B. 4 Material Accounting Policies
i. Revenue Recognition
a. Revenue towards satisfaction of performance obligations is measured at the amount of transaction price (net of variable
consideration) allocated to that performance obligation. The transaction price of goods sold and services rendered is net of
variable consideration on account of various discounts and schemes offered by the Company as part of the contract .
Consideration is generally due upon satisfaction of performance obligations and a receivable is recognised when it becomes
unconditional.
The Company manufactures and sells thermoplastic compounds. Sales are recognized when control of the products has been
transferred, when the products are delivered to the customer and there is no unfulfilled obligation that could affect the
customer’s acceptance of the products. Delivery occurs when the products have been shipped, the risks of obsolescence and
loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales
contract, the acceptance provisions have lapsed, or the company has objective evidence that all criteria for acceptance have
been satisfied.
A receivable is recognized when the goods are delivered as this is the point in time that the consideration is unconditional
because only the passage of time is required before the payment is due. Sales are stated net of discounts, rebates and returns.
It also excludes Goods and Service Tax.
b. Revenue from export incentives are accounted for on export of goods if the entitlements can be estimated with
reasonable assurance and conditions precedent to claim are fulfilled.
c. 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.
ii. Property, Plant and Equipment
a. Property, plant and equipment; and construction in progress are stated at cost, net of accumulated depreciation and
accumulated impairment losses. Such cost includes the cost of replacing parts of the property, plant and equipment and
borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of property,
plant and equipment are required to be replaced at intervals, the Company recognizes such parts as individual assets
with specific useful lives and depreciates them accordingly. Likewise, when a major inspection is performed, its cost is
recognized in the carrying amount of the Property, Plant and Equipment as a replacement if the recognition criteria are
satisfied. All other repair and maintenance costs are recognized in the Statement of Profit and Loss as incurred.
b. Capital work-in-progress comprises cost of fixed assets that are not yet installed and ready for their intended use at the
balance sheet date.
c. Own manufactured assets are capitalized at cost including an appropriate share of allocable expenses.
Depreciation and Amortization
Depreciation is charged on the basis of useful life of assets on Straight Line method for Lease hold land, Buildings, Plant &
Equipment and Right to use asset and written down value method for other assets.
• Depreciation on additions is provided from the date when asset is ready 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 date on which such assets are sold, discarded or demolished.
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected
from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net
disposal proceeds and the carrying amount of the asset) is included in the Statement of Profit and Loss when the asset is
derecognized.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial
year end and adjusted prospectively, if appropriate.
iii. Impairment of Assets
The Company assesses at each balance sheet date whether there is any indication due to internal or external factors that an
asset or a group of assets comprising a Cash Generating Unit (CGU) may be impaired. If any such indication exists, the
Company estimates the recoverable amount of the assets. If such recoverable amount of the assets or the recoverable amount
(economic value in use) of the CGU to which the asset belongs is less than the carrying amount of the assets or the CGU as the
case may be, the carrying amount is reduced to its recoverable amount and the reduction is treated as an impairment loss and
is recognized in the profit and loss account. If at any subsequent balance sheet date there is an indication that a previously
assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at recoverable
amount subject to a maximum of depreciated historical cost and is accordingly reversed in the profit and loss account.
iv. Financial instruments - initial recognition and subsequent measurement
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.
(a) Financial assets
(i) Initial recognition and measurement of financial assets
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 assets. However, trade receivables that
do not contain a significant financing component are measured at transaction price.
(ii) Subsequent measurement of financial assets
For the 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 (FVOCI)
• Financial assets at fair value through profit or loss (FVTPL)
• Financial assets at amortized cost:
A financial asset is measured at amortized cost if:
• 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 by applying the effective interest rate (EIR) to the
gross carrying amount of a financial asset if applicable. The EIR amortization is included in finance 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:
• the financial asset 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.
After initial measurement, such financial assets, until they are derecognized or reclassified, are subsequently measured at fair
value with unrealized gains or losses recognized in other comprehensive income except for interest income, impairment gains
or losses and foreign exchange gains and losses which are 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 with unrealized gains or losses
recognized in the statement of profit and loss.
(iii) Derecognition of financial assets
A financial asset is derecognized when:
• the contractual rights to the cash flows from the financial asset expire, 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 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.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through
arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither
transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the
Company continues to recognize the transferred asset to the extent of the Company’s continuing involvement. In that case,
the Company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis
that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original
carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
(iv) Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no
reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which
are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets.
Changes to the business model are expected to be infrequent. The Company’s senior management determines change in the
business model as a result of external or internal changes which are significant to the Company’s operations. Such changes
are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform
an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification
prospectively from the reclassification date which is the first day of the immediately next reporting period following the
change in business model. The Company does not restate any previously recognized gains, losses (including impairment
gains or losses) or interest.
(v) 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.
