7. Summary of Material
Accounting Policies Information
a) Revenue Recognition
The Company recognises the revenue when a customer ob¬
tains control of a promised good or service and thus has the
ability to direct the use and obtain the benefits from the good or
service in an amount that reflects the consideration to which
the entity expects to be entitled in exchange for those goods
and services.
The five-step process is applied for recognition of revenue:
• identify contracts with customers
• identify the separate performance obligation
• determine the transaction price of the contract
• allocate the transaction price to each of the separate per¬
formance obligations, and
• recognise the revenue as each performance obligation
is satisfied.
The Company assesses whether the revenue can be recog¬
nized over time as it performs if any of the following criteria
is met:
(a) The customer simultaneously consumes the benefits as the
Company performs, or
(b) The customer controls the work-in-progress, or
(c) The Company's performance does not create an asset with
alternative use to the Company and the Company has right to
payment for performance completed till date.
If none of the criteria above are met, the Company recognizes
revenue at a point-in-time. The point of recognition of revenue
is determined when the control of the goods or services is
transferred which is generally determined based on when the
significant risks and rewards of ownership are transferred to
the customer. Apart from this, the Company also considers its
present right to payment, the legal title to the goods, the physi¬
cal possession and the customer acceptance in determining
whether the control has been transferred.
i) Revenue from sale of products
The Company accounts for a contract when it has approval
and commitment from parties involved, the rights of the parties
are identified, payment terms are identified, the contract has
commercial substance and collectability of consideration
is probable.
Revenue from the sale of goods is measured at the
transaction price of the consideration received or receivable,
net of returns and allowances, trade discounts and volume
rebates/ incentives.
Contracts for the sale of goods provide customers with a right
of return the goods. The Company also provides retrospective
volume rebates to certain customers once the quantity of
goods purchased during the period exceeds the threshold
specified in the contract. The rights of return and volume re¬
bates give rise to variable consideration.
Sale of services
Revenue from job work charges is recognised based on stage
of completion of the contract. Stage of completion is deter¬
mined using ‘'input methods'' as a proportion of cost incurred to
date to the total estimated contract cost. Estimated loss on job
work to be undertaken in future years are provided for in the
period in which the estimate results in a loss on job work.
A contract asset is the right to consideration in exchange for
goods or services transferred to the customer. Contract assets
are subject to impairment assessment.
A contract liability is recognised if a payment is received or a
payment is due. Contract liabilities are recognised as revenue
when the Company performs under the contract
iii) Export Incentives
Revenue in respect of the export incentives is recognized when
no significant uncertainty exists with regard to the amount to be
realized and the ultimate collection thereof.
iv) Insurance and Other Claims
Revenue in respect of claims is recognized when no significant
uncertainty exists with regards to the amount to be realized
and the ultimate collection thereof.
v) Interest and Dividend Income
Interest income is recognised in the Statement of Profit and
Loss and for all financial instruments except for those classi¬
fied as held for trading or those measured or designated as at
fair value through profit or loss (FVTPL), is measured using the
effective interest method (EIR).
The effective interest method (EIR) is a method of calculating
the amortised cost of a financial instrument and of allocating
interest income or expense over the relevant period. The effec¬
tive 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.
The calculation of the EIR includes all fees and points paid or
received between parties to the contract that are incremental
and directly attributable to the specific lending arrangement,
transaction costs, and all other premiums or discounts. For fi¬
nancial assets at FVTPL transaction costs are recognised in
profit or loss at initial recognition.
The interest income is calculated by applying the EIR to the
gross carrying amount of non-credit impaired financial assets
(i.e. at the amortised cost of the financial asset before adjust¬
ing for any expected credit loss allowance). For credit-impaired
financial assets the interest income is calculated by applying
the EIR to the amortised cost of the credit-impaired financial
assets (i.e., the gross carrying amount less the allowance for
expected credit losses (ECLs). For financial assets originated
or purchased credit-impaired (POCI) the EIR reflects the ECLs
in determining the future cash flows expected to be received
from the financial asset.
