2. MATERIAL ACCOUNTING POLICIES:
2.1 Statement of compliance
In accordance with the notification issued by the Ministry of Corporate Affairs, the financial statements
of the Company have been prepared in accordance with the Indian Accounting Standards (Ind AS)
notified under the Companies (Indian Accounting Standards) Rules, 2015 and presentation requirements
of Division II of Schedule III to the Companies Act, 2013, (Ind AS compliant Schedule III), as applicable
to the Standalone Financial Statements.
2.2 Basis of accounting and preparation of financial statements
The standalone financial statements have been prepared on the historical cost convention under
accrual basis of accounting except for certain financial instruments and defined benefit plan (plan
assets measured at fair value)that are measured at fair values at the end of each reporting period.
2.2.1 Measurement of Fair values
Historical cost is generally based on the fair value of the consideration given in exchange for goods and
services. 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 disclosure purposes in these financial
statements is determined on such a basis, except for leasing transactions that are within the scope of
Ind AS 116, and measurements that have some similarities to fair value but are not fair value, such as
net realizable value in Ind AS 2 or value in use in Ind AS 36.
In addition, for financial reporting purposes, fair value measurement are categorized 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 measurments in its entirety, which are described as follows:
(i) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that
the Company can access at the measurement date;
(ii) 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
(iii) Level 3 inputs are unobservable inputs for the asset or liability.
2.3 Use of estimates and judgement
The preparation of the financial statements in conformity with Ind AS requires the management to
make estimates and assumptions considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the year. The Management believes
that the estimates used in preparation of the financial statements are prudent and reasonable. Future
results could differ due to these estimates and the differences between the actual results and the
estimates are recognized in the periods in which the results are known / materialise. Estimates have
been used in provision for employee benefits and useful lives of property, plant and equipment.
Recent Accounting Developments
Ministry of Corporate Affairs (MCA), vide notification dated 31st March, 2024, has made the following
amendments to Ind AS which are effective 1st April, 2024:
a. Amendments to Ind AS 1, Presentation of Financial Statements where the companies are now
required to disclose material accounting policies rather than their significant accounting policies.
b. Amendments to Ind AS 8, Accounting policies, Changes in Accounting Estimates and Errors where
the definition of 'change in account estimate' has been replaced by revised definition of 'accounting
estimate'.
c. Amendments to Ind AS 12, Income Taxes where the scope of Initial Recognition Exemption (IRE)
has been narrowed down. Based on preliminary assessment, the Company does not expect these
amendments to have any significant impact on its standalone financial statements MCA notifies
new standard or amendments to the existing standards. There is no such notification which would
have been applicable from April 01,2025.
2.4 Property, plant and equipment
Property, plant and equipment are carried at cost less accumulated depreciation and impairment losses,
if any. The cost of property, plant and equipment comprises its purchase price net of any trade discounts
and rebates, any import duties and other taxes (other than those subsequently recoverable from the
tax authorities), any directly attributable expenditure on making the asset ready for its intended use,
other incidental expenses and interest on borrowings attributable to acquisition of qualifying property,
plant and equipment up to the date the asset is ready for its intended use. Subsequent expenditure on
property, plant and equipment after its purchase / completion is capitalized only if such expenditure
results in an increase in the future benefits from such asset beyond its previously assessed standard of
performance. Property, plant and equipment acquired and put to use for project purpose are capitalized
and depreciation thereon is included in the project cost till the project is ready for its intended use.
2.4.1 Depreciation
Depreciation on Property, Plant and equipment has been provided on the straight-line method as per
the useful life prescribed in Schedule II to the Companies Act, 2013. Motor car purchased under new
block is depreciated over 4 years. Depreciation methods, useful lives and residual values are reviewed
periodically, including at each financial year end. Some of the fixed assets are depreciated over its
useful life on the basis of the technical certificate received by the company.
2.5 Intangible Assets
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated
amortization and accumulated impairment losses. Amortization is recognised on a straight-line basis
over their estimated useful lives. The estimated useful life and amortization method are reviewed at
the end of each reporting period, with the effect of any changes in estimate being accounted for on a
prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried
at cost less accumulated impairment losses. Intagible assets are amortized over their useful life.
2.5.1 Intangible assets under development
The Company expenses costs incurred during research phase to profit or loss in the year in which they are
incurred. Development phase expenses are initially recognised as intangible assets under development
until the development phase is complete, upon which the amount is capitalised as intangible asset.
