NOTE ‘1’ : SIGNIFICANT ACCOUNTING POLICES
1.1. Basis of preparation and presentation
(i) The financial statements have been prepared in accordance with Indian Accounting Standards (‘Ind AS') as notified by Ministry of Corporate
Affairs pursuant to Section 133 of the Companies Act, 2013 (the ‘Act') read with of the Companies (Indian Accounting Standards) Rules,
2015, as amended, and other relevant provisions of the Act.
(ii) The Financial statements have been prepared on the historical cost basis except certain financial assets & liabilities which are measured
at fair value wherever applicable:
(iii) All the assets and liabilites have been classified as current or non-current as per the company's normal operating cycle of twelve months
and other criteria set out in Schedule III of the Companies Act, 2013.
(iv) All amounts disclosed in the financial statements and notes have been rounded off to the nearest lakhs as per the requirement of
Schedule III, unless otherwise stated.
1.2. Use of Estimates & Judgements
The preparation of financial statements in conformity with Ind AS requires management to make judgments, estimates and assumptions, that
affect the application of accounting policies and the reported amounts of assets, liabilities, income, expenses etc. at the date of these financial
statements and the reported amounts of revenues and expenses for the years presented. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed at each balance sheet date. Revisions to accounting estimates are recognised in the period
in which the estimate is revised and future periods affected.
1.3. Property, Plant and Equipment
(i) Property, plant and equipment are stated at cost, net of recoverable taxes, trade discount and rebates less accumulated depreciation and
impairment loss, if any. Such cost includes purchase price, borrowing costs, and any cost directly attributable to bringing the asset to its
working condition for its intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations
attributable to the assets.
(ii) Capital work-in-progress includes expenditure during construcion period incurred on projects under implementation treated as pre-operative
expenses pending allocation to the assets. These expenses are apportioned to the respective fixed assets on their completion/
commencement of commercial production.
(iii) Depreciation on property, plant and equipment is provided based on useful life of the assets prescribed in Schedule II to the Companies
Act, 2013 on written down value.
(iv) When an assets is scrapped or otherwise disposed off, the cost and related depreciation are removed from the books of account and
resultant profit or loss, if any, is reflcted in statement of Profit and Loss.
(v) The Residual Value, useful lives and methods of depreciation of property, plant and equipment are reviewed at the end of each financial
year and ajusted prospectively, if appropriate.
Intangible assets
Intangible assets are stated at cost less accumulated amortization and impairment. 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. 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 and the level of
maintenance expenditures required to obtain the expected future cash flows from the asset. Amortization methods and useful lives are reviewed
periodically including at each financial year end.
1.4. Impairment of Non-financial Assets
The Company assesses at each reporting date whether there is any objective evidence that a non-financial asset or a group of non-financial
assets are impaired. If any such indications exists, the Company estimates the amount of impairment loss which may be caused to the company.
For the purpose of assessing impairment, the smallest identifiable group of assets that generates cash inflows from continuing use that are
largely independent of the cash inflows from other assets or groups of assets is considered as a cash generating unit. If any such indication
exists, an estimate of the recoverable amount of the individual asset/cash generating unit is made.
An impairment loss is calculated as the difference between an asset's carrying amount and recoverable amount. Losses are recognised in profit
or loss and reflected in an allowance account. When the Company considers that there are no realistic prospects of recovery of the asset, the
relevant amounts are written off. If the amount of impairment loss subsequently decreases and the decrease can be related objectively to an
event occurring after the impairment was recognised, then the previously recognised impairment loss is reversed through profit or loss.
1.5. Investment property
Property that is held for long-term rental yields or for capital appreciation or both, and that is not used by the Company, is classified as investment
property. Investment property is measured at its cost, including related transaction costs and, wherever applicable, borrowing costs less depreciation
and impairment, if any.
1.6. Cash & cash equivalents
Cash and Cash equivalents include cash and Cheque in hand, bank balances and demand deposits with banks that are readily convertible to
known amounts of cash & which are subject to an insignificant risk of changes in value where original maturity is three months or less.
