2 Significant accounting policies
(a) Basis of preparation
The financial statements have been prepared to comply in all material respects with the notified accounting standards by Companies
Accounting Standards Rules, 2006 as amended from time to time and the relevant provisions of the Companies Act, 2013 (‘The Act'). The
financial statements have been prepared in accordance with revised Schedule III requirements including previous year comparatives. The
financial statements have been prepared under historical cost convention on an accrual basis in accordance with accounting principles
generally accepted in India. The accounting policies have been consistently applied by the company and are consistent with those used in
previous year.
The preparation of financial statements is in conformity with general accepted accounting principles which require the management of the
Company to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to the
contingent liabilities as at the date of the financial statements and reported amounts of income and expenses during the year. Actual results
could differ from those estimates.
(b) Functional and presentation currency
Items included in the financial statements of Company are measured using the currency of the primary economic environment in which the
Company operates (“the functional currency”). Indian rupee is the functional currency of the Company.
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of transaction. Foreign currency denominated
monetary assets and liabilities are re-measured into the functional currency at the exchange rate prevailing on the balance sheet date.
Exchange differences are recognized in the Statement of Profit and Loss.
(c) Property, plant and equipment
Property, Plant and Equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any and capital
work in progress is stated at cost. The cost comprises purchase price, borrowing costs if capitalization criteria are met, directly attributable
cost of bringing the asset to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the
purchase price. Such cost includes the cost of replacing part of the plant and equipment. When significant parts of plant and equipment are
required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives.
Subsequent expenditure related to an item of property, plant and equipment is added to its book value only if it increases the future benefits
from the existing asset beyond its previously assessed standard of performance. All other expenses on existing property, plant and
equipment, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the Statement of Profit &
Loss for the period in which such expenses are incurred.
Likewise, when a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if
the recognition criteria are satisfied.
Leasehold improvement represent expenses incurred towards civil works, interior furnishings, etc. of the leasehold premises.
Cost of assets not ready for intended use, as on the balance sheet date, is shown as capital work in progress.
Items of stores and spares that meet the definition of property, plant and equipment are capitalized at cost and depreciated over their useful
life. Otherwise, such items are charged to the Statement of Profit and Loss.
The company identifies and determines cost of each component/ part of the asset separately, if the component/ part has a cost which is
significant to the total cost of the asset and has useful life that is materially different from that of the remaining asset.
Gains or losses arising from derecognition of property plant and equipments are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
(d) Depreciation on property plant and equipment
The Depreciation has been provided on the basis of useful life as prescribed in Schedule II of Companies Act, 2013.
Residual value of assets is considered at 5% of the original cost of the assets.
(e) Impairment of property, plant and equipment
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or
when annual impairment testing for an asset is required, the Company estimates the asset's recoverable amount. An asset's recoverable
amount is the higher of an asset's or cash-generating unit's (CGU) net selling price and its value in use. The recoverable amount is
determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets
or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and
is written down to its recoverable amount. 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. In
determining net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an
appropriate valuation model is used.
The Company bases its impairment calculation on detailed budgets and forecast calculations which are prepared separately for each of the
Company's cash-generating units to which the individual assets are allocated. These budgets and forecast calculations are generally
covering a period of five years. For longer periods, a long term growth rate is calculated and applied to project future cash flows after the
fifth year.
Impairment losses of continuing operations, including impairment on inventories, are recognized in the statement of profit and loss.
After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.
An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no
longer exist or may have decreased. If such indication exists, the company estimates the asset's or cash-generating unit's recoverable
amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the
asset's recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset
does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no
impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of profit and loss unless the asset
is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.
(f) Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification. An asset is treated as current
when it is:
- Expected to be realized or intended to be sold or consumed in normal operating cycle
- Held primarily for the purpose of trading
- Expected to be realized within twelve months after the 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.
A liability is current when:
- It is expected to be settled in normal operating cycle
- It is held primarily for the purpose of trading
- It is due to be settled within twelve months after the reporting period, or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realization in cash and cash equivalents. The
Company has identified twelve months as its operating cycle.
(g) Borrowing costs
Borrowing costs includes interest and amortization of ancillary costs incurred in connection with the arrangement of borrowings.
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 capitalized as part of the cost of the respective asset. All other borrowing costs are
expensed in the period in which they are incurred.
(h) Revenue recognition
Revenue is recognized to the extent it can be reliably measured and is probable that the economic benefits will flow to the company.
(i) Employee benefits
Short term employee benefits:
Employee benefits such as salaries, wages, short term compensated absences, expected cost of bonus, ex-gratia and performance-linked
rewards falling due wholly within twelve months of rendering the service are classified as short term employee benefits and are expensed in
the period in which the employee renders the related service.
(j) Taxes
Current income tax
- Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities.
The Company determines the tax as per the provisions of Income T ax Act 1961 and other rules specified thereunder.
Deferred tax
- Deferred tax is provided in full using the liability method on temporary differences between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes at the reporting date.
- Deferred tax liabilities are recognized for all taxable temporary differences, except:
(i) When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
(ii) Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax
losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible
temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized, except when the deferred tax
asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a
business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
(iii) The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable
that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are
re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the
deferred tax asset to be recovered.
(iv) Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or
the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
(v) Deferred tax relating to items recognized outside profit or loss is recognized through profit or loss.
(vi) Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current
tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
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