Dividend income is recognised when the Company's right to
receive dividend is established by the reporting date and no
significant uncertainty as to collectability exists.
vi)Other Operational Revenue
Other operational revenue represents income earned from the
activities incidental to the business and is recognised when the
right to receive the income is established as per the terms of
the contract.
b) Properties, Plant and Equipment (PPE)
PPE is recognised when it is probable that future economic
benefits associated with the item will flow to the Company and
the cost of the item can be measured reliably. PPE is stated at
original cost net of tax/duty credits availed, if any, less accumu¬
lated depreciation and cumulative impairment, if any. Cost in¬
cludes all direct cost related to the acquisition of PPE and, for
qualifying assets, borrowing costs capitalised in accordance
with the Company's accounting policy.
Land and buildings held for use are stated in the balance sheet
at cost less accumulated depreciation and accumulated impair¬
ment losses. Freehold land is not depreciated.
PPE not ready for the intended use on the date of the Balance
Sheet are disclosed as “capital work in progress”.
Depreciation is recognised using reducing balance method so
as to write off the cost of the assets (other than freehold land))
less their residual values over their useful lives specified in
Schedule II to the Companies Act, 2013, or in case of assets
where the useful life was determined by technical evaluation,
over the useful life so determined. Depreciation method is re¬
viewed at each financial year end to reflect expected pattern of
consumption of the future economic benefits embodied in the
asset. The estimated useful life and residual values are also
reviewed at each financial year end with the effect of any
change in the estimates of useful life/ residual value is ac¬
counted on prospective basis.
for impaired assets is adjusted in future periods in such a man¬
ner that the revised carrying amount of the asset is allocated
over its remaining useful life.
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefits are expected to
arise from the continued use of the asset. Any gain or loss aris¬
ing on the disposal or retirement of an item of property, plant
and equipment is recognised in the statement of profit and loss
under other income or other expenses respectively.
c) Intangible Assets
Intangible assets are recognised when it is probable that the
future economic benefits that are attributable to the asset will
flow to the enterprise and the cost of the asset can be mea¬
sured reliably. Intangible assets are stated at original cost net
of tax/duty credits availed, if any, less accumulated amortisa¬
tion and cumulative impairment. Direct expenses and adminis¬
trative and other general overhead expenses that are
specifically attributable to acquisition of intangible assets
are allocated and capitalised as a part of the cost of the
intangible assets.
Intangible assets not ready for the intended use on the
date of Balance Sheet are disclosed as “Intangible assets
under development”.
Intangible assets are amortised on straight line basis over the
estimated useful life. The method of amortisation and useful
life are reviewed at the end of each accounting year with the
effect of any changes in the estimate being accounted for on a
prospective basis.
*The Company, based on management estimate, depreciates
vehicles over estimated useful lives which are different from
the useful life prescribed in Schedule II to the Companies Act,
2013 (8 years) as the management believes that these are re¬
alistic and reflect fair approximation of the period over which
the assets are likely to be used.
Depreciation for additions to/deductions from, owned assets is
calculated pro rata to the period of use. Depreciation charge
An intangible asset is derecognised on disposal, or when no
future economic benefits are expected from use or disposal.
Gains or losses arising from derecognition of an intangible
asset are recognised in profit or loss when the asset
is derecognised.
d) Impairment of Tangible and
Intangible Assets other than Goodwill
As at the end of each accounting year, the Company reviews
the carrying amounts of its PPE and intangible assets to deter¬
mine whether there is any indication that those assets have
suffered an impairment loss. If such indication exists, the PPE,
investment property and intangible assets are tested for impair¬
ment so as to determine the impairment loss, if any. Goodwill
and the intangible assets with indefinite life are tested for im¬
pairment each year.
Impairment loss is recognised when the carrying amount of an
asset exceeds its recoverable amount.
Recoverable amount is determined:
• in the case of an individual asset, at the higher of the net
selling price and the value in use; and
• in the case of a cash generating unit (the smallest identifi¬
able Company of assets that generates independent cash
flows), at the higher of the cash generating unit's net selling
price and the value in use.
Recoverable amount is the higher of fair value less costs of
disposal and value in use. In assessing value in use, the esti¬
mated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market as¬
sessments 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.
