2(a) material accounting policies
a. Statement of compliance
These financial statements have been prepared in
accordance with the Indian Accounting Standards
(referred to as "Ind AS") as prescribed under section
133 of the Companies Act, 2013 read with Companies
(Indian Accounting Standards) Rules as amended
from time to time.
b. Basis of preparation
The financial statements have been prepared on
accrual and going concern basis. The accounting
policies are applied consistently to all the periods
presented in the financial statements. All assets and
liabilities have been classified as current or non¬
current as per the Companys' normal operating
cycle and other criteria as set out in the Division II of
Schedule III to the Companies Act, 2013. Based on the
nature of products and the time between acquisition
of assets for processing and their realization in cash
and cash equivalents, the Company has ascertained
its operating cycle as 12 months for the purpose of
current or non-current classification of assets and
liabilities.
The statement of cash flows has been prepared under
indirect method.
c. Functional and presentation currency
The financial statements are presented in INR, the
functional currency of the Company. All amounts have
been rounded off to the nearest lakh, unless otherwise
indicated. Items included in the financial statements
of the Company are recorded using the currency
of the primary economic environment in which
the Company operates (the 'functional currency').
Transactions and balances with values below the
rounding off norm adopted by the Company have
been reflected as "0" in the relevant notes to these
financial statements.
d. Basis of measurement
These financial statements have been prepared
on historical cost basis, except for certain financial
instruments which are measured at fair value or
amortised cost at the end of each reporting period,
as explained in the accounting policies below.
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.
2A.1 Use of estimate and judgments
The preparation of financial statements requires
management to make judgments, estimates and
assumptions in the application of accounting policies
that affect the reported amounts of assets, liabilities,
income and expenses. Actual results may differ from
these estimates. Continuous evaluation is done on
the estimation and judgments based on historical
experience and other factors, including expectations
of future events that are believed to be reasonable.
Revisions to accounting estimates are recognized
prospectively.
Information about critical judgments in applying
accounting policies, as well as estimates and
assumptions that have the most significant effect to
the carrying amounts of assets and liabilities within
the financial year, are included in the following notes:
a. Useful lives of property, plant and equipment
The Company reviews the useful life of property,
plant and equipment at the end of each reporting
period. This reassessment may result in change in
depreciation expense in future periods.
b. Recognition and measurement of defined
benefit obligations
The obligation arising from defined benefit plan is
determined on the basis of actuarial assumptions.
Key actuarial assumptions include discount rate,
trends in salary escalation, actuarial rates and life
expectancy. The discount rate is determined by
reference to market yields at the end of the reporting
period on government bonds. The period to maturity
of the underlying bonds correspond to the probable
maturity of the post-employment benefit obligations.
Due to complexities involved in the valuation and its
long term nature, defined benefit obligation is sensitive
to changes in these assumptions. All assumptions are
reviewed at each reporting period.
c. Recognition of deferred tax assets
Deferred tax assets and liabilities are recognized for
the future tax consequences of temporary differences
between the carrying values of assets and liabilities
and their respective tax bases, and unutilized business
loss and depreciation carry forwards and tax credits.
Deferred tax assets are recognized to the extent
that it is probable that future taxable income will be
available against which the deductible temporary
differences, unused tax losses, depreciation carry¬
forwards and unused tax credits could be utilized.
Deferred tax assets and liabilities are measured using
substantively enacted tax rates expected to apply to
taxable income in the years in which the temporary
differences are expected to be received or settled.
d. Recognition and measurement of other
provisions
The recognition and measurement of other provisions
are based on the assessment of the probability of
an outflow of resources, and on past experience and
circumstances known at the balance sheet date.
The actual outflow of resources at a future date may
therefore, vary from the amount included in other
provisions.
e. Fair value of financial instruments
Derivatives are carried at fair value. Derivatives
includes forward contracts. Fair value of foreign
currency forward contracts is determined using the
fair value reports provided by respective bankers.
f. Impairment of trade receivables, loans and
other financial assets
The impairment provisions for financial assets are
based on assumptions about risk of default and
expected loss rates. The Company uses judgment
in making these assumptions and selecting the
inputs to the impairment calculation, based on the
Companys' past history, existing market conditions as
well as forward looking estimates at the end of each
reporting period.
