variable consideration) allocated to that performance obligation. The transaction price of goods sold and services rendered is net of variable consideration on account of various discounts and schemes offered by the Company as part of the contract.
Sale of goods
When the property and all significant risks and rewards of ownership are transferred to the buyer and no significant uncertainty exists regarding recoverability of the consideration that revenue from the sale of goods is recognised.
Other Income
Interest income is considered as income on a time proportion basis taking into account the outstanding principal and the relative rate of interest.
Dividend income is considered as income from investments in shares on establishment of the Company's right to receive.
I. Foreign exchange transactions (IND AS 21)
I. The functional currency and presentation currency of the company is Indian Rupees.
II. Transactions in currencies other than the company's functional currency are recorded on initial recognition using the exchange rate at the transaction date. At each Balance Sheet date, foreign currency monetary items are reported using the closing rate. Non- monetary items that are measured in terms of historical cost in foreign currency are not translated. Exchange Differences that arise in settlement of monetary items or on reporting of monetary item at each Balance Sheet date at the closing spot rate are recognized in profit or loss in the period in which they arise.
J. Government Grants and Subsidies (IND AS 20)
i. Government grants and subsidies are recognized when there is reasonable assurance that the conditions attached to them will be complied and grant/subsidy will be received.
ii. Where the Government grant/subsidies relates to revenue, it is recognized as income on a systematic basis in the statement of profit & loss of the period in which the right to receive such grant/ subsidy is established. Government grants and subsidies receivable against an expense are deducted from such expense. The governemnt grants have been accounted on accrual basis every year and is forming a part of other income.
K. Investments : (IND AS 109)
Long term Investments are carried at cost including related expenses, Provision for diminution being made, if necessary, to recognize a decline, other than temporary, in the value thereof.
Current investments are valued at lower of cost or fair value.
L. Employee benefits -(Ind As 19)
Short Term Employee Benefits:
All employee benefits payable wholly within twelve months of rendering the service are classified as short term employee benefits and they are recognized in the period in which the employee renders the related service. The Company recognizes the undiscounted amount of short term employee benefits expected to be paid in exchange for services rendered as a liability (accrued expense) after deducting any amount already paid.
Post-Employment Benefits:
I. Defined contribution plans:
Defined contribution plans are employee state insurance scheme and Government administered pension fund scheme for all applicable employees.
Contribution to Defined contribution plan namely employer's contribution to Provident fund & Pension Plan is charged to Profit and Loss Account
II. Defined benefit plans:
The Employees gratuity fund scheme managed by Life Insurance Corporation of India is defined benefit plan. The present value of obligation is determined on the basis of Actuarial Valuation & it is fully provided for.
The cost of providing defined benefits is determined using the Projected Unit Credit method with actuarial valuations being carried out at each reporting date. The defined benefit obligations recognized in the Balance Sheet represent the present value of the defined benefit obligations as reduced by the fair value of plan assets, if applicable. Any defined benefit asset (negative defined benefit obligations resulting from this
calculation) is recognized representing the present value of available refunds and reductions in future contributions to the plan. All expenses represented by current service cost, past service cost, if any, and net interest on the defined benefit liability (asset)
are recognized in the Statement of Profit and Loss. Remeasurements of the net defined benefit liability (asset) comprising actuarial gains and losses and the return on the plan assets (excluding amounts included in net interest on the net defined benefit liability/ asset), are recognized in Other Comprehensive Income. Such remeasurements are not reclassified to the Statement of Profit and Loss in the subsequent periods.
The Company presents the above liability/ (asset) as current and non-current in the Balance Sheet as per actuarial valuation by the independent actuary;
Actuarial Gain / (Loss) : The remeasurement of gain /(loss) on net defined benefit plan is recognised in Other Comprehensive Income.
M. Borrowing Costs (IND AS 23)
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its 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.
All other borrowing costs are recognized in Statement of Profit & Loss in the period in which they are incurred.
N. Earning Per Share(IND AS 33)
Basic and diluted earning per share are computed in accordance with Ind AS 33.
Basic earning per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.
Diluted earnings per share is calculated as follows:-
The net profit attributable to equity shareholders and the weighted average of number of shares outstanding are adjusted for the effect of all dilutive potential equity shares from the exercise of options on unissued share capital. The number of equity shares is the aggregate of the weighted average number of equity shares and the weighted average number of equity shares which would be issued on the conversion of all the dilutive potential equity shares into equity shares.
O. Research and Development
Research and Development expenditure on revenue account is charged to profit & loss account under the relevant heads of account in the year in which it is incurred.
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