2. Significant Accounting Policies
2.1 Basis of Preparation
The financial statements have been prepared and presented under the historical cost convention on the
accrual basis of accounting following generally accepted accounting principles in India (GAAP) and
comply with the Accounting Standards issued by the Institute of Chartered Accountants of India &
notified under the Companies (Accounting Standards) Rules 2006 as amended and the relevant
provisions of the Companies Act, 2013 as amemded.
2.2 Functional and Presentation Currency
These financial statements are presented in Indian National Rupee ('INR'), which is the Company's
functional currency. All amounts have been rounded to the nearest thousands rupees, unless otherwise
indicated.
2.3 Use of Judgements and Estimates
In preparing these financial statements, management has made judgements, estimates and assumptions
that affect the company's accounting policies and the reported amounts of assets, liabilities, income and
expenses. Management believes that the estimates used in the preparation of the financial statements are
prudent and reasonable. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are
recognised prospectively.
Assumptions and Estimation Uncertainties
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a
material adjustment in the financial statements for every period ended is included below:
- Recognition of deferred tax assets: availability of future taxable profit against which carry-forward tax
losses can be used;
- Impairment test: key assumptions underlying recoverable amounts;
- Useful life and residual value of Property, Plant and Equipment;
- Recognition and measurement of provisions and contingencies: key assumptions about the likelihood
and magnitude of an outflow of resources.
2.4 Classification of Assets and Liabilities as Current and Non-Current
The Company presents assets and liabilities in the balance sheet based on current/ non-current
classification. An asset/liabilities is treated as current when it is:
- Expected to be realised/settled (liabilities) or intended to be sold or consumed 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 and Cash equivalents unless restricted from being exchanged or used to settle a liability for at
least 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.
All other assets/liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as non-current assets/liabilities.
The operating cycle is the time between the acquisition of the assets for processing and their realisation
in cash and cash equivalents.
2.5 Property, Plant and Equipment
Recognition and Measurement
Items of property, plant and equipment are stated at cost less accumulated depreciation and
accumulated impairment loss, if any. The cost of assets comprises of purchase price and directly
attributable cost of bringing the assets to working condition for its intended use including borrowing
cost and incidental expenditure during construction incurred upto the date when the assets are ready to
use. Capital work in progress includes cost of assets at sites, construction expenditure and interest on
the funds deployed less any impairment loss, if any.
If significant parts of an item of property, plant and equipment have different useful lives, then they are
accounted for as a separate item (major components) of property, plant and equipment.
Useful lives of depreciable and amortisable assets:-
The Company reviews the estimated useful lives of depreciable or amortisable assets at each reporting
period, based its expected utility of those assets. During the current financial year, the management
determined that there were no changes to the useful lives of depreciable or amortisable assets.
Useful life of Plant & Machinery (Continuous process plant), and electrical installations as per Schedule
II of Companies Act, 2013, is 8 yrs and 10 yrs respectively but it has been taken 25 years as per the
certificate from technical consultant dated 30.10.2014
Subsequent Measurement
Subsequent expenditure is capitalised only if it is probable that there is an increase in the future
economic benefits associated with the expenditure will flow to the Company.
Depreciation
Depreciation is calculated on Straight Line Method using the rates arrived at on the basis of estimated
useful lives given in Schedule II of the Companies Act, 2013.
Depreciation on additions to or on disposal of assets is calculated on pro-rata basis.
Depreciation methods, useful lives and residual values are reviewed in each financial year end and
changes, if any, are accounted for prospectively.
Capital work-in-progress
Expenditure incurred during the construction period, including all expenditure direct and indirect
expenses, incidental and related to construction, is carried forward and on completion, the costs are
allocated to the respective property, plant and equipment.
De-recognition
An item of property, plant and equipment is de-recognised upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the
disposal or retirement of an item of property, plant and equipment is determined as the difference
between net disposal proceeds and the carrying amount of the asset and is recognised in the Statement
of Profit and Loss.
2.6 Intangible Assets
Intangible Assets (Other than Goodwill) acquired separately are stated at cost less accumulated
amortization and impairment loss, if any. Intangible assets are amortized on straight line method basis
over the estimated useful life. Estimated useful life of the Software is considered as 10 years.
Amortisation methods, useful lives and residual values are reviewed in each financial year end and
changes, if any, are accounted for prospectively.
An intangible asset is de-recognised on disposal, or when no future economic benefits are expected from
use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the
difference between the net disposal proceeds and the carrying amount of the asset are recognised in the
Statement of Profit and Loss when the asset is derecognised.
a. Impairment of assets: At each Balance Sheet date, management assesses, using external and internal
sources, whether there is an indication that an asset may be impaired. Impairment occurs where the
carrying value exceeds the present value of future cash flows expected to arise from the continuing use
of the asset and its eventual disposal. The impairment loss to be expensed is determined as the excess of
the carrying amount over the present value as determined above. Actual results could differ from those
estimates.
2.7 Revenue Recognition
The Company recognises revenue from sale of goods when;
i) the Company has transferred to the buyer the significant risks and rewards of ownership of the
goods;
ii) the amount of revenue can be measured reliably;
iii) it is probable that the economic benefits associated with the transaction will flow to the
Company; and
iv) the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Revenue (other than sale of goods) is recognised to the extent that it is probable that the economic
benefits will flow to the company and the revenue can be reliably measured. Claim on insurance
companies, interest and others, where quantum of accrual cannot be ascertained with reasonable
certainty, are accounted for on acceptance basis.
Revenue represents net value of goods and services provided to customers after deducting for certain
incentives including, but not limited to discounts, volume rebates, incentive programs etc.
Interest incomes are recognised on an accrual basis using the effective interest method.
Dividends are recognised at the time the right to receive payment is established.
2.8 Inventories
Inventories are valued at lower of cost and net realisable value except waste/scrap which is valued at
net realisable value. Cost of traded goods is determined by taking cost of purchases and related
overheads. Net realisable value is the estimated selling price in the ordinary course of business, less
estimated costs of completion and to make the sale.
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