If recoverable amount of an asset (or cash generating unit) is
estimated to be less than its carrying amount, such deficit is
recognised immediately in the Statement of Profit and Loss as
impairment loss and the carrying amount of the asset (or cash
generating unit) is reduced to its recoverable amount. For this
purpose, the impairment loss recognised in respect of a cash
generating unit is allocated first to reduce the carrying amount
of any goodwill allocated to such cash generating unit and then
to reduce the carrying amount of the other assets of the cash
generating unit on a pro-rata basis.
When an impairment loss subsequently reverses, the carrying
amount of the asset (or cash generating unit), except for allo¬
cated goodwill, is increased to the revised estimate of its re¬
coverable amount, but so that the increased carrying amount
does not exceed the carrying amount that would have been de¬
termined had no impairment loss is recognised for the asset (or
cash generating unit) in prior years. A reversal of an impair¬
ment loss (other than impairment loss allocated to goodwill) is
recognised immediately in the Statement of Profit and Loss.
e) Inventories
Inventories are stated at lower of cost and net realisable value.
The cost is calculated on First in First Out (FIFO) method ex¬
cept work in progress which is valued at raw material cost plus
conversion costs depending upon the stage of completion.
Cost comprises expenditure incurred in the normal course of
business in bringing such inventories to its present location
and condition and includes, where applicable, appropriate
overheads based on normal level of activity.
Net realisable value is the estimated selling price less esti¬
mated costs for completion and sale.
Obsolete, slow moving, and defective inventories are identified
from time to time and, where necessary, a provision is made
for such inventories.
f) Employee Benefits
• Short Term Employee Benefits
Employee benefits 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. Liabilities recognised in respect
of short-term employee benefits are measured at the
undiscounted amount of the benefits expected to be paid in
exchange for the related service.
• Post-employment benefits:
a) Defined contribution plans: The Company's superannuation
scheme, state governed provident fund scheme, employee
state insurance scheme and employee pension scheme are
defined contribution plans. The contribution paid/ payable un¬
der the schemes is recognised during the period in which the
employee renders the related service.
b) Defined benefit plans: The obligation in respect of defined
benefit plans, which cover Gratuity are provided for on the ba¬
sis of an actuarial valuation at the end of each financial year
using project unit credit method. The Company's liability is ac¬
tuarially determined (using the Projected Unit Credit Method)
at the end of the year. Actuarial losses/gains are recognized
in the Other Comprehensive Income in the year in which
they arise.
Re-measurement, comprising actuarial gains and losses, is re¬
flected immediately in the Balance Sheet with a charge or
credit recognized in the Other Comprehensive Income in the
period in which they occur. Re-measurement recognized in
other comprehensive income is reflected immediately in re¬
tained earnings, and will not be reclassified to profit or loss.
Defined benefit costs are categorized as follows:
• Service cost (including current service cost, past
service cost, as well as gain and losses on curtailments
and settlements).
ii) Net interest expense or income; and
iii) Re-measurement.
The Company presents the first two components of defined
benefit costs in Statement of Profit and Loss in the line item
‘Employee Benefits Expense'.
The present value of the defined benefit plan liability is calcu¬
lated using a discount rate, which is determined by reference
to market yields at the end of the reporting period on govern¬
ment bonds.
The retirement benefit obligation, recognized in the Balance
Sheet, represents the Company's liability based on
actuarial valuation.
• Long term employee benefits:
The obligation recognised in respect of long term benefits such
as long term compensated absences is measured at present
value of estimated future cash flows expected to be made by
the Company and is recognised in a similar manner as in the
case of defined benefit plans vide (ii) (b) above.
• Termination benefits:
Termination benefits such as compensation under employee
separation schemes are recognised as expense when the
Company's offer of the termination benefit is accepted or when
the Company recognises the related restructuring costs which¬
ever is earlier.
g) Leases
The Company evaluates if an arrangement qualifies to be a
lease as per the requirements of Ind AS 116. Identification
of a lease requires significant judgment. The Company uses
significant judgement in assessing the lease term (including
anticipated renewals) and the applicable discount rate.
