2. BASIS OF PREPARATION, MEASURMENT AND SIGNIFICANT ACCOUNTING POLICES I . BASIS OF PREPARATION AND MEASURMENT:
a. Compliance with Ind-AS
In accordance with notification dated 16/02/2015, issued by Ministry of Corporate Affairs, the company has adopted Indian Accounting Standards (Referred to as “Ind AS”) notified under Companies (Indian accounting Standards) Rules, 2015 with effect from 01/04/2016.
The financial statements have been prepared in accordance with Ind As notified under companies (Companies Accounting Standards) Rules, 2015. The Date of transition to Ind AS is 01/04/2016. Refer to Note No.4 of First time adoption -mandatory exceptions and optional exemptions are availed by the company.
Up to the year March 31, 2017 the company had prepared the Financial Statements under the historical cost convention on accrual basis in accordance with the generally accepted Accounting Principles (Previous GAAP) applicable in India and the Applicable Accounting Standards as prescribed under the provisions of the Companies Act, 2013 read with the Companies (accounts) Rules, 2014.
b. Historical Cost Convention
The financial statements have been prepared on historical cost basis except for the followings:
• Certain financial assets and liabilities and contingent consideration that is measured at fair value;
• Assets held for sale measured at fair value less cost to sell.
• Defined benefit plans assets measured at fair value and
Historical Cost is generally based on the fair value of the consideration given in exchange for goods and services.
The Financial Statements are presented in Rupees in Lacs and all values are rounded to nearest in two decimal points except where otherwise stated.
II. CURRENT VERSUS NON CURRENT CLASSIFCATION
The Company Present assets and liabilities in the balance sheet based on current/non current classification. An asset is treated as current when it is:
a. Expected to be realized or intended to be sold consumed in normal operating cycle
b. Held primarily for the purpose of trading or
c. Expected to be realized within twelve months after the reporting year.
All other assets are classified as non - current.
A Liability is current when:
a. It is expected to be settled in normal operating year.
b. It is held primererily for trading and manufacturing
c. It is due to be settled within twelve months after the reporting year other than for (a) above
or,
d. There is no unconditional right to defer the settlement of the liability for at least twelve
months after the reporting year.
All other liabilities are classified as non - current.
III. FAIR VALUE MEASUREMENT
The Company measures financial instruments, such as derivatives at fair value at each balance sheet date.
Fair Value is the price that would be receive to sell an asset or paid to transfer a liability in orderly transaction between market participants at the measurement date.
A Fair value measurement of non financial assets takes into account a market participants ability to generate economic benefits by using the assets in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
The company categories assets and liabilities measured at fair value into one of three levels as follows:
Level-1: Quoted (Unadjusted)
This Hierarchy includes financial instruments measured using quoted price.
Level-2 :
Level 2 inputs are inputs other than quoted prices included within level 1 that are observable for the assets or liability, either directly or indirectly.
Level 2 inputs includes following:
a. Quoted Prices for similar assets or liabilities in active markets.
b. Quoted price for incidental or similar assets or liabilities in markets that are not active.
c. Input other than quoted prices that are observable for the assets or liability.
d. Market-Corroborated inputs.
Level-3
They are unobservable inputs for the assets or liability reflecting significant modifications to observable related market data or Company's assumptions about pricing by market participants. Fair Value are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
IV. NON CURRENT ASSETS HELD FOR SALE
Non Current assets held disposal groups classified as held for sale are measured at the lower of carrying amount and fair value less cost to sell.
V. PROPERTY PLANT AND EQUIPMENTS
Property, Plant and Equipment and intangible assets are not depreciated or amortized once classified as held for sale.
For transition to Ind AS, the company has elected to continue with the carrying value of its property, Plant and Equipment(PPE) recognized as of April 01, 2016 (Transition date) measured as per the Previous GAAP and used that carrying value as its deemed cost as on the transition date.
PPE are stated at actual cost less accumulated depreciation and impairment loss. Actual cost is inclusive of freight, installation cost, duties, taxes and other incidental expense for bringing the assets to its working conditions for its intended use (net of recoverable taxes) and any cost directly attributable to bring the assets into the location and conditions necessary for it to be capable of operating in the manner intended by the management. It includes professional fees and borrowing cost for qualifying assets.
Significant Parts of an item of PPE (Including major Inspections) having different useful lives and material value or other factors are accounted for as separate components. All other repairs and maintenance costs are recognized in the statement of Profit and Loss as incurred.
Depreciation of this PPE Commences when the assets are ready for their intended use.
Depreciation on subsequent expenditure on PPE arising on account of capital improvement or other factors is provided for prospectively over the remaining useful life.
