3 Material accounting policies information
A. Basis of preparation of standalone
financial statements:
The standalone financial statements of the
Company have been prepared in accordance
with Indian Accounting Standards (Ind AS)
specified under Section 133 of the Companies
Act, 2013 ("Act") read with the Companies (Indian
Accounting Standards) Rules, 2015 (as amended
from time to time) and guidelines issued by the
Security Exchange Boards of India.
The standalone financial statements have been
prepared under the historical cost convention and
amortised costs basis except for certain financial
assets and liabilities which are measured at fair
value. 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.
The standalone financial statements of the
Company are presented in Indian Rupees (B),
which is also its functional currency and all
amounts disclosed in the financial statements
and notes have been rounded off to the nearest
two decimals in Crores as per the requirement of
Schedule III to the Act, unless otherwise stated.
All assets and liabilities have been classified as
current or non-current as per the Company's
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 realisation 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 Company has prepared the standalone
financial statements on the basis that it will
continue to operate as a going concern.
B. Overall considerations
The standalone financial statements have been
prepared using the material accounting policies
and measurement basis summarized below.
These accounting policies have been used
throughout all periods presented in the standalone
financial statements.
a. Current versus non-current classification
The Company presents assets and liabilities
in the balance sheet based on current / non¬
current classification.
An asset/liability is treated as current when it is:
• Expected to be realised or intended to
be sold or consumed or settled in normal
operating cycle
• Held primarily for the purpose of trading
• Expected to be realised/settled
within twelve months after the
reporting period, or
• Cash or cash equivalent unless restricted
from being exchanged or used to settle
a liability for at least twelve months after
the reporting period
• There is no unconditional right to defer
the settlement of the liability for at least
twelve months after the reporting period.
All other assets and liabilities are classified as
non-current.
Deferred tax assets and liabilities are
classified as non-current assets and liabilities
respectively.
b. Revenue recognition
Revenue is recognised at an amount that
reflects the consideration to which the
Company expects to be entitled in exchange
for transferring goods or services to a
customer. The Company recognises revenue
at the point in time, when control of the asset
is transferred to the customer depending
upon the terms of sale with the customers.
When either party to a contract has
performed, an entity shall present the
contract in the balance sheet as a contract
asset or a contract liability, depending on the
relationship between the entity's performance
and the customer's payment.
When either party to a contract has
performed, an entity shall present the
contract in the balance sheet as a contract
asset or a contract liability, depending on the
relationship between the entity's performance
and the customer's payment.
Revenue includes only the gross inflows of
economic benefits, received and receivable
by the Company, on its own account.
Amounts collected on behalf of third parties
such as goods and service tax is excluded
from revenue.
Interest income and dividend:
Interest income is recognised using effective
interest method.
Dividend income is recognised when the
right to receive payment is established.
Export benefits:
The Company recognises income from
duty drawback and export benefit on an
accrual basis.
c. Inventories
Raw materials, work-in-progress, finished
goods, packing materials, stores and spares,
stock-in-trade and other products are carried
at the lower of cost and net realizable value.
In determining the cost of raw materials,
packing materials, stock-in-trade, stores
and spares and other products, weighted
average cost method is used. Cost of
inventory comprises all costs of purchase,
duties, taxes (other than those subsequently
recoverable from tax authorities) and all other
costs incurred in bringing the inventory to
their present location and condition.
Cost of finished goods and work-in-progress
includes the cost of raw materials, packi ng
materials, an appropriate share of fixed and
variable production overheads and other
costs incurred in bringing the inventories to
their present location and condition.
d. Property, plant and equipment
Measurement and recognition
An item of property, plant and equipment
that qualifies as an asset is measured on
initial recognition at cost. Following initial
recognition, items of property, plant and
equipment are carried at its cost less
accumulated depreciation and accumulated
impairment losses.
The Company identifies and determines cost
of each part of an item of property, plant and
equipment separately, if the part has a cost
which is significant to the total cost of that
item of property, plant and equipment and
has useful life that is materially different from
that of the remaining item.
The cost of an item of property, plant and
equipment comprises of its purchase price
including import duties and other non¬
refundable purchase taxes or levies, directly
attributable cost of bringing the asset to its
working condition for its intended use and
the initial estimate of decommissioning,
restoration and similar liabilities, if any. Any
trade discounts and rebates are deducted
in arriving at the purchase price. Cost
includes cost of replacing a part of a plant
and equipment if the recognition criteria are
met. Expenses directly attributable to new
manufacturing facility during its construction
period are capitalised if the recognition
criteria are met. Expenditure related to plans,
designs and drawings of buildings or plant
and machinery is capitalised under relevant
heads of property, plant and equipment if the
recognition criteria are met.
