D. Summary of significant accounting policies:
The principal accounting policies adopted in the preparation of the financial statements
are set out below. The policies have been consistently applied to all years presented,
unless otherwise stated. The presentation of financial statements requires the use of
certain accounting estimates. The areas where significant judgments and estimates have
been made in preparing the financial statements and their effects are disclosed.
1. Leases
Policy Applicable from April 1, 2019
The Company accounts for each lease component within the contract as a lease separately
from non-lease components of the contract and allocates the consideration in the contract
to each lease component on the basis of the relative stand -alone price of the lease
component and the aggregate stand-alone price of the non-lease components.
The Company recognises right-of-use asset representing its right to use the underlying
asset for the lease term at the lease commencement date. The cost of the right-of-use
asset measured at inception shall comprise of the amount of the initial measurement of
the lease liability adjusted for any lease payments made at or before the commencement
date less any lease incentives received, plus any initial direct costs incurred and an
estimate of costs to be incurred by the lessee in dismantling and removing the underlying
asset or restoring the underlying asset or site on which it is located. The right-of-use assets
is subsequently measured at cost less any accumulated depreciation, accumulated
impairment losses, if any and adjusted for any remeasurement of the lease liability. The
right-of-use assets is depreciated using the straight-line method from the commencement
date over the shorter of lease term or useful life of right-of-use asset. The estimated useful
lives of right-of use assets are determined on the same basis as those of property, plant
and equipment. Right-of-use assets are tested for impairment whenever there is any
indication that their carrying amounts may not be recoverable. Impairment loss, if any, is
recognised in the statement of profit and loss.
The Company measures the lease liability at the present value of the lease payments that
are not paid at the commencement date of the lease. The lease payments are discounted
using the interest rate implicit in the lease, if that rate can be readily determined. If that
rate cannot be readily determined, the Company uses incremental borrowing rate. For
leases with reasonably similar characteristics, the Company, on a lease by lease basis, may
adopt either the incremental borrowing rate specific to the lease or the incremental
borrowing rate for the portfolio as a whole. The lease payments shall include fixed
payments, variable lease payments, residual value guarantees, exercise price of a purchase
option where the Company is reasonably certain to exercise that option and payments of
penalties for terminating the lease, if the lease term reflects the lessee exercising an
option to terminate the lease. The lease liability is subsequently remeasured by increasing
the carrying amount to reflect interest on the lease liability, reducing the carrying amount
to reflect the lease payments made and remeasuring the carrying amount to reflect any
reassessment or lease modifications or to reflect revised in -substance fixed lease
payments. The company recognises the amount of the re-measurement of lease liability
due to modification as an adjustment to the right-of-use asset and statement of profit and
loss depending upon the nature of modification. Where the carrying amount of the right-
of-use asset is reduced to zero and there is a further reduction in the measurement of the
lease liability, the Company recognises any remaining amount of the re -measurement in
statement of profit and loss.
The Company has elected not to apply the requirements of Ind AS 116 to short-term leases
of all assets that have a lease term of 12 months or less and leases for which the
underlying asset is of low value. The lease payments associated with these leases are
recognized as an expense on a straight-line basis over the lease term.
2. Property Plant & Equipment:
(a) Initial Measurement & Recognition
Property, plant and equipment are carried at cost less accumulated depreciation and
impairment losses, if any. The cost of an item of Property, plant and equipment
comprises its purchase price, including import duties and other non-refundable taxes
or levies and any directly attributable cost of bringing the assets to its working
condition for its intended use with any trade discounts or rebates being deducted in
arriving at purchase price. Cost of the assets also includes interest on borrowings
attributable to acquisition, if any, of qualifying fixed assets incurred up to the date
the asset is ready for its intended use.
If significant parts of an item of property, plant and equipment have different useful
lives, then they are accounted for as separate items (major components) of Property,
plant and equipment.
Cost of Property, plant and equipment not ready for intended use as on the balance
sheet date, is disclosed as capital work in progress. Advances given towards
acquisition of property, plant and equipment outstanding at each balance sheet date
are disclosed as Capital Advances under Other non-current Assets.
Any gain or loss on disposal of an item of property plant and equipment is recognized
in statement of profit and loss.
(b) Subsequent expenditure
Subsequent costs are included in the asset's carrying amount or recognized as a
separate 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. All other repairs and maintenance are charged to the Statement of
Profit and Loss during the period in which they are incurred.
(c) Depreciation:
Depreciation is provided on the straight-line method based on estimated useful life
prescribed under Schedule II to the Companies Act, 2013. Depreciation on assets
added/disposed off during the year is provided on pro-rata basis from the date of
addition or up to the date of disposal, as applicable.
The residual values, useful lives and method of depreciation of property, plant and
equipment is reviewed at each financial year end and adjusted prospectively, if
appropriate.
