2 Summary of Material Accounting Policies
The Company has consistently applied the following accounting policies to all periods presented in the standalone
financial statements.
(a) Basis of preparation
The standalone financial statements have been prepared on a historical cost basis except certain items that are
measured at fair value as explained in accounting policies.
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, regardless of whether that price is directly observable
or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the
Company takes into account the characteristics of the asset or liability, if market participants would take
those characteristics into account when pricing the asset or liability at the measurement date. Fair value for
measurement and/or disclosure purposes in these financial statements is determined on such a basis, except
for leasing transactions that are within the scope of Ind AS 116 Leases, and measurements that have some
similarities to fair value but are not fair value, such as net realisable value in Ind AS 2 Inventories or value in
use in Ind AS 36 Impairment of Assets.
All assets and liabilities have been classified as current and non-current as per the Company's normal operating
cycle which is based on the nature of businesses and the time elapsed between deployment of resources and
the realisation of cash and cash equivalents. The Company has considered an operating cycle of 12 months.
These standalone financial statements are presented in Indian National Rupee (''), which is the Company's
functional currency. All amounts have been rounded to the nearest Lakhs, except when otherwise indicated.
(b) use of estimates and critical accounting judgements
In the preparation of standalone financial statements, the Company makes judgements in the application of
accounting policies; and estimates and assumptions which affects carrying values of assets and liabilities that
are not readily apparent from other sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is revised and future periods affected.
Key source of estimation of uncertainty at the date of standalone financial statements, which may cause
material adjustment to the carrying amounts of assets and liabilities within the next financial year, is in respect
of impairment, useful lives of property, plant and equipment and intangible assets, valuation of deferred tax
assets, provisions and contingent liabilities, fair value measurements of financial instruments, retirement
benefit obligations, classification of lease and allowances for expected credit loss as disclosed below:
- Useful lives of property, plant and equipment and intangible assets
The Company has estimated the useful life if each class of assets based on the nature of assets, the
estimated usage of the asset, the operating condition of the asset, past history of replacement, anticipated
technological changes, etc. The Company reviews the useful life of property, plant and equipment
and intangible assets at the end of each reporting period. This reassessment may result in change in
depreciation and amortisation expense in future periods.
- Impairment
An impairment loss is recognised for the amount by which an asset's or cash-generating unit's carrying
amount exceeds its recoverable amount to determine the recoverable amount, management estimates
expected future cash flows from each asset or cash generating unit and determines a suitable interest
rate in order to calculate the present value of those cash flows. In the process of measuring the Company
estimates the value in use of the cash generating unit (CGU) based on future cash flows after considering
current economic conditions and trends, estimated future operating results and growth rates and
anticipated future economic and regulatory conditions. The estimated cash flows are developed using
internal forecasts. The cash flows are discounted using a suitable discount rate in order to calculate the
present value.
- Valuation of current tax and deferred tax assets
The tax jurisdictions for the Company is India. Significant judgments are involved in determining the
provision for income taxes including judgment on whether tax positions are probable of being sustained
in tax assessments. A tax assessment can involve complex issues, which can only be resolved over
extended time periods. The recognition of current and deferred taxes that are subject to certain legal
or economic limits or uncertainties is assessed individually by management based on the specific facts
and circumstances. The Company reviews the carrying amount of deferred tax assets at the end of each
reporting period.
- provisions and contingent liabilities
A provision is recognised when the Company has a present obligation as result of a past event and it
is probable that the outflow of resources will be required to settle the obligation, in respect of which a
reliable estimate can be made. These are reviewed at each balance sheet date and adjusted to reflect the
current best estimates. Contingent Liability may arise from the ordinary course of business in relation
to claims against the Company. By their nature, contingencies will be resolved only when one or more
uncertain future events occur or fail to occur. The assessment of the existence, and potential quantum, of
contingencies inherently involves the exercise of significantjudgments and the use of estimates regarding
the outcome of future events. Contingent liabilities are not recognised in the standalone financial
statements.
- Fair value measurements of financial instruments
When the fair value of financial assets and financial liabilities recorded in the balance sheet cannot
be measured based on quoted prices in active markets, their fair value is measured using valuation
techniques. The inputs to these models are taken from observable markets where possible, but where
this is not feasible, a degree of judgement is required in establishing fair value. Judgements include
considerations of inputs such as liquidity risks, credit risks and volatility. Changes in assumptions about
these factors could affect the reported fair value of financial instruments.