Items such as spare parts, stand-by
equipment and servicing equipment that meet
the definition of property, plant and equipment
are capitalised at cost and depreciated over
their useful life. Costs in nature of repairs and
maintenance are recognised in the Statement
of Profit and Loss as and when incurred.
Capital work-in-progress and
capital advances
Capital work in progress includes
construction stores including material /
equipment / services, etc. received at site
for use in the projects. All revenue expenses
incurred during construction period, which
are exclusively attributable to acquisition /
construction of fixed assets, are capitalised
at the time of commissioning of such assets.
Cost of assets not ready for intended use,
as on the Balance Sheet date, is shown as
capital work in progress.
Advances given towards acquisition of
property, plant and equipment outstanding
at each Balance Sheet date are disclosed as
per requirement of Schedule III.
Depreciation
Depreciation on each part of an item of
property, plant and equipment is provided
using the Straight Line Method (SLM) based
on the useful life of the asset as estimated
by the management and is charged to the
Statement of Profit and Loss as per the
requirement of Schedule II of the Companies
Act, 2013 except on some assets, where
useful life has been taken based on external /
internal technical evaluation as given below:
Freehold land is not depreciated. Leasehold
improvements are amortised over the period
of the lease or the useful life of the asset,
whichever is lower.
The useful lives, residual values of each part
of an item of property, plant and equipment
and the depreciation methods are reviewed at
the end of each financial year. If any of these
expectations differ from previous estimates,
such change is accounted for as a change in
an accounting estimate.
De-recognition
An item of property, plant and equipment
and any significant part initially recognised
is de-recognised upon disposal or when no
future economic benefits are expected from
its use or disposal. Any gain or loss arising
on de-recognition of the asset (calculated
as the difference between the net disposal
proceeds and the carrying amount of the
asset) is included in the statement of profit
and loss when the asset is derecognised.
e. Intangible assets
Measurement and recognition
Intangible assets acquired separately are
measured on initial recognition at cost.
Following initial recognition, intangible
assets are carried at cost less accumulated
amortisation and accumulated impairment
loss, if any.
Amortisation
Intangible assets with finite lives are amortised
on a Straight Line basis over the estimated
useful economic life. The amortisation
expense on intangible assets with finite lives
is recognised in the Statement of Profit and
Loss. The amortisation period and method for
an intangible asset is reviewed at least at the
end of each reporting period.
Costs relating to computer software are
capitalised and amortised on straight
line method over their estimated useful
economic life.
De-recognition
The carrying amount of an intangible asset is
derecognised on disposal or when no future
economic benefits are expected from its use
or disposal. The gain or loss arising from
the de-recognition of an intangible asset is
measured as the difference between the net
disposal proceeds and the carrying amount
of the intangible asset and is recognised in
the Statement of Profit and Loss when the
asset is derecognised.
f. Research and development costs
Expenditure on research is recognised as an
expense when it is incurred. Expenditure on
development which does not meet the criteria
for recognition as an intangible asset is
recognised as an expense when it is incurred.
Items of property, plant and equipment
utilized for research and development are
capitalised and depreciated in accordance
with the policies stated for Property, Plant and
Equipment.
g. Borrowing costs
Borrowing cost includes interest, amortisation
of ancillary costs incurred in connection with
the arrangement of borrowings and exchange
differences arising from foreign currency
borrowings to the extent they are regarded as
an adjustment to the interest cost.
Borrowing costs, if any, directly attributable to
the acquisition, construction or production of
an asset that necessarily takes a substantial
period of time to get ready for its intended
use or sale are capitalised, if any. All other
borrowing costs are expensed in the period
in which they occur.
h. Foreign currency transactions
Initial recognition:
On initial recognition, transactions in foreign
currencies entered into by the Company
are recorded in the functional currency
(i.e. Indian Rupees), by applying to the
foreign currency amount, the spot exchange
rate between the functional currency and
the foreign currency at the date of the
transaction. Exchange differences arising on
foreign exchange transactions settled during
the year are recognised in the Statement of
Profit and Loss.