3. Inventories
Inventories, if any, are valued at the lower of cost and net realizable value. Cost is
computed on a weighted average basis. Cost of finished goods and work-in-progress
include all costs of purchases, conversion costs and other costs incurred in bringing the
inventories to their present location and condition. The net realizable value is the
estimated selling price in the ordinary course of business less the estimated costs of
completion and estimated costs necessary to make the sale.
4. Cash and Cash Equivalents
Cash and cash equivalents are short-term (three months or less from the date of
acquisition), highly liquid investments that are readily convertible into cash and which are
subject to an insignificant risk of changes in value.
5. Financial Instruments:
(A) Financial Assets
Recognition and measurement
Financial assets are recognised when the Company becomes a party to the
contractual provisions of the instrument. On initial recognition, a financial asset is
recognised at fair value, in case of financial assets which are recognised at fair value
through profit and loss (FVTPL), its transaction cost are recognised in the statement
of profit and loss. In other cases, the transaction cost are attributed to the acquisition
value of the financial asset.
Financial assets are subsequently classified as measured at
• amortised cost
• fair value through profit and loss (FVTPL)
• fair value through other comprehensive income (FVOCI)
(a) Measured at amortised cost: Financial assets that are held within a business
model whose objective is to hold financial assets in order to collect contractual
cash flows that are solely payments of principal and interest, are subsequently
measured at amortised cost using the effective interest rate ('EIR') method less
impairment, if any. The amortisation of EIR and loss arising from impairment, if
any, is recognised in the Statement of Profit and Loss.
(b) Measured at fair value through other comprehensive income: Financial assets
that are held within a business model whose objective is achieved by both, selling
financial assets and collecting contractual cash flows that are solely payments of
principal and interest, are subsequently measured at fair value through other
comprehensive income. Fair value movements are recognized in the other
comprehensive income (OCI). Interest income measured using the EIR method
and impairment losses, if any are recognised in the Statement of Profit and Loss.
On de-recognition, cumulative gain or loss previously recognised in OCI is
reclassified from the equity to 'other income' in the Statement of Profit and Loss.
(c) Measured at fair value through profit or loss: A financial asset not classified as
either amortised cost or FVOCI, is classified as FVTPL. Such financial assets are
measured at fair value with all changes in fair value, including interest income and
dividend income if any, recognised as 'other income' in the Statement of Profit
and Loss
Financial assets are not reclassified subsequent to their recognition, except if and in
the period the Company changes its business model for managing financial assets.
Trade Receivables and Loans:
Trade receivables and loans are initially recognised at fair value. Subsequently, these
assets are held at amortised cost, using the effective interest rate (EIR) method net of
any expected credit losses. The EIR is the rate that discounts estimated future cash
income through the expected life of financial instrument.
Equity Instruments:
All investments in equity instruments classified under financial assets are
subsequently measured at fair value. Equity instruments which are held for trading
are measured at FVTPL. For all other equity instruments, the Company may, on initial
recognition, irrevocably elect to measure the same either at FVOCI or FVTPL. The
Company makes such election on an instrument-by-instrument basis. Fair value
changes on an equity instrument shall be recognised as 'other income' in the
Statement of Profit and Loss unless the Company has elected to measure such
instrument at FVOCI. Fair value changes excluding dividends, on an equity instrument
measured at FVOCI are recognised in OCI. Amounts recognised in OCI are not
subsequently reclassified to the Statement of Profit and Loss. Dividend income on the
investments in equity instruments are recognised as 'other income' in the Statement
of Profit and Loss.
De-recognition
The Company derecognises a financial asset when the contractual rights to the cash
flows from the financial asset expire, or it transfers the contractual rights to receive
the cash flows from the asset.
Impairment of Financial Assets
Expected credit losses are recognized for all financial assets subsequent to initial
recognition other than financials assets in FVTPL category. For financial assets other
than trade receivables, as per Ind AS 109, the Company recognises 12 month
expected credit losses for all originated or acquired financial assets if at the reporting
date the credit risk of the financial asset has not increased significantly since its initial
recognition. The expected credit losses are measured as lifetime expected credit
losses if the credit risk on financial asset increases significantly since its initial
recognition. The Company's trade receivables do not contain significant financing
component and loss allowance on trade receivables is measured at an amount equal
to life time expected losses i.e. expected cash shortfall. The impairment losses and
reversals are recognised in Statement of Profit and Loss, if any.
(B) Financial Liabilities:
Initial recognition and measurement
Financial liabilities are recognised when the Company becomes a party to the
contractual provisions of the instrument. Financial liabilities are initially measured at
the amortised cost unless at initial recognition, they are classified as fair value
through profit and loss. In case of trade payables, they are initially recognised at fair
value and subsequently, these liabilities are held at amortised cost, using the
effective interest method.
Subsequent measurement
Financial liabilities are subsequently measured at amortised cost using the EIR
method. Financial liabilities carried at fair value through profit or losses are measured
at fair value with all changes in fair value recognised in the Statement of Profit and
Loss.
De-recognition
A financial liability is derecognised when the obligation specified in the contract is
discharged, cancelled or expires.
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