2.6 Impairment of tangible and intangible assets
The carrying values of assets / cash generating units at each balance sheet date are reviewed for
impairment if any indication of impairment exists.
If the carrying amount of the assets exceed the estimated recoverable amount, impairment is recognized
for such excess amount. The impairment loss is recognized as an expense in the Statement of Profit
and Loss, unless the asset is carried at revalued amount, in which case any impairment loss of the
revalued asset is treated as a revaluation decrease to the extent a revaluation reserve is available for
that asset.
The recoverable amount is the greater of the fair value less costs of disposal and their value in use.
Value in use is arrived at by discounting the future cash flows to their present value based on an
appropriate discount factor, 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. When
there is indication that an impairment loss recognized for an asset (other than a revalued asset) in
earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss
is recognized in the Statement of Profit and Loss, to the extent the amount was previously charged to
the Statement of Profit and Loss. In case of revalued assets such reversal is not recognized.
2.7 Inventories
Inventories are valued at the lower of cost (on FIFO basis) and net realisable value after providing for
obsolescence and other losses, where considered necessary. Cost includes all charges in bringing the
goods to the point of sale including octroi and other levies, transit insurance and receiving charges.
Finished goods and work in progress include apportionment of overheads. Net realisable value is the
estimated selling price less estimated costs for completion and sale.
Raw materials including components, finished goods, work in process, stock in trade, material in transit,
packing materials and stores & spares have been valued at lower of cost and estimated net realizable
value. In case the technical or economic factors underlying the valuation undergo material or adverse
changes, appropriate write down is made in the year of such adverse change. Material in transit is
valued at cost.
2.8 Foreign currency transactions and translations
The functional currency of the Company is Indian rupee (INR).
Foreign currency transactions are initially recorded at the spot rates on the date of the transactions.
Monetary assets and liabilities related to foreign currency transactions remaining unsettled at the end
of the year are translated at year-end rates. Non-monetary items denominated in other currencies
and that are measured in terms of historical cost are translated at the exchange rates prevailing on
the dates on which such values are determined.The difference in translation of monetary assets and
liabilities and realised gains and losses on foreign currency transactions are recognized in the Statement
of Profit and Loss.
2.9 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 or
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.
2.9.1 Financial assets
Classification
The Company classifies its financial assets in the following measurement categories:
(i) those measured at amortised cost and
(ii) those to be measured subsequently at fair value through profit and loss.
(a) 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.
(b) Financial assets at fair value through profit or loss:
Financial assets are measured at fair value through profit or loss where it is not measured at
amortised cost.
(c) Investment in subsidiaries:
Investment in subsidiaries are measured at cost as per Ind AS 27 - Separate Financial Statements.
(d) Impairment of financial assets:
The financial assets will be tested for impairment at each reporting date. Loss allowance for expected
credit losses will be recognised for financial assets measured at amortised cost, if any.
(e) Derecognition of financial assets:
The Company derecognizes a financial asset only when the contractual rights to the cash flows from
the asset expire.
2.9.2 Financial liabilities and equity
Classification
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:
(a) 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.
(b) Financial Liabilities
Financial liabilities are measured at amoritsed cost using the effective interest rate method. Trade
and other payables maturing within one year from the balance sheet date is measured at carrying
amount since the carrying amount approximates the fair value to short term maturity of these
instruments.
(c) Derecognition of financial liabilities
The Company derecognizes financial liabilities only when the Company's obligations are discharged,
cancelled or they expire.
2.10 Cash and cash equivalents
Cash comprises of cash in hand and demand deposits with banks. Cash equivalents are short-term
balances (with an original maturity of three months or less from the date of acquisition), highly liquid
investments that are readily convertible into known amounts of cash and which are subject to insignificant
risk of changes in value.
Bank overdraft and cash credit are also considered as part of cash and cash equivalents for the purpose
of Statement of Cash Flows as they form part of cash management system.
2.11 Revenue recognition
(a) Sale of goods
The Company recognizes revenue from sale of goods measured at the fair value of the consideration
received or receivable, upon satisfaction of performance obligation which is at a point in time when
control of the goods is transferred to the customer, generally on delivery of the goods.
(b) Interest income
Interest income from a financial asset is recognised when it is probable that the economic benefits
will flow to the Company and the amount of income can be measured reliably. Interest income
is accrued on a time basis, by reference to the principal outstanding and at the effective interest
rate applicable, which is the rate that exactly discounts estimated future cash receipts through the
expected life of the financial asset to that asset's net carrying amount on initial recognition.