The Company determines the lease term as the non-can¬
cellable period of a lease, together with both periods covered
by an option to extend the lease if the Company is reasonably
certain to exercise that option; and periods covered by an op¬
tion to terminate the lease if the Company is reasonably cer¬
tain not to exercise that option. In assessing whether the
Company is reasonably certain to exercise an option to extend
a lease, or not to exercise an option to terminate a lease, it
considers all relevant facts and circumstances that create an
economic incentive for the Company to exercise the option to
extend the lease, or not to exercise the option to terminate the
lease. The Company revises the lease term if there is a
change in the non-cancellable period of a lease.
The discount rate is generally based on the incremental
borrowing rate specific to the lease being evaluated or for a
portfolio of leases with similar characteristics.
Company as a lessee
The Company accounts for each lease component within the
contract as a lease separately from non-lease components of
the contract and allocates the consideration in the contract to
each lease component based on the relative stand-alone price
of the lease component and the aggregate stand-alone price of
the non-lease components.
The Company recognises right-of-use asset representing its
right to use the underlying asset for the lease term at the lease
commencement date. The cost of the right-of-use asset mea¬
sured at inception shall comprise of the amount of the initial
measurement of the lease liability adjusted for any lease pay¬
ments made at or before the commencement date less any
lease incentives received, plus any initial direct costs incurred
and an estimate of costs to be incurred by the lessee in dis¬
mantling and removing the underlying asset or restoring the
underlying asset or site on which it is located. The right-of-use
assets is subsequently measured at cost less any accumulated
depreciation, accumulated impairment losses, if any and ad¬
justed for any remeasurement of the lease liability. The right-of-
use assets is depreciated using the straight-line method from
the commencement date over the shorter of lease term or use¬
ful life of right-of-use asset. The estimated useful lives of right-
of-use assets are determined on the same basis as those of
property, plant and equipment. Right-of-use assets are tested
for impairment whenever there is any indication that their carry¬
ing amounts may not be recoverable. Impairment loss, if any,
is recognised in the statement of profit and loss.
The Company measures the lease liability at the present value
of the lease payments that are not paid at the commencement
date of the lease. The lease payments are discounted using
the interest rate implicit in the lease if that rate can be readily
determined. If that rate cannot be readily determined, the
Company uses incremental borrowing rate. For leases with
reasonably similar characteristics, the Company, on a lease-
by-lease basis, may adopt either the incremental borrowing
rate specific to the lease or the incremental borrowing rate for
the portfolio as a whole. The lease payments shall include
fixed payments, variable lease payments, residual value guar¬
antees, exercise price of a purchase option where the
Company is reasonably certain to exercise that option and pay¬
ments of penalties for terminating the lease, if the lease term
reflects the lessee exercising an option to terminate the lease.
The lease liability is subsequently remeasured by increasing
the carrying amount to reflect interest on the lease liability, re¬
ducing the carrying amount to reflect the lease payments made
and remeasuring the carrying amount to reflect any reassess¬
ment or lease modifications or to reflect revised in-substance
fixed lease payments. The company recognises the amount of
the re-measurement of lease liability due to modification as an
adjustment to the right-of-use asset and statement of profit and
loss depending upon the nature of modification. Where the car¬
rying amount of the right-of-use asset is reduced to zero and
there is a further reduction in the measurement of the lease lia¬
bility, the Company recognises any remaining amount of the
re-measurement in statement of profit and loss.
Company as a Lessor
At the inception of the lease the Company classifies each of its
leases as either an operating lease or a finance lease. The
Company recognises lease payments received under operat¬
ing leases as income on a straight- line basis over the lease
term. In case of a finance lease, finance income is recognised
over the lease term based on a pattern reflecting a constant
periodic rate of return on the lessor's net investment in the
lease. When the Company is an intermediate lessor it ac¬
counts for its interests in the head lease and the sub-lease
separately. It assesses the lease classification of a sub-lease
with reference to the right-of-use asset arising from the head
lease, not with reference to the underlying asset. If a head
lease is a short-term lease to which the Company applies the
exemption described above, then it classifies the sub-lease as
an operating lease.
h) Financial Instruments
Financial assets and financial liabilities are recognised in the
Company's balance sheet when the Company becomes a
party to the contractual provisions of the instrument.
