1.4 Summary of significant accounting policies
a i) Ind AS 16 - Property, Plant and Equipment
Property, plant and equipment are stated at cost, net of recoverable taxes, trade discount and rebates less
accumulated depreciation and impairment losses, if any. Such cost includes purchase price, borrowing cost and
any cost directly attributable to bringing the assets to its working condition for its intended use.
Expenses incurred relating to project, net of income earned during the project development stage prior to its
intended use, are considered as pre - operative expenses and disclosed under Capital Work - in - Progress.
ii) Depreciation
Depreciation is calculated on cost of items of property, plant and equipment less their estimated residual values
over their estimated useful lives using the straight-line method and is recognised in the statement of profit and
loss
Depreciation method, useful lives and residual values are reviewed at each financial year-end and adjusted if
appropriate. Based on internal assessment and consequent advice, the management believes that its estimates
of useful lives as given above best represent the period over which management expects to use these assets.
Depreciation on additions / (disposals) is provided on a pro-rata basis i.e. from / (up to) the date on which asset is
ready for use / (disposed off),
b Leases
^ a lessee
Ind AS 116 sets out principles for the recognition, measurement, presentation and disclosure of leases. Ind AS
116 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all
leases with a term of more than 12 months, unless the underlying asset is of low value. For all leases except as
noted above, a lessee is required to recognise a Right-Of-Use asset (ROU Asset) representing its right to use the
underlying leased asset and a lease liability representing its obligation to make lease payments in the balance
sheet. Lessee will recognise depreciation of right-of-use assets and interest on lease liabilities in the statement of
profit and loss.
The Company’s leases primarily consist of leasehold lands. 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.
At the date of commencement of the lease, the Company recognizes a 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/or low value leases, the Company recognises 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 ROU 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. Currently, ROU assets are being amortised over a period of respective lease terms (being lower of lease
term and estimated useful life of underlying assets).
Lease liability and ROU assets have been separately presented in the Balance Sheet and lease payments have
been classified as financing activities in statement of cash flows."
As a lessor
Lease income from operating leases where the Company is a lessor is recognised in income 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 inflation.
c Borrowing Cost
Borrowings are initially recognised at fair value (net of transaction costs incurred). Any difference between the
proceeds (net of transaction costs) and the redemption amount is recognized in the Statement of profit and loss
over the period of the borrowings using the effective interest rate method. Subsequently all borrowings are
measured at amortised cost using the effective interest rate method.
Borrowings are derecognized from the balance sheet when the obligation specified in the contract is discharged,
cancelled or expired. The difference between the carrying amount of financial liability that has been extinguished
or transferred to another party and the consideration paid including any non-cash asset transferred or liability is
assumed, is recognised in the statement of profit and loss. The gain / loss is recognised in other equity in case of
transaction with shareholders.
d 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.
All other borrowing costs are charged to the Statement of Profit and Loss for the period for which they are
incurred.
e Inventories
Items of inventories i.e stores and spares 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 net of recoverable taxes incurred in bringing them to their respective present
location and condition.
Cost of components, stores and spares are determined on FIFO (First In First Out) basis,
f Impairment of non-financial assets
The Company assesses at each reporting date as to whether there is any indication that any asset or group of
assets, called cash generating units may be impaired. If any such indication exists the recoverable amount of an
asset or cash generating units is estimated to determine the extent of impairment, if any. When it is not possible
to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the
cash generating units to which the asset belongs.
For impairment testing, assets that do not generate independent cash inflows are grouped together into Cash
Generating Units (CGUs). Each CGU represents fhe smallest group of assets that generates cash inflows that are
largely independent of the cash inflows of other assets or CGUs
The recoverable amount of a CGU (or an individual asset) is the higher of its value in use and its fair value less
costs to sell. Value in use is based on the estimated future cash flows, 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 CGU (or the asset).
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its estimated recoverable
amount. Impairment losses are recognised in the statement of profit and loss. Impairment loss recognised in
respect of a CGU is allocated to the CGU, and then to reduce the carrying amounts of the other assets of the
CGU (or group of CGUs) on a pro rata basis
|