2A.2 Property, plant and equipment (PPE)
i. Recognition and measurement
Items of property, plant and equipment are measured
at cost, which include capitalized borrowing cost,
less accumulated depreciation and accumulated
impairment losses, if any.
Cost of an item of property, plant and equipment
comprises its purchase price, including import duties
and non-refundable purchase taxes, after deducting
trade discounts and rebates and any directly
attributable cost of bringing the item to its working
condition for its intended use.
If any significant parts of item of property, plant and
equipment have different useful lives, then they are
accounted for as separate items (major components)
of property, plant and equipment.
Gains or losses arising on retirement or disposal of
property, plant and equipment are recognized in the
Statement of Profit and Loss.
ii. Capital work in progress and capital advance
Property, plant and equipment which are not ready
for intended use as on the date of Balance Sheet are
disclosed as "Capital work-in-progress".
Advances paid towards the acquisition of property,
plant and equipment outstanding at each balance
sheet date is classified as capital advances under
"Other non-current assets".
iii. Subsequent expenditure
Subsequent costs are included in the asset's carrying
amount or recognized as a separate asset, as
appropriate, only 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. All other repairs and maintenance
cost are charged to the Statement of Profit and Loss
during the period in which they are incurred.
iv. Depreciation
Depreciation is provided on a pro-rata basis on the
straight-line method based on estimated useful life
prescribed under Schedule II to the Companies Act,
2013.
Freehold land is not depreciated. Land under finance
lease is amortized over the period of lease.
The residual values, useful lives and method of
depreciation of property, plant and equipment is
reviewed at each financial year end and adjusted
prospectively, if appropriate.
2A.3 Impairment
i. Financial assets (other than at fair value)
The Company assesses at each date of balance
sheet whether a financial asset or a group of financial
assets is impaired. Ind AS 109 requires expected credit
losses to be measured through a loss allowance.
In determining the allowances for doubtful trade
receivables, the Company has used a practical
expedient by computing the expected credit loss
allowance for trade receivables based on a provision
matrix. The provision matrix takes into account
historical credit loss experience and is adjusted for
forward looking information. The expected credit loss
allowance is based on the ageing of the receivables
that are due and allowance rates used in the provision
matrix. For all other financial assets, expected credit
losses are measured at an amount equal to the
12-months expected credit losses or at an amount
equal to the life time expected credit losses if the credit
risk on the financial asset has increased significantly
since initial recognition.
ii. Non-financial assets
Property, plant and equipment and intangible assets
with finite life are evaluated for recoverability whenever
there is any indication that their carrying amounts
may not be recoverable. If any such indication exists,
the recoverable amount (i.e. higher of the fair value
less cost to sell and the value-in-use) is determined
on an individual asset basis unless the asset does not
generate cash flows that are largely independent of
those from other assets. In such cases, the recoverable
amount is determined for the Cash Generating Unit
(CGU) to which the asset belongs.
If the recoverable amount of an asset (or CGU) is
estimated to be less than its carrying amount, the
carrying amount of the asset (or CGU) is reduced
to its recoverable amount and impairment loss is
recognized in the statement of profit and loss.
2A.4 Inventories
Inventories are valued at the lower of cost and net
realizable value. Cost is computed on a weighted
average basis. Cost of finished goods and work-in¬
progress include all costs of purchases, conversion
costs and other costs incurred in bringing the
inventories to their present location and condition.
The net realizable value is the estimated selling price
in the ordinary course of business less the estimated
costs of completion and estimated costs necessary
to make the sale.
2A.5 Borrowing costs
Borrowing costs that are directly attributable to the
acquisition or construction of a qualifying asset that
necessarily takes a substantial period of time to get
ready for its intended use are capitalized as part of the
cost of that asset till the date it is ready for its intended
use or sale. Other borrowing costs are recognized as
an expense in the period in which they are incurred.
Borrowing costs consist of interest and other costs
that an entity incurs in connection with the borrowing
of funds.
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