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.
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 and retirement
benefit obligations 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
including Discounted Cash Flow Model. 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.
(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. Capital work in progress includes cost of assets at sites, construction expenditure and interest on
the funds deployed less any impairment loss, if any.
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 service it. All other repair and maintenance costs,
including regular servicing, 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 having 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. 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. For this purpose, cost includes deemed cost which represents the
carrying value of intangible assets recognised as at April 1, 2015 measured as per the previous Generally
Accepted Accounting Principles (GAAP). Intangible assets subsequently purchased are measured at cost as at
the date of acquisition, as applicable, less accumulated amortisation and accumulated impairment, if any. 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 on property, plant and equipment and investment property is calculated on Straight Line Method
using the rates arrived at based on the estimated useful lives given in Schedule II of the Companies Act, 2013.
Assets value up to ' 5,000 are fully depreciated in the year of acquisition. Intangible assets are amortized over
their respective individual estimated useful lives on a straight-line basis, from the date that they are available
for use. Depreciation on property, plant and equipment and investment property commences from the dates
the assets are available for their intended use and are spread over their estimated useful economic lives.
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.
The estimated useful lives of assets and residual values are reviewed at each reporting date and, when
necessary, are revised. If significant parts of an item of property, plant and equipment have different useful
lives, then they are accounted for as a separate item (major components) of property, plant and equipment.
(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 unless the asset is carried at a revalued amount, in which case, the
reversal is treated as a revaluation increase.
(k) Borrowing 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. The difference between the carrying amount of a borrowings
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 statement of profit and loss as other gains/
(losses). 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.
(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 serv'ce
is prov'ded. 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 serv'ce prov'ded by the employee and the
obligation can be estimated reliably.
Post-Employment Benefits
(i) Defined Contribution Plan
Retirement benefit in the form of provdent fund,pension scheme and employee state insurance are
defined contribution schemes. The Company makes specified monthly contributions towards Government
administered provdent 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 servces
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 serv'ce 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, hav'ng 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) and the return on plan assets (excluding interest)), 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 serv'ce 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:
• serv'ce cost (including current serv'ce cost, past serv'ce 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 incentives including, but
not limited to 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.
The Company is engaged in the business of manufacturing & sales of Nonwoven Fabric Products of various
dimensions and grades.
Export incentives are recognized when there is reasonable assurance that the Company will comply with the
conditions and the incentives will be received.
(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.
Claim on insurance companies where quantum of accrual cannot be ascertained with reassurance certainty, are
accounted for on acceptance basis.
(p) Trade receivables
Trade receivables are amounts due from customers for goods sold or services 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) Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Company
has received consideration (or an amount of consideration is due) from the customer. If a customer pays
consideration before the Company transfers goods or services to the customer, a contract liability is recognised
when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as
revenue when the company performs under the contract.
(r) Inventories
Inventories are measured at lower of cost and net realisable value after providing 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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