2 SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Preparation
These financial statements have been prepared
in accordance with the Generally Accepted
Accounting Principles in India ('Indian GAAP') to
comply with the Accounting Standards specified
under Section 133 of the Companies Act, 2013,
as applicable. The financial statements have been
prepared under the historical cost convention on
accrual basis.
b. Use of Estimates
The preparation of financial statements in
conformity with Indian GAAP requires judgments,
estimates and assumptions to be made that affect
the reported amount of assets and liabilities,
disclosure of contingent liabilities on the date of
the financial statement and the reported amount
of revenues and expenses during the reporting
period.
Difference between the actual results and
estimates are recognized in the period in which the
results are known/materialized.
c. Accounting Convention
The company follows the mercantile system of
accounting, recognizing income and expenditure
on accrual basis. The accounts are prepared
on historical cost basis and as a going concern.
Accounting policies not referred to specifically
otherwise, are consistent with the generally
accepted accounting principles. The accounting
Policies adopted in the preparation of the financial
statements are consistent with those followed in
the previous year.
d. Property, Plant and Equipment
Property, Plant and Equipment are stated at cost,
less accumulated depreciation / amortisation.
Costs include all expenses incurred to bring the
asset to its present location and condition.
Costs directly attributable to acquisition
are capitalised until the property, plant and
equipment are ready for use, as intended by the
management. Cost comprises the purchase price
and any attributable cost of bringing the asset to
its working condition for its intended use.
Input tax credit of GST, Grants on capital goods
are accounted for by reducing the cost of Capital
Goods. Subsequent expenditures relating to
property, plant and equipment are capitalised only
when it is probable that future economic benefits
associated with them will flow to the Company
and the cost of the expenditure can be measured
reliably.
When assets are disposed or retired, their cost is
removed from the financial statements. The gain
or loss arising on the disposal or retirement of an
asset is determined as the difference between
sales proceeds and the carrying amount of the
asset and is recognized in Statement of Profit and
Loss for the relevant financial year.
Repairs and Maintenance costs are recognised in
the Statement of Profit and Loss when they are
incurred.
e. Intangible assets
Intangible assets purchased are initially measured
at cost. The cost of an intangible asset comprise
its purchase price including any costs directly
attributable to making the asset ready for their
intended use.
f. Depreciation and amortization
Depreciation has been provided on the Fixed Asset
on the Straight Line method and in accordance
with the useful life of the Asset as prescribed
under Schedule II of the Companies Act, 2013.
Depreciation for assets purchased/sold during the
period is proportionately charged. Depreciation
method, useful life & residual value are reviewed
periodically.
The useful life of the Assets has been taken as
below;
g. Impairment of assets
At each balance sheet date, the management
reviews the carrying amounts of its assets
included in each cash generating unit to determine
whether there is any indication that those assets
were impaired. If any such indication exists, the
recoverable amount of the asset is estimated in
order to determine the extent of impairment.
Recoverable amount is the higher of an asset's
net selling price and value in use. In assessing
value in use, the estimated future cash flows
expected from the continuing use of the asset and
from its disposal are discounted to their present
value using a pre-tax discount rate that reflects
the current market assessments of time value of
money and the risks specific to the asset.
Reversal of impairment loss is recognised as income
in the statement of profit and loss. An impairment
loss is charged off to profit and loss account as
and when asset is identified for impairment.
h. Leases
Assets taken on lease by the Company in its
capacity as lessee, where the Company has
substantially all the risks and rewards of ownership
are classified as finance lease. Such a lease is
capitalised at the inception of the lease at lower of
the fair value or the present value of the minimum
lease payments and a liability is recognised for
an equivalent amount. Each lease rental paid is
allocated between the liability and the interest
cost so as to obtain a constant periodic rate of
interest on the outstanding liability for each year.
Lease arrangements where the risks and rewards
incidental to ownership of an asset substantially
vest with the lessor, are recognised as operating
leases. Lease rentals under operating leases are
recognised in the statement of profit and loss on a
straight-line basis.
i. Investment
Long-term investments and current maturities
of long-term investments are stated at cost, less
provision for other than temporary diminution in
value. Current investments, except for current
maturities of long-term investments, comprising
investments in shares,etc are stated at the lower
of cost and fair value.
Investment which are readily realizable and
intended to be held for not more than one year
from the date on which such investments are
made, are classified as current investments. All
other investments are classified as non-current
investments.
On initial recognition, all investments are measured
at cost. The cost comprises purchase price and
directly attributable acquisition charges such as
brokerage, fees and duties.
j. Inventories
Raw materials are carried at the lower of cost and
net realisable value. Cost is determined on a first-
in-first-out basis. Work-in-progress is carried at
the lower of cost and net realisable value. Stores
and spare parts are carried at lower of cost and
net realisable value. Finished goods produced or
purchased by the Company are carried at lower
of cost and net realisable value. Cost includes
direct material and labour cost and a proportion of
manufacturing overheads.
Cost of Finished Goods and semi-finished goods
includes all Costs of Purchases, Conversion Cost
and other cost Incurred in bringing the inventories
to their present location and Condition. The Net
realizable value is estimated selling price in the
ordinary course of business less the estimated
costs of Completion and estimated cost necessary
to make the finished goods/product ready for
sale.
k. Cash and cash equivalents
The Company considers all highly liquid financial
instruments, which are readily convertible into
known amount of cash that are subject to an
insignificant risk of change in value and having
original maturities of three months or less from
the date of purchase, to be cash equivalents.
l. Cash Flow Statement
Cash flows are reported using the indirect method,
whereby profit before tax is adjusted for the
effects of transactions of a non- cash nature, any
deferrals or accruals of past or future operating
cash receipts or payments and item of income or
expenses associated with investing or financing
cash flows. The cash flows from operating,
investing and financing activities are segregated.
m. Revenue recognition
Revenue is recognized to the extent that it is
probable that the economic benefits will flow to
the Company and the revenue can be reliably
measured. Revenue is reported net of discounts.