An item of PPE asset is derecognized on disposal, or when no future economic benefits are expected from use or disposal. Any Gains or losses arising from disposal or retirement of an item of PPE is determined as the difference between the net disposal proceeds and the carrying amount of assets, and are recognized in the Statement of Profit and Loss when the assets is derecognized.
VI. INTANGIBLE ASSETS
For Transition to Ind AS, the Company has elected to continue with the carrying value of intangible assets recognized as of April 01, 2016 (transition date) measured as per the previous GAAP and use that carrying value as its deemed cost as on the transition date.
Intangible assets are stated at cost (net of recoverable taxes) less accumulated amortization and impairment loss. Intangible assets are amortized over their respective estimated useful lives on a straight line basis, from the date they are available for use. The estimated useful life of an identifiable intangible assets is based on a number of factors including effect of obsolesce, demand, competition, and other economic factors (such as the stability of the industry, and known technological advances), and the level of maintenance expenditure required to obtain the expected future cash flows from the assets. Amortization method and useful lives are reviewed periodically including at each financial year end.
Depreciation on subsequent expenditure on intangible assets arising on account of capital improvement or other factors is provided for prospectively over the remaining useful life.
The estimated useful lives and residual values are reviewed on an annual basis and if necessary, changes in estimates are accounted for prospectively.
An Intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognization of assets, measured as the difference between the net disposal proceeds and the carrying amount of assets, and are recognized in the Statement of Profit and Loss when the assets are derecognized.
VII. FINANCIAL INSTRUMENTS
A Financial instrument is any contract that gives rise to a financial assets of one entity and a financial liability or equity instrument of another entity.
i. Financial assets
a. Initial Recognition and measurement
All financial assets are recognized initially at fair value plus, in the case of financial assets not recorded at fair value trough profit and loss, transaction cost that are attributable to the acquisition of the financial assets. Purchases or Sales of financial assets that require delivery of assets within a time frame are recognized on the trade date, i.e. date that the Company commits to purchase or sell the assets.
b. Subsequent measurement
For Purpose of subsequent measurement, financial assets are classified in following categories based on business model of the entity:
• Financial Assets at amortized cost
A Financial asset is measured at amortized 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 assets gives rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
• Financial Assets at fair value through other comprehensive income (FVTOCI)
A Financial asset is measured at FVTOCI 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 assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
• Financial Assets and Equity instruments 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.
• Other Equity Investments
All other equity investments are measured at fair value,, with value changes recognized in statement of Profit and Loss, except for those equity investments for which the company has elected to present the value changes in 'Other Comprehensive Income'.
• Cash and Cash Equivalents
The Company considers all highly liquid financial instruments, which are readily convertible into known amounts of cash that are subject to an insignificant risk of change in value and having original maturities of three months or less from the date of purchase, to be cash equivalents. Cash and cash equivalents consist of balance with banks which are unrestricted for withdrawal and usage.
c. Investments in subsidiaries, Associates and Joint Ventures
The Company has accounted for its subsidiaries, Associates and Joint ventures at Cost.
d. De-recognition
A Financial assets is de-recognized only when
• The Company has transferred the rights to receive cash flows from the financial assets or
• Retains the contractual rights to receive the cash flows of the financial assets, but assumes a contractual obligation to pay the cash flows to one or more recipients.
Where the company has transferred an asset, it evaluates whether it has transferred substantially all risk and rewards of ownership of the financial assets. In such cases, the financial assets are de-recognized.
Where the company has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial assets. The financial assets is de-recognized if the company retains controls the financial assets, the assets is continued to be recognized to the extent of continuing involvement in the financial assets.
e. Impairment of Financial assets
In Accordance with Ind AS 109, The Company applies expected credit loss (ECL), simplified model approach for measurement and recognition of impairment loss on 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 11 and Ind AS 18.
ECL Impairment loss allowance (or reversal) recognized during the year is recognized as income/expense in the statement of Profit and Loss.
ii. Financial Liabilities
a. 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 definition of a financial liability and an equity instrument.
b. Initial Recognition and measurements
Financial Liabilities are recognized when the company becomes a party to the contractual provisions of the instruments. Financial liabilities are initially measured at the amortized cost unless at initial recognition, they are classified as fair value through profit and loss.
c. Subsequantial Measurement
Financial liabilities are subsequently measured at amortized cost using the effective interest rate method. Financial Liabilities carried at fair value though profit and loss are measured at fair value with all changes in fair recognized in the statement of profit and loss.
• Trade and other Payables:
These amounts represent liabilities for goods and services provided to the Company prior to the end of financial year which are unpaid. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting year. They are recognized initially at their fair value and subsequently measured at amortized cost using the effective interest method.