• Financial assets that are debt instruments and are measured as at FVOCI
• Lease receivables
• Trade receivables
The Company follows ‘simplified approach’ for recognition of impairment loss allowance on:
• Trade receivables, if they do not contain a significant financing component
Trade receivables or contract assets that contain a significant financing component, if the Company applies practical
expedient to
• ignore separation of time value of money, and
• All lease 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 asignificant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month
ECL is used to providefor impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in a
subsequent period, credit quality of theinstrument improves such that there is no longer a significant increase in credit risk
since initial recognition, then the entity reverts torecognizing 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 in a separate line in the P&L as an impairment gain or loss. The balance sheet
presentation for various financial instruments is described below:
• Financial assets measured as at amortized cost, contract assets and lease receivables: 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-off criteria, the Company does not derecognize impairment allowance from the gross
carrying amount.
• Loan commitments: ECL is presented as a provision in the balance sheet, i.e. as a liability.
In addition to the Expected Credit Loss (ECL) model prescribed under Ind AS 109 - Financial Instruments , the Company has
recognized additional provisions on certain financial assets. These provisions are based on specific information and
circumstances available at the reporting date that were assessed on a case-by-case basis, where such information indicates
that the credit risk has increased significantly beyond the thresholds normally captured by the ECL model.
These additional provisions have been made to reflect management’s best estimate of expected future cash flows,
recoverability risks, and other qualitative factors specific to each counterparty or asset. The Company believes that this
approach enhances the accuracy and prudence of financial reporting, including the cases where forward-looking information
or post-balance sheet events provide material evidence regarding the financial health or performance of counterparties.
Such provisions are reviewed periodically and adjusted as and when new information becomes available.
For assessing increase in credit risk and impairment loss, the Company combines financial instruments on the basis of shared
credit risk characteristics with the objective of facilitating an analysis that is designed to enable significant increases in credit
risk to be identified on a timely basis.
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.
(b) Financial Liabilities
(i) Initial recognition and measurement of financial liabilities
All financial liabilities are recognized initially at fair value minus, in the case of financial liabilities not recorded at fair value
through profit or loss, transaction costs that are attributable to the issue of the financial liabilities.
(ii) Subsequent measurement of financial liabilities
For the purposes of subsequent measurement, financial liabilities are classified and measured as follows:
• Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities
designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading
if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial
instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined
by Ind AS 109.
Gains or losses on liabilities held for trading are recognized in the statement of profit and loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of
recognition, and only if the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses
attributable to changes in own credit risks are recognized in OCI. These gains/ losses are not subsequently transferred to P&L.
However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability
are recognized in the statement of profit and loss. The Company has not designated any financial liability as at fair value
through profit and loss.
• Loans and Borrowings at amortized Cost
Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently measured at
amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognized in
profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan
facilities are recognized as transaction case, the fee is deferred until the draw down occurs. To the extent there is no evidence
that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a prepayment for liquidity
services and amortized over the period of the facility to which it relates.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or
expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to
another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in
profit or loss as other gains/(losses).
(iii) De-recognition of financial liabilities
A financial liability (or a part of a financial liability) is derecognized 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 derecognition of the
original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the
statement of profit and loss.
v. Foreign Currency Transactions
Functional and presentation currency
Items included in the financial statements of the Company are measured using the currency of the primary economic
environment in which the entity operates ('the functional currency'). The financial statements are presented in Indian rupee
(INR), which is the Company’s functional and presentation currency.
a. Initial Recognition
Foreign currency transactions are recorded in Indian currency, by applying the exchange rate between the Indian currency
and the foreign currency at the date of the transaction.
b. Conversion
Current assets and current liabilities, Secured Loans, being monetary items, designated in foreign c urrencies are revalorized
at the rate prevailing on the date of Balance Sheet or forward contract rate or other appropriate rate.
c. Exchange Differences
Exchange differences arising on the settlement and conversion of foreign currency transactions are recognized as income or
as expenses in the year in which they arise.
vi. Leases
Lease is a contract that provides to the customer (lessee) the right to use an asset for a period in exchange for consideration.
Company as a lessee
A lessee is required to recognize assets and liabilities for all leases and to recognize depreciation of leased assets separately
from interest on lease liabilities in the statement of Profit and Loss. The Company uses the practical expedient to apply the
requirements of this standard to a portfolio of leases with similar characteristics if the effect on the financial statements of
applying to the portfolio does not differ materially from applying the requirement to the individual leases within that
portfolio.
However according to Ind AS 116, for leases with a lease term of 12 months or less (short-term leases) and for leases for which
the underlying asset is of low value, not to recognize a right-of-use asset and a lease liability. The Company applies both
recognition exemptions. The lease payments associated with those leases are generally recognized as an expense on a
straight-line basis over the lease term or another systematic basis if appropriate.
Right to use asset
Right-of-use assets, which are included under property, plant and equipment, are measured at cost less any accumulated
depreciation and, if necessary, any accumulated impairment. The cost of a right-of-use asset comprises the present value of
the outstanding lease payments plus any lease payments made at or before the commencement date less any lease
incentives received, any initial direct costs and an estimate of costs to be incurred in dismantling or removing the underlying
asset. In this context, the Company also applies the practical expedient that the payments for non-lease components are
generally recognized as lease payments. If the lease transfers ownership of the underlying asset to the lessee at the end of the
lease term or if the cost of the right-of-use asset reflects that the lessee will exercise a purchase option, the right-of-use asset
is depreciated to the end of the useful life of the underlying asset. Otherwise, the right-of-use asset is depreciated to the end
of the lease term.