1.7. Inventory
Inventories of Finished Goods and Stock-in-trade are stated ‘at the lower of cost or net realisable value'. Raw Materials, Work-in-Progress and
Goods-in-transit are stated ‘at cost'. Cost comprise all cost of purchase, cost of conversion and other costs incurred in bringing the inventories
to their present location and condition. Cost formulae used are ‘First-in-First-out'. Due allowance is estimated and made for defective and
obsolete items, wherever necessary.
Having regard to the nature & value of items of Stores & consumables, the same are treated as consumed in the year of their purchase.
1.8. Investments in subsidiaries, associates and joint ventures
Investments in subsidiaries, associates and joint ventures are carried at cost/deemed cost less accumulated impairment losses, if any. Where an
indication of impairment exists, the carrying amount of investment is assessed and an impairment provision is recognised, if required immediately
to its recoverable amount. On disposal of such investments, difference between the net disposal proceeds and carrying amount is recognised in
the statement of profit and loss.
1.9. Financial Instruments
(i) Financial Assets
Initial Recognition and Measurement
Financial assets are recognised when the company becomes party to the contractual provisions of the instruments. Financial assets, other than
trade receivables, are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through statement of
profit or loss. Financial assets carried at fair value through statement of profit or loss are initially recognised at fair value and transaction costs are
expensed in the statement of Profit and Loss.
Subsequent measurement
Financial assets, other than equity instruments, are subsequently measured at amortised cost or fair value through other comprehensive income
(OCI) or fair value through profit or loss on the basis of:
- the entity's business model for managing the financial assets; and
- the contractual cash flow characteristics of the financial asset.
Financial assets carried at amortised cost (AC)
A financial asset is measured at amortised cost if it is held within a business model whose objective is to hold the asset 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.
Financial assets at fair value through other comprehensive income (FVTOCI)
A financial asset is measured at FVTOCI if it is held within a business model whose objective is achieved by both collecting contractual cash
flows and selling 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.
Financial assets at fair value through profit or loss (FVTPL)
Investment in financial asset other than equity instrument, not measured at either amortised cost or FVTOCI is measured at FVTPL. Such
financial assets are measured at fair value with all changes in fair value, including interest income and dividend income if any, recognised in the
Statement of Profit and Loss.
Equity Instruments:
All investment in equity instrument classified under finanacial assets are subsequently measured at fair value. Equity instruments which are held
for trading are measured at FVTPL.
For all other equity instruments, on initial recognition, irrevocably elect to measure the same either at FVOCI or FVTPL. The Compnay makes
such election on an instument-by-instrument basis.
Impairment of financial assets
In accordance with Ind AS 109, the company uses ‘Expected Credit Loss' (ECL) model, for evaluating impairment of financial asets other than
those measured at fair value through profit and loss (FVTPL)
Expected credit losses are measured through a loss allowance at an amount equal to:
- The 12 month expected credit losses (expected credit losses that result from those default events on the financial instrument that are
possible within 12 months after the reporting date); or
- Full lifetime expected credit losses (expected credit losses that result from all possible default events over the life of the financial instruments).
(ii) Financial liabilities
Initial recognition and measurement
Financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments. Financial liabilities are
initially recognised at fair value net of transaction costs for all financial liabilities not carried at fair value through profit or loss.
The Company's financial liabilities includes trade and other payables, loans and borrowings including bank overdrafts and derivative instruments.
Subsequent measurement
Financial liabilities measured at amortised cost are subsequently measured using Effective Interest Rate (EIR) method. Financial liabilities
carried at fair value through profit or loss (FVTPL) are measured at fair value with all changes in fair value recognised in the Statement of Profit
and Loss.
Loans & Borrowings
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using EIR method. Gains and
losses are recognized in profit & loss when the liabilities are derecognized as well as through EIR amortization process.
Financial Guarantee Contracts
Financial guarantee contracts issued by the Company are those contracts that requires a payment to be made or to reimburse the holder for a
loss it incurs because the specified debtors fails to make payment when due in accordance with the term of a debt instrument. Financial
guarantee contracts are recognized initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance
of the guarantee.
Subsequently the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109
and the amount recognized less cumulative adjustments.