- Retirement benefit obligations
The Company's retirement benefit obligations are subject to number of assumptions including discount
rates, inflation and salary growth. Significant assumptions are required when setting these criteria and
a change in these assumptions would have a significant impact on the amount recorded in the Company's
balance sheet and the statement of profit and loss. The Company sets these assumptions based on previous
experience and third party actuarial advice.
- Classification of Leases
The Company enters into leasing arrangements for various assets. The classification of the leasing
arrangement as a finance lease or operating lease is based on an assessment of several factors, including,
but not limited to, transfer of ownership of leased asset at end of lease term, lessee's option to purchase
and estimated certainty of exercise of such option, proportion of lease term to the assets economic
life, proportion of present value of minimum lease payments to fair value of leased asset and extent of
specialized nature of the leased assets.
- Allowances for expected credit loss
The Company makes provision for expected credit losses through appropriate estimations of irrecoverable
amount. The identification of expected credit loss requires use of judgment and estimates. The Company
evaluates trade receivables ageing and makes a provision for those debts as per the provisioning policy.
Where the expectation is different from the original estimate, such difference will impact the carrying
value of the trade and other receivables and doubtful debts expenses in the period in which such estimate
has been changed.
(c) operating cycle and current versus non-current classification
Based on the nature of goods manufactured and the time between acquisition of assets for processing and their
realisation in cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the
purpose of current/ noncurrent classification of assets and liabilities.
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification. An
asset is treated as current when it is:
- Expected to be realised or intended to be sold or consumed in normal operating cycle;
- Held primarily for the purpose of trading;
- Expected to be realised within twelve months after the reporting period, or
- Cash and cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve
Months after the reporting period.
All other assets/liabilities are classified as non-current.
- A liability is treated as current when:
- It is expected to be settled in normal operating cycle.
- It is held primarily for the purpose of trading
- It is due to be settled within twelve months after the reporting period, or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the
reporting period
All other liabilities are classified as non-current.
Deferred tax liabilities are classified as non-current liabilities.
The operating cycle is the time between the acquisition of the assets for processing and their realisation in cash and
cash equivalents. The Company has identified twelve months as its operating cycle.
(d) property, plant and Equipment
Items of property, plant and equipment are stated at cost less accumulated depreciation and accumulated
impairment loss, if any. For this purpose, cost includes deemed cost which represents the carrying value of property,
plant and equipment recognised as at April 1, 2015 measured as per the previous Generally Accepted Accounting
Principles (GAAP). The cost of assets comprises of purchase price and directly attributable cost of bringing the
assets to working condition for its intended use including borrowing cost attributable to qualifying assets and
incidental expenditure during construction incurred unto the date when the assets are ready to use.
An item of property, plant and equipment is recognised as an asset if it is probable that future economic benefits
associated with the item will flow to the Company and its cost can be measured reliably. This recognition principle
is applied to costs incurred initially to acquire an item of property, plant and equipment and also to costs incurred
subsequently to add to, replace part of, or serv'ce it. All other repair and maintenance costs, including regular
serv'cing, are recognised in the statement of profit and loss as incurred. When a replacement occurs, the carrying
value of the replaced part is derecognised. Where an item of property, plant and equipment comprises major
components hav'ng different useful lives, these components are accounted for as separate items.
The gain or loss arising on disposal of an item of property, plant and equipment is determined as the difference
between sale proceeds and carrying value of such item, and is recognised in the statement of profit and loss.
(e) Capital work-in-progress
Capital work-in-progress representing expenditure incurred in respect of assets under development and not
ready for their intended use, are carried at cost less any impairment loss, if any. Cost includes related acquisition
expenses, construction cost, related borrowing cost and other direct expenditure.
(f) Investment property
Investment property comprises land and buildings held to earn rentals or for capital appreciation. It is measured at
cost less accumulated depreciation and impairment losses, if any. The fair value of investment property is disclosed
in the notes to accounts, as determined by an independent valuer.
(g) Intangible assets (other than goodwill)
Intangible assets (other than goodwill) are stated at cost of acquisition or construction less accumulated
amortisation and impairment, if any. Intangible assets (other than goodwill) subsequently purchased are measured
at cost as at the date of acquisition. The estimated useful life of an identifiable intangible asset is based on a
number of factors including the effects of obsolescence, demand, competition and other economic factors (such
as the stability of the industry and known technological advances) and the level of maintenance expenditures
required to obtain the expected future cash flows from the asset.