Measurement of foreign currency items at
reporting date:
Foreign currency monetary items of the
Company are translated at the closing
exchange rates. Non-monetary items that
are measured at historical cost in a foreign
currency, are translated using the exchange
rate at the date of the transaction. Non¬
monetary items that are measured at fair
value in a foreign currency, are translated
using the exchange rates at the date when
the fair value is measured.
Exchange differences arising out of these
translations are recognised in the Statement
of Profit and Loss.
i. Government grants
Government grants are recognised where
there is reasonable assurance that the grant
will be received and all attached conditions
will be complied with.
When the grant relates to an asset, the cost
of the asset is shown at gross value and grant
thereon is treated as capital grant which is
recognised as income in statement of profit
and loss over the period and in proportion in
which depreciation is charged.
When the grant relates to an expense item,
it is recognised as income on a systematic
basis over the periods that the related costs,
for which it is intended to compensate,
are expensed.
When the Company receives grants of non¬
monetary assets, the asset and the grant are
recorded at fair value amounts and released
to profit or loss over the expected useful life in
a pattern of consumption of the benefit of the
underlying asset.
When loans or similar assistance are provided
by governments or related institutions, with
an interest rate below the current applicable
market rate, the effect of this favorable interest
is regarded as a government grant. The loan
or assistance is initially recognised and
measured at fair value and the government
grant (deferred income) is measured as the
difference between the initial carrying value
of the loan and the proceeds received.
The loan is subsequently measured as
per the accounting policy applicable to
financial liabilities. The loan or assistance is
subsequently recognised in the statement of
profit and loss on a straight line basis over the
period of loan.
j. Taxes on income
Tax expense is the aggregate amount
included in the determination of profit or loss
for the period in respect of current tax and
deferred tax.
Current tax
Current tax is measured at the amount
expected to be paid/ recovered to/from the
taxation authorities. The tax rates and tax
laws used to compute the amount are those
that are enacted or substantively enacted, at
the reporting date.
Current income tax relating to items
recognised directly in equity/other
comprehensive income is recognised under
the respective head and not in the statement
of profit and loss. Management periodically
evaluates positions taken in the tax returns
with respect to situations in which applicable
tax regulations are subject to interpretation
and establishes provisions where appropriate.
Current tax assets are offset against current tax
liabilities if, and only if, a legally enforceable
right exists to set off the recognised amounts
and there is an intention either to settle on a
net basis, or to realise the asset and settle the
liability simultaneously.
Deferred tax
Deferred tax is provided using the liability
method on temporary differences between
the tax bases of assets and liabilities and
their carrying amounts for financial reporting
purposes at the reporting date.
Deferred tax assets are recognised for
all deductible temporary differences, the
carry forward of unused tax credits and any
unused tax losses. Deferred tax assets are
recognised to the extent that it is probable
that taxable profit will be available against
which the deductible temporary differences,
and the carry forward of unused tax credits
and unused tax losses can be utilised.
Deferred tax assets and liabilities are
measured at the tax rates that are expected
to apply to the period when the asset is
realized or the liability is settled, based on tax
rates (and tax laws) that have been enacted
or substantively enacted at the balance sheet
date. Tax relating to items recognised directly
in equity/other comprehensive income is
recognised in respective head and not in the
statement of profit & loss.
The carrying amount of deferred tax assets
is reviewed at each balance sheet date and
is adjusted to the extent that it is no longer
probable that sufficient taxable profit will be
available to allow all or part of the asset to
be recovered.
Deferred tax assets and deferred tax liabilities
are offset if a legally enforceable right exists
to set off current tax assets against current
tax liabilities and the deferred taxes relate
to the same taxable entity and the same
taxation authority.
k. Employee benefits
Short term employee benefits:
All employee benefits payable wholly within
twelve months of rendering the service are
classified as short term employee benefits
and they are recognised in the period in which
the employee renders the related service.
The Company recognises the undiscounted
amount of short term employee benefits
expected to be paid in exchange for services
rendered as a liability (accrued expense)
after deducting any amount already paid.
Post-employment benefits:
I. Defined contribution plans:
The Company makes payments made
to defined contribution plans such
as provident fund and employees'
state insurance. The Company has
no further payment obligations once
the contributions have been paid.
The contributions are accounted for
as defined contribution plans and
the contributions are recognised as
employee benefit expense when they
are due. Prepaid contributions are
recognised as an asset to the extent that
a cash refund or a reduction in the future
payments is available.