Recognised financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are directly at¬
tributable to the acquisition or issue of financial assets and fi¬
nancial liabilities (other than financial assets and financial lia¬
bilities at FVTPL) are added to or deducted from the fair value
of the financial assets or financial liabilities, as appropriate, on
initial recognition. Transaction costs directly attributable to the
acquisition of financial assets or financial liabilities at FVTPL
are recognised immediately in profit or loss.
A financial asset and a financial liability is offset and presented
on net basis in the balance sheet when there is a current
legally enforceable right to set-off the recognised amounts and
it is intended to either settle on net basis or to realise the asset
and settle the liability simultaneously.
Financial Assets
Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost
using the effective interest rate (EIR) 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 at fair value through
other comprehensive income (FVTOCQ
Financial assets are measured at fair value through other com¬
prehensive income if these financial assets are held within a
business model whose objective is achieved by both collecting
contractual cash flows that give rise on specified dates to sole
payments of principal and interest on the principal amount out¬
standing and by selling financial assets.
Debt instruments at
amortised cost or at FVTOCI
The Company assesses the classification and measurement
of a financial asset based on the contractual cash flow
characteristics of the asset and the Company's business model
for managing the asset.
For an asset to be classified and measured at amortised cost,
its contractual terms should give rise to cash flows that are
solely payments of principal and interest on the principal out¬
standing (SPPI).
For an asset to be classified and measured at FVTOCI, the as¬
set is held within a business model whose objective is
achieved both by collecting contractual cash flows and selling
financial assets; and the contractual terms of instrument give
rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
The Company has more than one business model for manag¬
ing its financial instruments which reflect how the Company
manages its financial assets to generate cash flows. The
Company's business models determine whether cash flows will
result from collecting contractual cash flows, selling financial
assets or both.
The Company considers all relevant information available
when making the business model assessment. However, this
assessment is not performed on the basis of scenarios that the
Company does not reasonably expect to occur, such as so-
called ‘worst case' or ‘stress case' scenarios. The Company
takes into account all relevant evidence available such as:
• how the performance of the business model and the finan¬
cial assets held within that business model are evaluated
and reported to the entity's key management personnel;
• the risks that affect the performance of the business model
(and the financial assets held within that business model)
and, in particular, the way in which those risks are man¬
aged; and
• how managers of the business are compensated (e.g.,
whether the compensation is based on the fair value
of the assets managed or on the contractual cash
flows collected).
The Company reassess its business models each reporting pe¬
riod to determine whether the business models have changed
since the preceding period. For the current and prior reporting
period the Company has not identified a change in its
business models.
When a debt instrument measured at FVTOCI is derecog¬
nised, the cumulative gain/loss previously recognised in OCI is
reclassified from equity to profit or loss.
In contrast, for an equity investment designated as measured
at FVTOCI, the cumulative gain/loss previously recognised in
OCI is not subsequently reclassified to profit or loss but trans¬
ferred within equity.
Debt instruments that are subsequently measured at amortised
cost or at FVTOCI are subject to impairment.
Financial assets at fair value
through profit or loss [FVTPL]
Financial assets are measured at fair value through profit or
loss unless it is measured at amortised cost or at fair value
through other comprehensive income on initial recognition. The
transaction costs directly attributable to the acquisition of finan¬
cial assets and liabilities at fair value through profit or loss are
immediately recognised in profit or loss.
Trade receivables
A receivable is classified as a ‘trade receivable' if it is in re¬
spect to the amount due from customers on account of goods
sold or services rendered in the ordinary course of business.
Trade receivables are recognised initially at the transaction
value except trade receivable that contains significant financ¬
ing component that are subsequently measured at amortised
cost using the effective interest rate method, less provision for
impairment. For some trade receivables, the Company may
obtain security in the form of guarantee, security deposit or let¬
ter of credit which can be called upon if the counterparty is in
default under the terms of the agreement.