(c) Insurance Claims
Insurance claims are accounted for on the basis of claims admitted and to the extent that the amount
recoverable can be measured reliably and it is reasonable to expect ultimate collection.
2.12 Employee benefits
2.12.1 Retirement benefit costs and termination benefits:
(a) Defined contribution plan
The eligible employees of the Company are entitled to receive benefits in respect of provident fund,
a defined contribution plan, in which both employees and the Company make monthly contributions
at a specified percentage of the covered employees' salary. The contributions as specified under
the law are made to the Employee Provident Fund Organization(EPFO). The Company is liable only
for its fixed contributions which is required to be made in accordance with the schemes in force as
notified by EPFO. All contributions made by the company are recognized as expenses for the relevant
period.
(b) Defined benefit plan
For defined benefit retirement plans, the cost of providing benefits is determined using the projected
unit credit method, with actuarial valuations being carried out at the end of each annual reporting
period. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset
ceiling (if applicable) and the return on plan assets (excluding net interest), is reflected immediately in
the Balance Sheet with a charge or credit recognized in other comprehensive income in the period in
which they occur. Remeasurement recognized in other comprehensive income is reflected immediately
in retained earnings and is not reclassified to profit or loss. Past service cost is recognized in profit
or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate
at the beginning of the period to the net defined benefit liability or asset. The following are the
defined benefit plans:
Gratuity - The Company has an obligation towards gratuity, a defined benefit plan covering eligible
employees. The plan provides for lump sum payment to vested employees on retirement, death
while in employment or on separation. Vesting occurs upon completion of five years of service. The
liability, which is determined by means of an independent actuarial valuation, is funded with LIC.
Defined benefit costs are categorized as follows:
(i) Service cost (including current service cost, past service cost, gains and losses on curtailment and
settlement);
(ii) net interest income or expense and
(iii) remeasurement.
2.12.2 Short term employee benefits and other long-term employee benefits
A liability is recognized for benefits accruing to employees in respect of wages and salaries, annual
leave and other leaves in the period the related service is rendered at the undiscounted amount of
the benefits expected to be paid in exchange for that service. Liabilties recognized in respect of short
term employee benefits are measured at the undiscounted amount of the benefits expected to be
paid in exchange of that related service. Other employee benefits include compensated absences and
termination benefits. Both these benefits are settled as per the Company policy and charged to profit
and loss account as and when the payment is made.
2.13 Borrowing costs
Borrowing costs include interest, amortization of ancillary costs incurred and exchange differences
arising from foreign currency borrowings to the extent they are regarded as an adjustment to the
interest cost. Borrowing costs that are directly attributable to the acquisition, construction or production
of a qualifying asset form part of the cost of that asset. Other borrowing costs are recognized as an
expense.
2.14 Income Tax
Income tax comprises current and deferred tax. It is recognised in profit or 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.
2.14.1Current Tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the
year and any adjustment to the tax payable or receivable in respect of previous years. The amount of
current tax reflects the best estimate of the tax amount expected to be paid or received after considering
the uncertainty, if any related to income taxes. It is measured using tax rates (and tax laws) enacted or
substantively enacted by the reporting date.
2.14.2 Deferred Tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes.
Deferred tax is also recognised in respect of carried forward tax losses and tax credits. Deferred tax is
not recognised for temporary differences arising on the initial recognition of assets or liabilities in a
transaction that is not a business combination and that affects neither accounting nor taxable profit or
loss at the time of transaction.
Deferred tax assets recognised or unrecognised are reviewed at each reporting date and are recognised
/ reduced to the extent that it is probable / no longer probable respectively that the related tax benefit
will be realised. Deferred tax is measured at the tax rates that are expected to apply to the period when
the asset is realised or the liability is settled, based on the laws that have been enacted or substantively
enacted by the reporting date. 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. The Company offsets, the current tax assets and liabilities
(on a year on year basis) and deferred tax assets and liabilities, where it has a legally enforceable right
and where it intends to settle such assets and liabilities on a net basis.
Minimum Alternate Tax (MAT) credit is recognised as an asset only when and to the extent there is
convincing evidence that the company will pay normal income tax during the specified period. Such
asset is reviewed at each balance sheet date and the carrying amount of the MAT credit asset is written
down to the extent there is no longer a convincing evidence to the effect that the company will pay
normal income tax during the specified period.
2.14.3 Current and deferred tax for the year
Current and deferred tax are recognised in profit or loss, except when they relate to items that are
recognised in other comprehensive income or directly in equity, in which case, the current and deferred
tax are also recognised in other comprehensive income or directly in equity respectively.
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