II. Defined benefit plans:
The liability or asset recognised in the
balance sheet in respect of defined
benefit gratuity plans is the present
value of the defined benefit obligation
at the end of the reporting period less
the fair value of plan assets. The defined
benefit obligation is calculated annually
by actuaries using the projected unit
credit method. The net interest cost is
calculated by applying the discount
rate to the net balance of the defined
benefit obligation and the fair value
of plan assets. This cost is included
in employee benefit expense in the
statement of profit and loss.
Re-measurement gains and losses
arising from experience adjustments and
changes in actuarial assumptions are
recognised in the period in which they
occur, directly in other comprehensive
income. They are included in retained
earnings in the statement of changes in
equity and in the balance sheet.
Changes in the present value of the
defined benefit obligation resulting from
plan amendments or curtailments are
recognised immediately in profit or loss
as past service cost.
Other long-term employee benefits:
Other long-term employee benefits are
recognised as an expense in the Statement of
Profit and Loss as and when they accrue. The
Company determines the liability using the
Projected Unit Credit Method, with actuarial
valuations carried out as at the balance sheet
date. Actuarial gains and losses in respect of
such benefits are charged to the Statement of
Profit and Loss.
l. Share-based payments
The fair value of options granted under
Employee Stock Option Plan is recognised
as an employee benefits expense with a
corresponding increase in equity. The total
amount to be expensed is determined by
reference to the fair value of the options. The
total expense is recognised over the vesting
period, which is the period over which all of
the specified vesting conditions are to be
satisfied. At the end of each period, the entity
revises its estimates of the number of options
that are expected to vest based on the
non-market vesting and service conditions.
It recognises the impact of the revision
to original estimates, if any, in statement
of profit and loss, with a corresponding
adjustment to equity.
m. Leases
The Company as a lessee
The Company's lease asset classes primarily
consist of property leases. The Company
assesses whether a contract contains a
lease, at inception of a contract. 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
consideration. To assess whether a contract
conveys the right to control the use of an
identified asset, the Company assesses
whether: (i) the contract involves the use
of an identified asset (ii) the Company has
substantially all of the economic benefits
from use of the asset through the period of
the lease and (iii) the Company has the right
to direct the use of the asset.
At the date of commencement of the lease,
the Company recognizes a right-of-use asset
(“ROU”) and a corresponding lease liability
for all lease arrangements in which it is a
lessee, except for leases with a term of twelve
months or less (short-term leases) and low
value leases. For these short-term and low
value leases, the Company recognizes the
lease payments as an operating expense on
a straight-line basis over the term of the lease.
Certain lease arrangements include the
options to extend or terminate the lease
before the end of the lease term. ROU assets
and lease liabilities includes these options
when it is reasonably certain that they will
be exercised.
The right-of-use assets are initially recognized at
cost, which comprises the initial amount of the
lease liability adjusted for any lease payments
made at or prior to the commencement date of the
lease plus any initial direct costs less any lease
incentives. They are subsequently measured
at cost less accumulated depreciation and
impairment losses.
Right-of-use assets are depreciated from the
commencement date on a straight-line basis over
the shorter of the lease term and useful life of the
underlying asset.
The lease liability is initially measured at amortized
cost at the present value of the future lease
payments. The lease payments are discounted
using the interest rate implicit in the lease or, if
not readily determinable, using the incremental
borrowing rates in the country of domicile of these
leases. Lease liabilities are re-measured with a
corresponding adjustment to the related right of
use asset if the Company changes its assessment
if whether it will exercise an extension or a
termination option.
The Company as a lessor
Leases for which the Company is a lessor is
classified as a finance or operating lease. Whenever
the terms of the lease transfer substantially all the
risks and rewards of ownership to the lessee, the
contract is classified as a finance lease. All other
leases are classified as operating leases.
When the Company is an intermediate lessor, it
accounts for its interests in the head lease and the
sublease separately. The sublease is classified as
a finance or operating lease by reference to the
right-of-use asset arising from the head lease.
For operating leases, rental income is recognized
on a straight-line basis over the term of the
relevant lease.
n. Segment reporting
Operating segments are reported in a
manner consistent with the internal reporting
provided to the Chief Operating Decision
Maker (CODM) of the Company. The CODM
is responsible for allocating resources and
assessing performance of the operating
segments of the Company.
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