(h) Depreciation and amortisation of property, plant and equipment, investment property and intangible assets
Depreciation is calculated using the straight-line method to allocate their cost, net of their residual values,
over their estimated useful lives. The Company, based on technical assessments made by technical experts and
management estimates, depreciates the certain items of tangible assets over estimated useful lives which are
different from the useful life prescribed in Schedule II to the Companies Act, 2013. The management believes that
these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely
to be used. Assets value up to 5,000 are fully depreciated in the year of acquisition. Table below prov'de the details
of the useful lives considered by the management and prescribed under Schedule II of the Companies Act, 2013:
Depreciation methods, useful lives and residual values are reviewed in each financial year end and changes, if any,
are accounted for prospectively.
Based on technical evaluation and consequent advice, the management believes that its estimates of useful lives as
given above best represent the period over which management expects to use these assets.
Intangible assets (other than goodwill) are amortized over their respective individual estimated useful lives
considered upto 5 years, on a straight-line basis, from the date that they are available for use.
Right to use of assets are depreciated on a straight line basis over the shorter of the lease term and the estimated
useful lives of the underlying assets.
(i) Non-current assets (or disposal groups) held for sale
Non-current assets, or disposal groups comprising assets and liabilities, are classified as held-for sale if it is highly
probable that they will be recovered primarily through sale rather than through continuing use.
Such assets, or disposal groups, are generally measured at the lower of their carrying amount and fair value less
costs to sell. An impairment loss is recognised for any initial or subsequent write-down of the asset to fair value less
costs to sell.
Once classified as held-for-sale, intangible assets and property, plant and equipment are no longer amortised or
depreciated. Assets and liabilities held for sale are presented separately in the Balance Sheet.
(j) Impairment of non-financial assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any
indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset's
recoverable amount. An asset's recoverable amount is the higher of an assets or cash-generating unit's (CGU) fair
value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset, unless
the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.
When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and
is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no
such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by
valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.
Impairment losses of continuing operations, including impairment on inventories, are recognised in the statement
of profit and loss.
For assets an assessment is made at each reporting date to determine whether there is an indication that previously
recognised impairment losses no longer exist or have decreased. If such indication exists, the Company estimates
the asset's or CGU's recoverable amount. A previously recognised impairment loss is reversed only if there has been
a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was
recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount,
nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss
been recognised for the asset in prior years. Such reversal is recognised in the statement of profit or loss.
(k) Borrowings and Borrowing Costs
Borrowings are initially recognised at fair value, net of transaction 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 Statement of profit and loss over the period of the borrowings using the effective interest
method. Borrowings are derecognised from the balance sheet when the obligation specified in the contract
is discharged, cancelled or expired. Borrowings are classified as current liabilities unless the Company has an
unconditional right to defer settlement of the liability for at least 12 months after the reporting period.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are
capitalised as part of the cost of such assets up to the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in the statement of profit and loss 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.
Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs..
(l) Foreign currency transactions
The standalone financial statements are presented in Indian Rupees, which is also its functional currency.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Company at functional currency spot rates at the date
the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency closing
rate of exchange at the reporting date.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss
arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the
gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss
is recognised in statement of profit or loss are also recognised in OCI or statement of profit or loss, respectively).
(m) Employee Benefits
Short term employee Benefits
Short-term employee benefits are measured on an undiscounted basis and are expensed as the related service
is provided. A liability is recognised for the amount expected to be paid if the Company has a present legal or
constructive obligation to pay this amount as a result of past service provided by the employee and the obligation
can be estimated reliably.
post-employment Benefits
(i) Defined Contribution plan
Retirement benefit in the form of provident fund,pension scheme and employee state insurance are defined
contribution schemes. The Company makes specified monthly contributions towards Government administered
provident fund scheme. Obligations for contributions to defined contribution plans are recognised as an
employee benefit expense in profit or loss in the periods during which the related services are rendered by
employees.
(ii) defined Benefit plan
The employee Gratuity Fund Scheme managed by a insurer is a defined benefit plan. The present value of
obligation under such defined benefit plan is determined based on actuarial valuation at year end under
the projected unit credit method which recognizes each period of service as giving rise to additional unit
of employees benefits entitlement and measures each unit separately to build up the final obligation. The
obligation is measured at the present value of future cash flows. The discount rates used for determining the
present value of the obligation under defined benefit plans, having maturity periods approximated to the
returns of related obligations. In case of funded plans the fair value of the planned assets is reduced from the
gross obligation under the defined benefit plans to recognize the obligation on net basis.