Sale of goods
Revenue is recognized when the significant risks
and rewards of ownership of the goods have been
passed to the buyer. Sales are disclosed net of
GST, trade discounts and returns, as applicable.
Income from services
Revenue from services is recognized when
services have been rendered and there should
be no uncertainty regarding consideration and its
ultimate collection.
Other income
Dividend is recorded when the right
to receive payment is established.
Interest income is recognised on time
proportion basis taking into account the
amount outstanding and the rate applicable.
All other income is recognised on accrual basis.
n. Employee Benefits
Post-employment benefit plans
Contributions to defined contribution retirement
benefit schemes are recognised as expense when
employees have rendered services entitling them
to such benefits.
For defined benefit schemes (i.e. gratuity), the
cost of providing benefits is determined using
the Projected Unit Credit Method, with actuarial
valuations being carried out at each balance sheet
date. Actuarial gains and losses are recognised
in full in the statement of profit and loss for the
period in which they occur. Past service cost is
recognised immediately to the extent that the
benefits are already vested, or amortised on a
straight-line basis over the average period until
the benefits become vested.
The retirement benefit obligation recognised in
the balance sheet represents the present value
of the defined benefit obligation as adjusted for
unrecognised past service cost.
Other employee benefits
The undiscounted amount of short-term employee
benefits expected to be paid in exchange for the
services rendered by employees is recognised
during the period when the employee renders the
service.
Others
All short term employee benefits are accounted
on undiscounted basis during the accounting
period based on services rendered by employees.
The Company's contribution to Provident Fund is
charged to the Statement of Profit and Loss on
accrual basis. The Company's obligation is limited
to the amount to be contributed by it.
Borrowing Cost
Borrowing costs that are directly attributable to
the acquisition or construction of qualifying assets
are capitalized as part of the cost of such assets
till such time the asset is ready for its intended
use. A qualifying asset is one that necessarily
takes substantial period of time to get ready for
intended use. Costs incurred in raising funds are
amortized equally over the period for which the
funds are acquired. All other borrowing costs are
charged to profit and loss account.
Borrowing costs, allocated to and utilised for
qualifying assets, pertaining to the period
from commencement of activities relating to
construction / development of the qualifying
asset upto the date of capitalisation of such asset
is added to the cost of the assets. Capitalisation
of borrowing costs is suspended and charged to
the Statement of Profit and Loss during extended
periods when active development activity on the
qualifying assets is interrupted.
p. Foreign currency transactions
Income and expense in foreign currencies are
converted at exchange rates prevailing on the date
of the transaction. Foreign currency monetary
assets and liabilities are translated at the exchange
rate prevailing on the balance sheet date and
exchange gains and losses are recognised in the
statement of profit and loss.
Exchange differences arising on the settlement of
monetary items at rates different from those at
which they are initially recorded during the year
or reported in previous financial statement are
recognized as income or as expenses at the end of
year by applying closing rate.
q. Taxation
The accounting treatment for the Income Tax in
respect of the Company's income is based on the
Accounting Standard on 'Accounting for Taxes on
Income' (AS-22). The provision made for Income
Tax in Accounts comprises both, the current tax
and deferred tax.
Provision for Current Tax is made on the
assessable Income Tax rate applicable to the
relevant assessment year after considering various
deductions available under the Income Tax Act,
1961.
Deferred tax expense or benefit is recognised on
timing differences being the difference between
taxable income and accounting income that
originate in one period and is likely to reverse in
one or more subsequent periods. Deferred tax
assets and liabilities are measured using the tax
rates and tax laws that have been enacted or
substantively enacted by the balance sheet date.
The carrying amount of deferred tax asset/liability
is reviewed at each Balance Sheet date and
consequential adjustments are carried out.
Advance taxes and provisions for current income
taxes are presented in the balance sheet after off¬
setting advance tax paid and income tax provision
arising in the same tax jurisdiction for relevant tax
paying units and where the Company is able to
and intends to settle the asset and liability on a
net basis.
The Company offsets deferred tax assets and
deferred tax liabilities if it has a legally enforceable
right and these relate to taxes on income levied by
the same governing taxation laws.
r. Segment accounting
The company is operating only one business
segment viz different types of PVC and plastic
products. Further, the company primarily operates
in India. Therefore, no further information required
to disclose as per “Accounting Standard 17-
Segment Reporting".
s. Government Grants
Government Grants are recognized when there
is reasonable assurance that the company will
comply with the conditions attached to them and
the grants will be received.
Government grants whose primary conditions that
company should purchase, construct or otherwise
acquired capital assets are presented by deducting
them from carrying value of assets.
Grants related to the revenue are adjusted against
expenses to the extent there is certainty to
receive.
t. Earnings Per Shares
Basic earning per share is computed by dividing
the net profit or loss for the period attributable
to equity shareholders by the weighted average
number of equity shares outstanding during the
period. Diluted earning per share is computed by
taking into account the weighted average number
of equity shares outstanding during the period and
the weighted average number of equity shares
which would be issued on conversion of all dilutive
potential equity shares into equity shares.
In case of bonus issue the weighted average
number of equity shares outstanding during the
period and for all periods presented should be
adjusted for events, other than the conversion of
potential equity shares, that have changed the
number of equity shares outstanding, without a
corresponding change in resources.
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