Note 3 MATERIAL ACCOUNTING POLICIES:
3.1 Property, Plant and Equipment:
Property, Plant and Equipment are carried at cost, net of recoverable taxes, trade discount and rebates less accumulated depreciation, amortisation
and impairment losses, if any. Cost includes purchase price, borrowing cost and any cost directly attributable to the bringing the assets to its working
condition for its intended use. In case of Property, Plant and Equipment, the Company has availed the carrying value as deemed cost on the date of
transition i.e. 1st April, 2015.
Depreciation on the Property, Plant and Equipment is provided using straight line method over the useful life of assets as specified in schedule II to the
Companies Act, 2013. Depreciation on Property, Plant and Equipment which are added / disposed off during the year, is provided on pro-rata basis with
reference to the date of addition / deletion. Freehold land is not depreciated.
The assets residual values, useful lives and method of depreciation are reviewed at each financial year end and are adjusted prospectively, if appropriate.
The effects of any revision are included in the statement of profit and loss when the changes arises.
Capital work-in-progress includes cost of Property, Plant and Equipment under installation as at the balance sheet date.
Property, Plant and Equipment are eliminated from financial statement, either on disposal or when retired from active use. Profits / losses arising in the
case of retirement / disposal of Property, Plant and Equipment are recognised in the statement of profit and loss in the year of occurrence.
Leasehold lands are amortised over the period of lease. Buildings constructed on leasehold land are depreciated based on the useful life specified
in schedule II to the Companies Act, 2013, where the lease period of land is beyond the life of the building. In other cases, buildings constructed on
leasehold lands are amortised over the primary lease period of the lands.
3.2 Investment Properties:
Investment properties are measured initially at cost, including transaction costs and net of recoverable taxes, trade discounts and rebates. Subsequent
to initial recognition, investment properties are stated at cost less accumulated depreciation and impairment losses, if any. In case of Investment
properties, the company has availed the carrying value as deemed cost on the date of transition i.e. 1st April, 2015.
Depreciation on investment properties is provided using straight line method over the estimated useful lives as specified in Schedule II to the Companies
Act, 2013. Residual values, useful lives and method of depreciation of investment properties are reviewed at each financial year end and are adjusted
prospectively, if appropriate. The effects of any revision are included in the statement of profit and loss when the changes arises.
Though the Company measures investment properties using cost based measurement, the fair value of investment property is disclosed in the notes.
Investment properties are derecognised either when they have been disposed off or when they are permanently withdrawn from use and no future
economic benefit is expected from their disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised
in the statement of profit and loss in the period of derecognition.
3.3 Intangible Assets :
Intangible assets are carried at cost, net of recoverable taxes, trade discount and rebates less accumulated amortisation and impairment losses, if any.
Cost includes expenditure that is directly attributable to the acquisition of the intangible assets. In case of Intangible Assets, the Company has availed
the carrying value as deemed cost on the date of transition i.e. 1st April, 2015.
Identifiable intangible assets are recognised when it is probable that future economic benefits attributed to the asset will flow to the Company and the
cost of the asset can be reliably measured.
Computer softwares are capitalised at the amounts paid to acquire the respective license for use and are amortised over the period of useful lives
or period of three years, whichever is less. The useful lives and method of amortisation are reviewed at each financial year end and are adjusted
prospectively, if appropriate.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognised in the statement of profit and loss when the asset is derecognised.
3.4 Leases:
At inception of contract, the Company assesses whether the Contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset for a period of time in exchange for onsideration. At inception or on reassessment of a contract that
contains a lease component, the Company allocates consideration in the contract to each lease component on the basis of their relative standalone
price.
As a lessee
i) Right-of-use assets
The Company recognises right-of-use assets at the commencement date of the lease. Right of- use assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease
liabilities recognised, initial direct costs incurred, lease payments made at or before the commencement date less any lease incentives received and estimate
of costs to dismantle. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the
assets
The Company presents right-to-use assets within the same line item as that within which the corresponding underlying assets would be presented if
they were owned by the Company
ii) Lease liabilities
At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of lease payments to be made over the
lease term. In calculating the present value of lease payments, the Company generally uses its incremental borrowing rate at the lease commencement
date if the discount rate implicit in the lease is not readily determinable.
After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made.
The carrying amount is remeasured when there is a change in future lease payments arising from a change in index or rate. In addition, the carrying
amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments or a change in the
assessment of an option to purchase the underlying asset.
The Company presents lease liabilities under financial liabilities in the Balance Sheet.
iii) Short term leases and leases of low value of assets
The Company applies the short-term lease recognition exemption to its short-term leases. It also applies the lease of low-value assets recognition
exemption that are considered to be low value. Lease payments on short-term leases and leases of low value assets are recognised as expense on a
straight-line basis over the lease term.
As a lessor
Leases in which the Company does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases.
Rental income from operating lease is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating
and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental
income. Contingent rents are recognised as revenue in the period in which they are earned.
Leases are classified as finance leases when substantially all of the risks and rewards of ownership transfer from the Company to the lessee. Amounts
due from lessees under finance leases are recorded as receivables at the Company's net investment in the leases. Finance lease income is allocated to
accounting periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease.
3.5 Inventories:
In general, all inventories are measured at lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Cost of inventories comprise of all cost of
purchase, cost of conversion and other cost incurred in bringing the inventory to their present location and condition. Raw Materials are valued on FIFO
basis and Stores & Spares, Packing materials and Consumables are determined on weighted average basis. Waste, by products and trial run products
are valued at net realisable value. Finished products are valued at raw material cost (determined on weighted average Basis) plus costs of conversion,
comprising labour costs and an attributable proportion of manufacturing overheads based on normal levels of activity.