De-recognition
A financial asset (or, where applicable, a part of a financial as¬
set or part of a Company of similar financial assets) is primarily
de-recognised when:
• The rights to receive cash flows from the asset have ex¬
pired, or
• The Company has transferred its rights to receive cash
flows from the asset or has assumed an obligation to pay
the received cash flows in full without material delay to a
third party under a ‘pass-through' arrangement; and
• either (a) the Company has transferred substantially all the
risks and rewards of the asset, or (b) the Company has
neither transferred nor retained substantially all the risks
and rewards of the asset, but has transferred control of
the asset.
The transferred asset and the associated liability are measured
on a basis that reflects the rights and obligations that the
Company has retained.
Financial liabilities
At initial recognition, all financial liabilities other than fair val¬
ued through profit or loss are recognised initially at fair value
less transaction costs that are attributable to the issue of finan¬
cial liability. Transaction costs of financial liability carried at fair
value through profit or loss is expensed in profit or loss.
Financial liabilities at fair
value through profit or loss
Financial liabilities at fair value through profit or loss include fi¬
nancial liabilities held for trading. The Company has not desig¬
nated any financial liabilities upon initial measurement recogni¬
tion at fair value through profit or loss. Financial liabilities at fair
value through profit or loss are at each reporting date at fair
value with all the changes recognised in the Statement of Profit
and Loss.
(ii) Financial liabilities measured at amortised cost Borrowings
Borrowings are initially recognised at fair value, net of transac¬
tion costs incurred. Borrowings are subsequently measured at
amortised cost. Any difference between the proceeds (net of
transaction costs) and the redemption amount is recognised in
profit or loss over the period of the borrowings using the effec¬
tive interest rate method. Fees paid on the establishment of
loan facilities are recognised as transaction costs of the loan to
the extent that it is probable that some or all of the facility will
be drawn-down. In this case, the fee is deferred until the draw
down occurs. To the extent there is no evidence that it is proba¬
ble that some or all of the facility will be drawn-down, the fee is
capitalised as a prepayment for liquidity services and amor¬
tised over the period of the facility to which it relates
Borrowings are derecognised from the Balance Sheet when
the obligation specified in the contract is extinguished, can¬
celled or expired. The difference between the carrying amount
of a financial liability that has been extinguished or transferred
to another party and the consideration paid, including any non¬
cash assets transferred or liabilities assumed, is recognised
in the Statement of Profit and Loss as other income or
finance costs.
Borrowings are classified as current liabilities unless, at the
end of the reporting period, the Company has unconditional
right to defer settlement of the liability for at least 12 months
after reporting period.
Trade and other payables
A payable is classified as 'trade payable' if it is in respect of the
amount due on account of goods purchased or services re¬
ceived in the normal course of business. These amounts repre¬
sent 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 pay¬
ment is not due within 12 months after the reporting period.
They are recognised initially at their fair value and subse¬
quently measured at amortised cost using the effective interest
rate method.
De-recognition of financial liability
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or expired. The differ¬
ence between the carrying amount of a financial liability that
has been extinguished or transferred to another party and the
consideration paid, including any non-cash assets transferred
or liabilities assumed, is recognised in the Statement of Profit
and Loss as other income or finance costs.
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is
reported in the Balance Sheet where the Company has a
legally enforceable right to offset the recognised amounts, and
there is an intention to settle on a net basis or realise the asset
and settle the liability simultaneously. The legally enforceable
right must not be contingent on future events and must be
enforceable in the normal course of business and in the
event of default, insolvency or bankruptcy of the Company or
the counterparty.
Write Off
Loans and debt securities are written off when the Company
has no reasonable expectations of recovering the financial as¬
set (either in its entirety or a portion of it). This is the case
when the Company determines that the borrower does not
have assets or sources of income that could generate sufficient
cash flows to repay the amounts subject to the write-off. A
write-off constitutes a derecognition event. The Company may
apply enforcement activities to financial assets written off.
Recoveries resulting from the Company's enforcement activi¬
ties will result in impairment gains.
Impairment of financial assets
Loss allowance for expected credit losses is recognised for fi¬
nancial assets measured at amortised cost and fair value
through the statement of profit and loss.