(iii) Derivative financial instruments and Hedge Accounting
The Company can use various derivative financial instruments such as interest rate swaps, currency swaps, forwards & options and commodity
contracts to mitigate the risk of changes in interest rates, exchange rates and commodity prices. Such derivative financial instruments are initially
recognised at fair value on the date on which a derivative contract is entered into and are also subsequently measured at fair value. Derivatives
are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to Statement of Profit and Loss, except for the effective
portion of cash flow hedges which is recognised in Other Comprehensive Income and later to Statement of Profit and Loss when the hedged item
affects profit or loss or treated as basis adjustment if a hedged forecast transaction subsequently results in the recognition of a non-financial
assets or non-financial liability
For the purpose of hedge accounting, hedges are classified as:
Cashflow hedge
The Company designates derivative contracts or non derivative financial assets / liabilities as hedging instruments to mitigate the risk of movement
in interest rates and foreign exchange rates for foreign exchange exposure on highly probable future cash flows attributable to a recognised
asset or liability or forecast cash transactions. When a derivative is designated as a cash flow hedging instrument, the effective portion of
changes in the fair value of the derivative is recognized in the cash flow hedging reserve being part of other comprehensive income. Any
ineffective portion of changes in the fair value of the derivative is recognized immediately in the Statement of Profit and Loss. If the hedging
relationship no longer meets the criteria for hedge accounting, then hedge accounting is discontinued prospectively. If the hedging instrument
expires or is sold, terminated or exercised, the cumulative gain or loss on the hedging instrument recognized in cash flow hedging reserve till the
period the hedge was effective remains in cash flow hedging reserve until the underlying transaction occurs. The cumulative gain or loss
previously recognized in the cash flow hedging reserve is transferred to the Statement of Profit and Loss upon the occurrence of the underlying
transaction. If the forecasted transaction is no longer expected to occur, then the amount accumulated in cash flow hedging reserve is reclassified
in the Statement of Profit and Loss.
Fair value hedge
The Company designates derivative contracts or non derivative financial assets / liabilities as hedging instruments to mitigate the risk of change
in fair value of hedged item due to movement in interest rates, foreign exchange rates and commodity prices.
Changes in the fair value of hedging instruments and hedged items that are designated and qualify as fair value hedges are recorded in the
Statement of Profit and Loss. If the hedging relationship no longer meets the criteria for hedge accounting, the adjustment to the carrying amount
of a hedged item is amortised to Statement of Profit and Loss over the period of maturity
(iv) Derecognition of financial instruments
The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers
the financial asset and the transfer qualifies for derecognition under Ind AS 109. A financial liability (or a part of a financial liability) is
derecognized from the Company's Balance Sheet when the obligation specified in the contract is discharged or cancelled or expires.
1.10. Leases
Finance lease
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 leases are capitalized 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 recognized 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.
Operating lease
Company as a lessee
Leases where significant portion of risk and reward of ownership are retained by the lessor are classified as operating leases. Operating lease
payments are recognized as an expense in the Statement of Profit and Loss on a straight line basis over the lease period unless the payments
are structured to increase in line with expected general inflation to compensate for the company's expected inflationary cost increases.
Company as a lessor
Leases in which the Company does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating
leases. Assets subject to operating leases are included in the property, plant and equipment. Lease income on an operating lease is recognised
in the Statement of Profit and Loss on a straight line basis over the lease term. unless the receipts are structured to increase in line with expected
general inflation to compensate for the expected inflationary cost increases. Costs, including depreciation, are recognised as an expense in the
Statement of Profit and Loss.
1.11. Fair Value Measurement:
The Company measures financial instruments, such as, derivatives at fair value at each balance sheet date.
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, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1 : Quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2 : Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.
Level 3 : Techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have
occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value
measurement as a whole) at the end of each reporting period.
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.
1.12. Borrowing Cost
Borrowing costs include interest expenses as per effective interest rate and exchange differences arising from foreign currency borrowings to the
extent they are regarded as an adjustment to the interest cost. Borrowing costs that are directly attributable to the acquisition or construction of
qualifying assets are capitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to
get ready for its intended use.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the
borrowing costs eligible for capitalisation.
All other borrowing costs are charged to the Statement of Profit and Loss for the period for which they are incurred.
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