3.6 Cash and Cash equivalents:
Cash and cash equivalent in the balance sheet comprise cash at banks, cash on hand and short-term deposits with an original maturity of three months
or less, which are subject to an insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding
bank overdrafts as they are considered an integral part of the Company's cash management.
3.7 Impairment of Non-Financial Assets - Property, Plant and Equipment and Intangible Assets:
The Company assesses at each reporting date as to whether there is any indication that any Property, Plant and Equipment and Intangible Assets
or group of assets, called cash generating units (CGU) may be impaired. If any such indication exists the recoverable amount of an asset or CGU is
estimated to determine the extent of impairment, if any. When it is not possible to estimate the recoverable amount of an individual asset, the Company
estimates the recoverable amount of the CGU to which the asset belongs.
An impairment loss is recognised in the statement of profit and loss to the extent, asset's carrying amount exceeds its recoverable amount. The
recoverable amount is higher of an asset's fair value less cost of disposal and value in use. Value in use is based on the estimated future cash flows,
discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value of money and risk specific to
the assets.
The impairment loss recognised in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.
3.8 Discontinued operation and non-current assets (or disposal groups) held for sale:
Discontinued operation:
A discontinued operation is a component of the Company that has been disposed off or is classified as held for sale and that represents a separate
major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose off such a line of business or area of operations,
or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the statement of profit
or loss.
Non-current assets (or disposal groups) held for sale
Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through
continuing use. This condition is regarded as met only when a sale is highly probable from the date of classification, management are committed to
the sale and the asset is available for immediate sale in its present condition. Non-current assets are classified as held for sale from the date these
conditions are met and are measured at the lower of carrying amount and fair value less cost to sell. Any resulting impairment loss is recognised in
the Statements of Profit and Loss as a separate line item. On classification as held for sale, the assets are no longer depreciated. Assets and liabilities
classified as held for sale are presented separately as current items in the Balance Sheet.
3.9 Financial Instruments - Initial Recognition, Subsequent Measurement and Impairment:
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
I) Financial Assets - Initial Recognition and Measurement:
All financial assets are initially recognised at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets,
which are not at fair value through profit or loss, are adjusted to the fair value on initial recognition. Financial assets are classified, at initial recognition,
as financial assets measured at fair value or as financial assets measured at amortised cost.
Financial Assets - Subsequent Measurement:
For the purpose of subsequent measurement, financial assets are classified in two broad categories:-
a) Financial assets at fair value
b) Financial assets at amortised cost
Where assets are measured at fair value, gains and losses are either recognised entirely in the statement of profit and loss (i.e. fair value through profit
or loss), or recognised in other comprehensive income (i.e. fair value through other comprehensive income).
A financial asset that meets the following two conditions is measured at amortised cost (net of any write down for impairment) unless the asset is
designated at fair value through profit or loss under the fair value option.
a) Business model test: The objective of the Company's business model is to hold the financial asset to collect the contractual cash flow.
b) Cash flow characteristics test: The contractual terms of the financial asset give rise on specified dates to cash flow that are solely payments of
principal and interest on the principal amount outstanding.
A financial asset that meets the following two conditions is measured at fair value through other comprehensive income unless the asset is designated
at fair value through profit or loss under the fair value option.
a) Business model test: The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flow and
selling financial assets.
b) Cash flow characteristics test: The contractual terms of the financial asset give rise on specified dates to cash flow that are solely payments of
principal and interest on the principal amount outstanding.
All other financial asset is measured at fair value through profit or loss.
Financial Assets - Equity Investment in Subsidiary:
The Company has accounted for its equity investment in subsidiary at cost.
Financial Assets - Derecognition
A financial assets (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed
from the Company's statement of financial position) when:
a) The rights to receive cash flows from the asset have expired, or
b) The Company has transferred its rights to receive cash flow from the asset.
Impairment of Financial Assets
In accordance with Ind AS 109, the Company uses 'Expected Credit Loss' (ECL) model, for evaluating impairment of financial assets other than those
measured at fair value through profit and loss (FVTPL).
Expected credit losses are measured through a loss allowance at an amount equal to:
a) The 12 months expected credit losses (expected credit losses that result from those default events on the financial instrument that are possible within
12 months after the reporting date); or
b) Full lifetime expected credit losses (expected credit losses that result from all possible default events over the life of the financial instrument)
For trade receivables, Company applies 'simplified approach' which requires expected lifetime losses to be recognised from initial recognition of the
receivables. The Company uses historical default rates to determine impairment loss on the portfolio of trade receivables. At every reporting date these
historical default rates are reviewed and changes in the forward looking estimates are analysed.
For other assets, the Company uses 12 month ECL to provide for impairment loss where there is no significant increase in credit risk. If there is
significant increase in credit risk full lifetime ECL is used.
II) Financial Liabilities - Initial Recognition and Measurement:
The financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction
costs.
Financial Liabilities - Subsequent Measurement:
Financial liabilities are subsequently carried at amortised cost using the effective interest method. For trade and other payables maturing within one year
from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
Financial Liabilities - Financial Guarantee Contracts:
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs
because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are
recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently,
the liability is measured at the higher of the amount of loss allowance determined and the amount recognised less cumulative amortisation.
Financial Liabilities - Derecognition:
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is
replaced by another, from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an
exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective
carrying amounts is recognised in the statement of profit and loss.
III) Derivative Financial Instruments
The Company uses various derivative financial instruments such as interest rate swaps, currency swaps, forwards and options to mitigate the risk of
changes in interest rates and exchange rates. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative
contract is entered into and are also subsequently measured at fair value. Derivatives are carried as financial assets when the fair value is positive and
as financial liabilities when the fair value is negative. Any gains or losses arising from changes in the fair value of derivatives are taken directly to the
statement of profit and loss.
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