Lease liability
Lease liabilities, which are assigned to financing liabilities, are measured initially at the present value of the lease payments.
Subsequent measurement of a lease liability includes the increase of the carrying amount to reflect interest on the lease
liability and reducing the carrying amount to reflect the lease payments made.
vii. Inventories
a. Raw materials, components, stores and spares are valued at cost or net realizable value whichever is lower. Cost includes
all cost of purchase and incidental expenses incurred in bringing the inventories to their present location and condition. Cost
is ascertained using weighted average cost method.
b. Work-in-process including finished components and finished goods are valued at cost or realizable value whichever is
lower. Cost includes direct materials, labor costs and a proportion of manufacturing overheads based on the normal
operating capacity.
c. Materials-in-transit and materials in bonded warehouse are valued at actual cost incurred up to the date of balance
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and
the estimated costs necessary to make the sale.
viii. Taxes
Current income tax
Current income tax assets and liabilities are measured at the amounts expected to be recovered from or paid to the taxation
authorities; on the basis of the taxable profits computed for the current accounting period in accordance with Income Tax Act,
1961. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the
reporting date.
Current income tax relating to items recognized in other comprehensive income or directly in equity is recognized in other
comprehensive income or in equity, respectively, and not in the statement of Profit and Loss. The Management periodically
evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to
interpretation and establishes provisions where appropriate.
Deferred tax
Deferred tax is provided using the liability method 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 or taxable profit or loss;
Deferred tax assets are recognized for all deductible temporary differences including, 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 difference 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 subsidiaries, associates and interests in
joint arrangements, 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.
Deferred tax relating to items recognized outside the statement of profit and loss is recognized outside the profit or loss.
Deferred tax items are recognized in correlation to the underlying transaction either 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.
Goods & Service Tax (GST)
Expenses and assets are recognized net of the amount of GST, except:
• When the GST incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case,
the GST is recognized as part of the cost of acquisition of the asset or as part of the expense item, as applicable.
• When receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables
in the balance sheet.
ix. Non-Current Assets held for sale
Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered principally
through a sale transaction rather than through continuing use. Non-current assets and disposal groups classified as held for
sale are measured at the lower of their carrying amount and fair value less costs to sell. This condition is regarded as met only
when the sale is highly probable and the asset or disposal group is available for immediate use in its present condition.
Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within
one year from the date of classification.
x. Employee Benefits
a. Short Term Employee Benefits
The distinction between short term and long term employee benefits is based on expected timing of settlement rather than
the employee’s entitlement benefits. All employee benefits payable within twelve months of rendering the service are
classified as short term benefits. Such benefits include salaries, wages, bonus, short term compensated absences, awards,
ex-gratia, performance pay etc. and are recognized in the period in which the employee renders the related service.
b. Post-Employment Benefits
1. Defined contribution plan
The Company makes payment to state government provident fund scheme and employee state insurance scheme which are
defined contribution plans. The contribution paid/payable under the schemes is recognized in the statement of profit and
loss during the period in which the employee renders the related service. The Company has no further obligations under
these schemes beyond its periodic contributions.
2. Defined benefit plan
The employee’s gratuity fund scheme is Company’s defined benefit plans. The present value of the obligation under such
defined benefit plans is determined based on the actuarial valuation using the Projected Unit Credit Method as at the date of
the Balance sheet. In case of funded plans, the fair value of plan asset is reduced from the gross obligation under the defined
benefit plans, to recognize the obligation on a net basis.
Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net
interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the
net defined benefit liability), are recognized immediately in the Balance Sheet with a corresponding debit or credit to retained
earnings through OCI in the period in which they occur. Re-measurements are not reclassified to the profit or loss in
subsequent periods.
Past service costs are recognized in the statement of profit and loss on the earlier of:
• The date of the plan amendment or curtailment, and
• The date that the Company recognizes related restructuring cost
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognizes
the following changes in the net defined benefit obligation as an expense in the statement of profit and loss:
• Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine
settlements; and
• Net interest expense or income.
The Employee Group Gratuity Fund and the Employee Superannuation Fund respectively have been constituted through
Kingfa Science and Technology (India) Limited Employees Group Gratuity Trust and Kingfa Science and Technology (India)
Limited Employee Superannuation Trust in which Company Secretary is a Trustee.
3. Other long term employment benefits:
The employee’s long term compensated absences are Company’s other long term benefit plans. The present value of the
obligation is determined based on the actuarial valuation using the Projected Unit Credit Method as at the date of the Balance
sheet. In case of funded plans, the fair value of plan asset is reduced from the gross obligation, to recognize the obligation on
a net basis.
In regard to other long term employment benefits, the Company recognizes the net total of service costs; net interest on the
net defined benefit liability (asset); and re-measurements of the net defined benefit liability (asset) in the statement of profit
and loss.
4. The company does not offer any Termination benefits to its employees.
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