The Company recognises impairment loss on trade receiv¬
ables using expected credit loss model, which involves use
of provision matrix constructed on the basis of historical
credit loss experience as permitted under Ind AS 109 -
Financial Instruments.
For financial assets whose credit risk has not significantly in¬
creased since initial recognition, loss allowance equal to
twelve months expected credit losses is recognised.
Loss allowance equal to the lifetime expected credit losses is
recognised if the credit risk on the financial instruments has
significantly increased since initial recognition.
For financial assets maturing within one year from the balance
sheet date, the carrying amounts approximates fair value due
to the short maturity of these instruments.
Loss allowances for ECL are presented in the statement of fi¬
nancial position as follows:
• for financial assets measured at amortised cost: as a de¬
duction from the gross carrying amount of the assets;
• for debt instruments measured at FVTOCI: no loss al¬
lowance is recognised in Balance Sheet as the carrying
amount is at fair value.
Derecognition of financial assets
A financial asset is derecognised only when
• The Company has transferred the rights to receive cash
flows from the financial asset or
• retains the contractual rights to receive the cash flows of
the financial asset but assumes a contractual obligation to
pay the cash flows to one or more recipients.
Where the entity has transferred an asset, the Company evalu¬
ates whether it has transferred substantially all risks and re¬
wards of ownership of the financial asset. In such cases,
the financial asset is derecognised. Where the entity has not
transferred substantially all risks and rewards of ownership of
the financial asset, the financial asset is not derecognised.
Where the entity has neither transferred a financial asset nor
retains substantially all risks and rewards of ownership of the
financial asset, the financial asset is derecognised if the
Company has not retained control of the financial asset. Where
the Company retains control of the financial asset, the asset is
continued to be recognised to the extent of continuing involve¬
ment in the financial asset.
Fair value financial instruments
The company measure financial instrument at fair value at
each balance sheet date. 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.
In determining the fair value of its financial instruments, the
company use various method and assumption that are based
on market conditions and risks existing at each reporting date.
The methods used to determine the fair value includes dis¬
counted cash flow analysis, available quoted market price and
dealer quotes and valuation report etc. The method of assess¬
ing fair value results in general approximation of value and
such value may never actually be realised.
Fair Values are categorized into different levels in a fair value
hierarchy based on the inputs used in the valuation techniques
as follows:
Level 1: quoted prices (unadjusted) in active markets for identi¬
cal assets or liabilities
Level 2: inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly (i.e.
as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs)
When measuring the fair value of an asset or liability, the com¬
pany uses observable market data as far as possible. If the in¬
puts used to measure the fair value of an asset or a liability fall
into different levels of the fair value hierarchy, then the fair
value measurement is categorized in its entirety in the same
level of the fair value hierarchy as the lowest level input that is
significant to the entire measurement.
i) Government Grant:
Government grants with a condition to purchase, construct or
otherwise acquire long-term assets are initially measured
based on grant receivable under the scheme. Such grants are
recognised in the Statement of Profit and Loss on a systematic
basis over the useful life of the asset.
Amount of benefits receivable in excess of grant income ac¬
crued based on usage of the assets is accounted as
Government grant received in advance. Changes in estimates
are recognised prospectively over the remaining life of
the assets.
The Company has option to present the Government grant re¬
lated to property, plant and equipment by deducting the grant
from the carrying value of the asset and to present the non¬
monetary grant at a nominal amount. The Company has not
availed this option in the current financial year.
Grants from the Government are recognised at their fair
value where there is a reasonable assurance that the grant
will be received and the Company will comply with all
attached conditions.
Government revenue grants relating to income are deferred
and recognised in the Statement of Profit and Loss over the
period necessary to match them with the costs that they are in¬
tended to compensate and presented with other income.
