1. Material Accounting Policies
This note provides a list of the material accounting policies adopted in the preparation of these standalone financial
statements. These policies have been consistently applied to all the years presented, unless otherwise stated.
(a) Basis of preparation
(i) Compliance with Ind AS
These standalone financial statements of the Company have been prepared in accordance with Indian
Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015
as amended from time to time.
(ii) Historical cost convention
The standalone financial statements have been prepared on a historical cost basis, except for the following :
• Certain financial assets and liabilities that are measured at fair value.
• Defined benefit plans - plan assets measured at fair value.
tiii) Current versus non-current classification
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 realized or intended to be sold or consumed in normal operating cycle.
• Held primarily for the purpose of trading.
• Expected to be realized within twelve months after the reporting period or
• Cash or cash equivalents unless restricted from being exchanged or used to settle a liability for at
least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is 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.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities respectively.
The operating cycle is the time between the acquisition of assets for processing and their realization in
cash and cash equivalents. The Company has identified twelve months as its operating cycle.
(b) Interest Income
Interest income from debt instruments is recognized 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 timely
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.
(c) Dividends
Dividends are recognized in profit or loss only when the right to receive payment is established, it is probable
that the economic benefits associated with the dividend will flow to the company and the amount of the
dividend can be measured reliably.
(d) Taxes
Current tax
Current tax is the amount of tax payable based on the taxable profit for the year as determined in accordance
with the applicable tax rates and the provisions of the Income tax Act, 1961. The management periodically
evaluates positions taken in returns with respect to situations in which applicable tax regulation is subject to
interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to
tax authorities.
Deferred Tax
Deferred tax is provided using the balance sheet approach 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 liabilities are recognized for all taxable temporary differences, except :
• When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss.
• In respect of taxable temporary differences associated with investments in associates, when the timing
of the reversal of the temporary differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax
credits and any unused tax losses. Deferred tax assets are recognized 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 utilized, except :
• When the deferred tax asset relating to the deductible temporary differences arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and at the time of
the transaction, affects neither the accounting profit nor taxable profit or loss.
• In respect of deductible temporary differences associated with investments in associates, deferred tax
assets are recognized only to the extent that it is probable that the temporary differences will reverse in
the foreseeable future and taxable profit will be available against which the temporary differences can
be utilized.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent
that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred
tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at each reporting date and are
recognized to the extent that it has become probable that future taxable profits will allow the deferred tax
asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year 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 reporting date.
Current and deferred taxes are recognized in the statement of profit and loss, except to the extent that it
relates to items recognized in other comprehensive income or directly in equity.
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.
(e) Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at banks and 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 consists of cash and short-term
deposits, as defined above, net of outstanding bank overdrafts and cash credit facilities as they are considered
an integral part of the Company's cash management.
(f) Investment in associate
Investment in associate are accounted at cost less accumulated impairment.
(g) Fair value measurement
The Company measures financial instruments at fair value on initial recognition.
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 fair value measurement is based
on the presumption that the transaction to sell the asset or transfer the liability takes place either :
• In the principal market for the asset or liability or
• In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use
when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate
economic benefits by using the asset in its highest and best use or by selling it to another market participant
that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient
data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing
the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the standalone financial statements
are categorized within the fair value hierarchy, described as follows, based on the lowest level inputs that is
significant to the fair value measurement as a whole :
• Level 1 - Quoted (unadjusted) market prices in active markets for identical assets and liabilities.
• Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable.
• Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value
measurement is un-observable.
For assets and liabilities that are recognized in the standalone financial statements on a recurring basis,
the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing
categorization at the end of each reporting period.
External valuers are involved for valuation of significant assets, such as unquoted financial assets. Involvement
of external valuers is decided upon annually by the management. Selection criteria include market knowledge,
reputation, independence and whether professional standards are maintained. The management decides,
after discussions with the Company's external valuers, which valuation techniques and inputs to use for each
case.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the
basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy
as explained above.
(h) Financial instruments
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 recognized initially at fair value plus, in the case of financial assets not recorded at fair
value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in three categories :
• Financial assets at amortized cost
• Financial assets at fair value through other comprehensive income (FVTOCI)
• Financial assets at fair value through profit or loss (FVTPL)
Financial assets at amortized cost
A financial asset is measured at amortized cost if both following conditions are met :
• The financial asset is held within a business model whose objective is to hold financial assets in order to
collect contractual cash flows and
• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortized cost using the
effective interest rate (EIR) method. Amortized cost is calculated by taking into account any discount or
premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included
in other income in the statement of profit and loss. The losses arising from impairment are recognized in the
statement of profit and loss.
Financial assets at fair value through other comprehensive income
A financial asset is measured at fair value through other comprehensive income if both of the following criteria
are met :
• The financial asset is held within a business model whose objective is achieved by both collecting
contractual cash flows and selling the financial assets and
• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
After initial measurement, such financial assets, until they are de-recognized or reclassified, are subsequently
measured at fair value and recognized in other comprehensive income except for interest income, gain / loss
on impairment, gain / loss on foreign exchange which is recognized in the statement of profit and loss.
Financial assets at fair value through profit or loss
A financial asset is measured at fair value through profit or loss unless it is measured at amortized cost or at
fair value through other comprehensive income.
In addition, the Company may elect to classify a financial asset, which otherwise meets amortized cost or
fair value through other comprehensive income criteria, as at fair value through profit or loss. However, such
election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred
to as 'accounting mismatch'). After initial measurement, such financial assets are subsequently measured at
fair value in the statement of profit and loss.