• Loans and Borrowings
After Initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR Method. Gains and Losses are recognized in profit or loss when the liabilities are derecognized as well as through the EIR amortization Process.
d. De-Recognition
A Financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.
VIII. Impairment of Non-Financial Assets
The company assesses, at each reporting date. Whether there is an indication that an assets may be impaired. If any indication exists, or when annual impairment testing for an assets 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) fair Value less cost of disposal and its value in use.
Recoverable amount is determined for an individual assets, unless the assets does not generate cash inflows that are largely independent of those from other assets or groups of assets.
When the carrying amount of an asset or CGU exceeds its recoverable amount, the assets is considered impaired and is written down to its recoverable amount.
In assesseing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount are that reflect current market assessments of the time value of money and the risks specific to assets. In determining fair value less cost of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used.
Impairment of loss of continuing operations, including impairment on inventories, are recognized in the statement of profit and loss.
A previously recognized impairment loss(except for goodwill) is reversed only if there has been a change in the assumptions used to determine the assets recoverable amount since the last impairment loss was recognized. The reversal is limited to the carrying amount of the assets.
IX. REVENUE RECOGNITION
• Sale of Services
Revenue from rendering services is recognized when the performance of agreed contractual task has been completed.
• Interest Income
Interest Income from a financial assets is recognized using effective interest rate method.
X. GOODS AND SERVICE TAX
Goods and Service Tax benefit is accounted for by reducing the purchase cost of the materials/fixed assets/services.
XI. LEASE
As a Leasee
Lease in which a significant portion of the risks and rewards of ownership are not transferred to the company as leasee are classified as operating lease. Payments made under operating lease(net of any incentives received from the lessor) are charged to statement of profit and loss on a straight line basis over the period of the lease unless the payments are structured to increase in line with expected general inflation to compensate for the leasor's expected inflationary cost increases.
As a Leassor
Lease income from operating lease where the company is a lessor is recognized in income on a straight line basis over the lease term unless the receipts are structured to increase in line with expected general inflation to compensate for the expected inflationary cost increases.
XII. FOREIGN CURRENCY TRANSACTIONS
The Functional currency of the company is Indian Rupees which represent the currency of the economic environment in which it operates.
T ransactions in currencies other than the company's functional currency (foreign currencies) are recoginsed at the rates of exchange prevailing at the dates of the transactions. Monetary items denominated in foreign currency at the year end and not covered under forward exchange contracts are translated at the functional currency spot rates of exchange at the reporting date.
Any income or expense on account of exchange difference between the dates of transactions and on settlement or on translation is recognized in the profit and loss account as income or expense.
Non Monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translated using the exchange rate at the date when the fair value was determined. Translation difference on such assets and liabilities carried at fair value are reported as part of fair value gain or loss.
XII. EMPLOYEE BENEFITS
i. Short term employee benefits:-
Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12 months after the end of the year in which the employee render the related services are recognized in respect of employees services up to the end of the reporting year and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
ii. Long term employee benefits:-
Compensated expenses which are not expected to occur within twelve months after the end of year in which the employee renders the related services are recognized as a liability at the present value of the defined benefit obligation at the balance sheet date.
iii. Post Employment obligations
a. Defined Contribution Plans
The Company is not covered under the Employees State Insurance Act and the Provident Fund Act.
b. Defined benefit plans Gratuity
The Company provide for Gratuity obligations through a defined benefit retirement plan (the 'Gratuity Plan') covering all employees. The Gratuity Plan Provides a lumpsum payments to vested employees at retirement or termination of employment based on the respective employee salary and years of employment with the company. The company provides for the Gratuity plan based on actuarial valuations in accordance with Indian Accounting Standard 19(Revised), “Employee Benefits”. The present value of obligation under gratuity is determined based on actuarial valuation using Project Unit Credit Method, which recognizes each period of services as giving rise to additional units of employee benefit entitlement and measures each unit separately to build up the final obligation.
Gratuity is recognized based on the present value of defined benefits obligation which is computed using the projected unit credit method. With actuarial valuations being carried out at the end of each annual reporting year. These are accounted either as current employee cost or included in cost of assets as permitted.
Leave Encashment
As per the company's policy, leave earned during the year do not carry forward, they lapse if the current period's entitlement is not used in full and do not entitle employees to a cash payment for unused entitlement during service.
Re-measurement of defined benefit plans in respect of post-employment are charged to the other comprehensive income.
Termination Benefits
Termination Benefits are recognized as an expense in the year in which they are incurred.
XIV. BORROWING COST
Borrowing Cost that are directly attributable to the acquisition, construction or production of qualifying asset are capitalized as part of cost of such assets. Other borrowing cost are recognized as an expense in the year in which they are incurred.
Borrowing costs consist of interest and other cost that an entity incurs in connection with the borrowing of funds.
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