The effect of the remeasurement changes (comprising actuarial gains and losses) to the asset ceiling (if
applicable), is reflected in the balance sheet with a charge or credit recognised in other comprehensive income
in the period in which they occur. Remeasurement recognised in other comprehensive income is reflected
immediately in other equity and will not be reclassified to the statement of profit and loss. Past service cost is
recognised in the statement of profit and loss in the period of a plan amendment. Net interest is calculated by
applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined
benefit costs are categorised as follows:
• service cost (including current service cost, past service cost, as well as gains and losses on curtailments
and settlements);
• net interest expense or income; and
• remeasurement
The Company presents the first two components of defined benefit costs in the statement of profit and loss in
the line item employee benefits expense.
The retirement benefit obligation recognised in the balance sheet represents the actual deficit or surplus in the
Company's defined benefit plans. Any surplus resulting from this calculation is limited to the present value of
any economic benefits available in the form of refunds from the plans or reductions in future contributions to
the plans.
(iii) Other long-term employee benefits
The Company has long term employment benefit plans i.e. accumulated leave. Accumulated leave is encashed
to eligible employees at the end of each year and cost is accounted for at the time of encashment.
(n) Revenue Recognition
The Company recognizes revenue when it satisfies a performance obligation in accordance with the provisions
of contract with the customer. This is achieved when:
(a) effective control of goods along with significant risks and rewards of ownership has been transferred to
customer and in case of services, the year in which such services are rendered.
(b) the amount of revenue can be measured reliably:
(c) it is probable that the economic benefits associated with the transaction will flow to the Company; and
(d) the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Revenue represents net value of goods sold to customers after deducting for certain discounts, volume rebates,
etc.
The Company considers shipping and handling activities as costs to fulfil the promise to transfer the related
products and the customer payments for shipping and handling costs are recorded as a component of revenue.
Revenue are net of Goods and Service Tax. No element of significant financing is present as the sales are made
with a credit term, which is consistent with market practice.
Export incentives are recognized when there is reasonable assurance that the Company will comply with the
conditions and the incentives will be received.
Income from sale of the scrap is measured at the fair value of the consideration received or receivable.
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If
the Company performs by transferring goods or services to a customer before the customer pays consideration
or before payment is due, a contract asset is recognised for the earned consideration that is conditional.
Contract assets are subject to impairment assessment.
A contract liability is the obligation to transfer goods or services to a customer for which the Company has
received consideration from the customer. Contract liabilities are recognised as revenue when the Company
performs obligations under the contract.
(o) Other Income
Revenue (other than sale) is recognised to the extent that it is probable that the economic benefits will flow to the
company and the revenue can be reliably measured.
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the
Company and the amount of income can be measured reliably. Interest income is accrued on a time proportionate
basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that
exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net
carrying amount on initial recognition.
Dividends are recognised at the time the right to receive payment is established.
Insurance claims where quantum of accrual cannot be ascertained with reasonable certainty, are accounted for on
acceptance basis.
(p) Trade receivables
Trade receivables are amounts due from customers for goods sold or serv'ces performed in the ordinary course of
business. If the receivable is expected to be collected within a period of 12 months or less from the reporting date
(or in the normal operating cycle of the business, if longer), they are classified as current assets otherwise as non¬
current assets.
Trade receivables are measured at their transaction price unless it contains a significant financing component in
accordance with Ind AS 115 for pricing adjustments embedded in the contract.
Expected credit Loss allowance is recognised on initial recognition.
(q) Inventories
Inventories are measured at lower of cost and net realisable value after prov'ding for obsolescence, if any. Cost of
inventories comprises of cost of purchase, cost of conversion and other costs including manufacturing overheads
incurred in bringing them to their respective present location and condition. Cost of raw materials is determined
on FIFO basis and cost of stores, packing materials are determined on weighted average basis.
Further the cost for Work-in-Progress includes material cost, stage wise direct cost and other related manufacturing
overheads.
Non usable wastes are valued at net realizable 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. The net realisable value of work-in-progress is
determined with reference to the selling prices of related finished products.
Materials and other items held for use in the production of inventories are not written down below costs, if finished
goods in which they will be incorporated are expected to be sold at or above cost.
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