De-recognition of financial assets
A financial asset is de-recognized when :
• the contractual rights to receive cash flows from the financial asset have expired or
• The Company has transferred its contractual rights to receive cash flows from the asset or has assumed
an obligation to pay the received cash flows in full without material delay to a third party under a
pass-through arrangement and either
(a) The Company has transferred substantially all the risks and rewards of the asset or
(b) The Company has neither transferred nor retained substantially all the risks and rewards of the asset,
but has transferred control of the asset.
Impairment of financial assets
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and
recognition of impairment loss on the following financial assets and credit risk exposure :
• Financial assets that are debt instruments and are measured at amortized cost e.g. loans, debt-securities,
deposits, trade receivables and bank balance.
• Financial assets that are debt instruments and are measured as at FVTOCI.
The Company follows 'simplified approach' for recognition of impairment loss allowance on trade receivables.
The application of simplified approach does not require the Company to track changes in credit risk. Rather,
it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial
recognition.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines
that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has
not increased significantly, 12 month ECL is used to provide for impairment loss. However, if credit risk has
increased significantly, lifetime ECL is used. If, in a subsequent period, credit quality of the instrument improves
such that there is no longer a significant increase in credit risk since initial recognition, then the entity reverts
to recognizing impairment loss allowance based on 12 month ECL.
Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life
of a financial instrument. The 12 month ECL is a portion of the lifetime ECL which results from default events
on a financial instrument that are possible within 12 months after the reporting date.
ECL is the difference between all contractual cash flows that are due to the Company in accordance with the
contract and all the cash flows that the Company expects to receive (i.e. all cash shortfalls), discounted at
the original EIR. When estimating the cash flows, an entity is required to consider :
• All contractual terms of the financial instrument (including prepayment, extension, call and similar options)
over the expected life of the financial instrument. However, in rare cases when the expected life of the
financial instrument cannot be estimated reliably, then the Company is required to use the remaining
contractual term of the financial instrument.
• Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual
terms.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income / expense in
the statement of profit and loss. This amount is reflected under the head "Other Expenses" in the statement
of profit and loss.
The Balance sheet presentation for various financial instruments is described below :
• Financial assets measured as at amortized cost.
ECL is presented as an allowance, i.e. as an integral part of the measurement of those assets in the balance
sheet. The allowance reduces the net carrying amount. Until the asset meets write-offs criteria, the Company
does not de-recognize impairment allowance from the gross carrying amount.
The Company does not have any purchased or originated credit-impaired (POCI) financial assets, i.e. financial
assets which are credit impaired on purchase / origination.
(j) De-recognition of financial liabilities
A financial liability (or a part of a financial liability) is de-recognized from its balance sheet when and only
when, it is extinguished i.e. when the obligation specified in the contract is discharged or cancelled or expired.
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 de-recognition of the original liability and the recognition of an new liability. The difference in
the respective carrying amounts is recognized in the statement of profit and loss.
(k) Offsetting of financial instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there
is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net
basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be
contingent on future events and must be enforceable in the normal course of business and in the event of
default, insolvency or bankruptcy of the company or the counterparty.
(l) Property, plant and equipment
Property, plant and equipment are stated at cost of acquisition or construction net of accumulated depreciation
and impairment loss (if any). All directly attributable costs relating to the acquisition and installation of
property, plant and equipment are capitalized. All repair and maintenance costs are recognized in statement
of profit and loss during the reporting period in which they are incurred.
Subsequent costs are included in the asset's carrying amount as recognized as a standalone asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to
the Company and the cost of the item can be measured reliably. The carrying amount of any component
accounted for a standalone asset is de-recognized when replaced.
The identified components are depreciated over their useful lives, the remaining asset is depreciated over
the life of the principal asset.
Depreciation on additions is provided from the beginning of the month in which the asset is put to use.
Depreciation on assets sold, discarded or demolished during the year is being provided at their respective
rates on pro-rata basis up to the end of the month prior to the month in which such assets are sold, discarded
or demolished.
The useful lives has been determined based on technical evaluation done by the management's expert which
are higher than those specified by Schedule II to the Companies Act, 2013, in order to reflect the actual usage
of the assets. The residual values are not more than 5% of the original cost of the asset.
Depreciation is charged on the basis of useful life of assets on straight line method.
An item of property, plant and equipment and any significant part initially recognized is de-recognized 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 is included in the standalone statement of profit and loss when the asset is
de-recognized.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed
at each financial year.
Transition to Ind AS
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its property,
plant and equipment recognized as at April 1, 2017 measured as per the previous GAAP and use that carrying
value as the deemed cost of the property, plant and equipment.
(m) 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, the Company estimates the asset's recoverable amount. An asset's recoverable amount
is the higher of an asset's or cash-generating unit's (CGU) fair vale 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 group 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.
Impairment inventories are recognized in the statement of profit and loss.
Previously recognized 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 recognized. The reversal
is limited so that the carrying amount of asset does not exceed its recoverable amount. Such reversal is
recognized in statement of profit and loss.
(n) Trade and other payables
These amounts represent liabilities for goods and services provided to the company prior to the end of
financial year which are unpaid. Trade and other payables are unsecured and are presented as current
liabilities unless payment is not due within operating cycle determined by the Company after the reporting
period. They are recognized initially at their fair value and subsequently measured at amortized cost using
the effective interest method.
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