The Company may receive government grants that require
compliance with certain conditions related to the Company's
operating activities or are provided to the Company by way of
financial assistance on the basis of certain qualifying criteria.
j) Cash and bank balances:
Cash and bank balances also include fixed deposits, margin
money deposits, earmarked balances with banks and other
bank balances which have restrictions on repatriation. Short
term and liquid investments being subject to more than
insignificant risk of change in value, are part of cash and
cash equivalents.
k) Borrowing costs:
Borrowing costs include interest expense calculated using the
effective interest method, finance charges in respect of assets
acquired on finance lease and exchange differences arising
from foreign currency borrowings, to the extent they are re¬
garded as an adjustment to interest costs.
Borrowing costs net of any investment income from the tempo¬
rary investment of related
borrowings, that are attributable to the acquisition, construction
or production of a qualifying asset are capitalised as part of
cost of such asset till such time the asset is ready for its in¬
tended use or sale. A qualifying asset is an asset that neces¬
sarily requires a substantial period of time to get ready for its
intended use or sale. All other borrowing costs are recognised
in profit or loss in the period in which they are incurred.
l) Accounting and reporting of
information for Operating Segments:
Operating segments are those components of the business
whose operating results are regularly reviewed by the chief op¬
erating decision making body in the Company to make deci¬
sions for performance assessment and resource allocation.
The Managing Director has been identified as the chief operat¬
ing decision maker (CODM), who evaluates the Company's
performance. The reporting of segment information is the same
as provided to the management for the purpose of the perfor¬
mance assessment and resource allocation to the segments.
Segment accounting policies are in line with the accounting
policies of the Company.
m) Foreign currencies:
i) The functional currency and presentation currency of the
Company is Indian Rupee. Functional currency of the
Company and foreign operations has been determined based
on the primary economic environment in which the Company
and its foreign operations operate considering the currency in
which funds are generated, spent and retained.
• Transactions in currencies other than the Company's func¬
tional 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 at
the prevailing closing spot rate. Non-monetary items that
are measured in terms of historical cost in foreign currency
are not retranslated. Exchange differences that arise on
settlement of monetary items or on reporting of monetary
items at each Balance Sheet date at the closing spot rate
are recognised in the Statement of Profit and Loss in the
period in which they arise.
• Financial statements of foreign operations whose functional
currency is different than Indian Rupees are translated into
Indian Rupees as follows:
A. assets and liabilities for each Balance Sheet presented are
translated at the closing rate at the date of that Balance Sheet;
B. income and expenses for each income statement are trans¬
lated at average exchange rates; and
C. all resulting exchange differences are recognised in other
comprehensive income and accumulated in equity as foreign
currency translation reserve for subsequent reclassification to
profit or loss on disposal of such foreign operations.
n) Taxation:
Current Tax:
Tax on income for the current period is determined on the basis
of taxable income and computed in accordance with the provi¬
sions of the Income Tax Act, 1961 and based on the expected
outcome of assessments/appeals.
The Company has exercised the option under Section 115BA
of the Income Tax Act, 1961 which is irrevocable
Deferred Tax:
Deferred tax is recognised on temporary differences between
the carrying amounts of assets and liabilities in the Company's
financial statements and the corresponding tax bases used in
computation of taxable profit and quantified using the tax rates
and laws enacted or substantively enacted as on the Balance
Sheet date.
Deferred tax assets are generally recognised for all taxable
temporary differences to the extent that is probable that tax¬
able profits will be available against which those deductible
temporary differences can be utilised. The carrying amount of
deferred tax assets is reviewed at the end of each reporting pe¬
riod and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or part of
the asset to be recovered.
Deferred tax assets relating to unabsorbed
depreciation/business losses/losses under the head “capital
gains” are recognised and carried forward to the extent of
available taxable temporary differences or where there is con¬
vincing other evidence that sufficient future taxable income will
be available against which such deferred tax assets can be re¬
alised. Deferred tax assets in respect of unutilised tax credits
which mainly relate to minimum alternate tax are recognised
to the extent it is probable of such unutilised tax credits will
get realised.
The measurement of deferred tax liabilities and assets reflects
the tax consequences that would follow from the manner
in which the Company expects, at the end of reporting
period, to recover or settle the carrying amount of its assets
and liabilities.
Transaction or event which is recognised outside profit or loss,
either in other comprehensive income or in equity, is recorded
along with the tax as applicable.
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