MATERIAL ACCOUNTING POLICIES
1. Statement of Compliance
The financial statements have been prepared in
accordance with Ind AS notified under section 133
of the Companies Act 2013 [Companies (Indian
Accounting Standards) Rules, 2015] and other
relevant provisions of the Act.
1.1 Basis of preparation and presentation
The financial statements have been prepared in
accordance with Ind AS under notified under section
133 of the Companies Act 2013 [Companies (Indian
Accounting Standards) Rules, 2015] and other
relevant provisions of the Act.
The financial statements have been prepared on
a historical cost basis except for certain financial
instruments that are measured at fair values at the
end of each reporting period, as explained in the
accounting policies below.
Historical cost is generally based on the fair value of
the consideration given in exchange for goods and
services.
Fair value is the price that would be received to sell
an asset or paid to transfer liability in an orderly
transaction between market participants at the
measurement date, regardless of whether that price
is directly observable or estimated using another
valuation technique. In estimating the fair value
of an asset or a liability, the Company considers
the characteristics of the asset or liability if market
participants would take those characteristics into
account when pricing the asset or liability at the
measurement date. Fair value for measurement
and/or disclosure purposes in these financial
statements is determined on such a basis, leasing
transactions that are within the scope of Ind AS 116,
and measurements that have some similarities to fair
value but are not fair value, such as net realizable
value in Ind AS 2 or value in use in Ind AS 36.
In addition, for financial reporting purposes, fair
value measurements are categorized into Level
1, 2, or 3 based on the degree to which the inputs
to the fair value measurements are observable
and the significance of the inputs to the fair value
measurement in its entirety, which are described as
follows:
• Level 1 inputs are quoted prices (unadjusted) in
active markets for identical assets or liabilities that
the entity can access at the measurement date,
• Level 2 inputs are inputs, other than quoted prices
included within Level 1, that are observable for
the asset or liability, either directly or indirectly
and
• Level 3 inputs are unobservable inputs for the
asset or liability.
The principal accounting policies are set out below:
1.2 Revenue Recognition
Revenue is measured at the fair value of the
consideration received or receivable. Revenue is
reduced for estimated customer returns, rebates and
other similar allowances.
a. Sale of goods
Revenue from the sale of goods is recognizedat the
point in time when control of goods is transferred to
the customer depending on the terms of the sales
and all the following conditions are satisfied:
• the company has transferred to the buyer the
significant risks and rewards of ownership of the
goods.
• the company retains neither continuing managerial
involvement to the degree usually associated with
ownership nor effective control over the goods
sold.
• the amount of revenue can be measured reliably.
• it is probable that the economic benefits associated
with the transaction will flow to the company; and
the costs incurred or to be incurred in respect of
the transaction can be measured reliably.
b. Rendering of Services
Revenue from a contract to provide services is based
on the agreements/ arrangements with the parties
concerned. In the case of services rendered over a
period revenue is recognized based on the progress
measured in line with the receiver of service. In the
case of service rendered at a point in time, revenue is
recognized as satisfaction of performance obligation.
c. Dividend and interest income
(i) Dividend income from investments is
recognized when the shareholder's right to
receive payment has been established.
(ii) Interest income from a financial asset is
recognized when it is probable that the
economic benefits will flow to the Company
using the effective interest rate method.
d. Insurance Claims
Insurance claims are accounted for based on
claims admitted / expected to be admitted and
to the extent that the amount recoverable can be
measured reliably and it is reasonable to expect
ultimate collection.
1.3 Leasing
Leases are classified in accordance with Ind AS 116,
Standards for Leases which is effective form 01st
April 2019. Below conditions need to be fulfilled if the
contract is to be classified as lease:
• Identified asset.
• Lessee obtains substantially all of the economic
benefits.
• Lessee directs the use.
Lessee Accounting:
A Lessee will recognize assets and liabilities for all
leases for a term of more than 12 months unless the
underlying asset is of low value. A Lessee is required
to recognize a right of use asset representing its right
to use the underlying leased asset and a lease liability
representing its obligations to make lease payments.
A lessee will measure right-of-use assets similarly to
other non-financial assets (such as property, plant
and equipment) and lease liabilities similarly to other
financial liabilities.
A lessee recognizes depreciation of the right-of-use
asset and interest on the lease liability (as per IND
AS 17 the same was classified as rent in case of
operating lease on a straight-line basis)
Lease liability = Present value of lease rentals
present value of expected payments at the end of
lease. The lease liability will be amortized using the
effective interest rate method.
Lease term = non-cancellable period renewable
period if lessee reasonably certain to exercise.
Right to use asset = Lease liability lease payments
(advance)-lease incentives to be received if any initial
initial direct costs cost of dismantling / restoring
etc. The assets will be depreciated as per IND AS 16
Property, plant and equipment.
Lessor Accounting:
A lessor shall classify each of its leases as either an
operating lease or a finance lease.
A lease is classified as a finance lease if it transfers
substantially all the risks and rewards. incidental
to ownership of an underlying asset. A lease is
classified as an operating lease if it does not transfer
substantially all the risks and rewards incidental to
ownership of an underlying asset.
For operating leases, lessors continue to recognize
the underlying asset and recognize the lease rental
incomes on a straight-line basis.
For finance leases, lessors derecognize the
underlying asset and recognize a net investment in
the lease.
1.4 Functional and presentation currency and Foreign
Currency Transactions
Items included in the financial statements of the
Company are measured using the currency of the
primary economic environment in which these entities
operate (i.e., the “functional currency”). The financial
statements are presented in Indian Rupee ('), the
national currency of India, which is the functional
currency of the Company.
In preparing the financial statements of the
company, transactions in currencies other than the
entity's functional currency (foreign currencies) are
recognized at the rates of exchange prevailing at
the dates of the transaction. All receivables and
payable in foreign currency are restated based on
the exchange rate prevailing at the reporting date
and the resultant gain or loss is recognized in the
profit and loss statement.
1.5 Borrowing and related costs
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 and Loss over the period of borrowings using
an effective interest method.
Borrowing costs directly attributable to the acquisition,
construction, or production of qualifying assets, which
are assets that necessarily take a substantial period
to get ready for their intended use or sale, are added
to the cost of those assets, until such time as the
assets are substantially ready for their intended use
or sale. Interest income earned from the temporary
investment of specific borrowings pending their
expenditure on qualifying assets is deducted from
the borrowing costs eligible for capitalization.
All other borrowing costs are recognizedas profit or
loss in the period in which they are incurred.
1.6 Government grants
Government grants are not recognized until there is a
reasonable assurance that the Company will comply
with the conditions attached to them and the grants
will be received.
Government grants related to revenue nature are
recognized on a systematic basis in the Statement of
Profit and Loss over the periods necessary to match
them with the related costs which they are intended
to compensate for and are adjusted with the related
expenditure. If not related to a specific expenditure,
it is taken as income and presented under “Other
Income.”
1.7 Employee Benefits
(a) Retirement benefit costs and termination
benefits
Payments to defined contribution retirement
benefit plans are recognized as an expense when
employees have rendered service entitling them to
the contributions.
For defined benefit retirement benefit plans, the cost
of providing benefits is determined using the projected
unit credit method, with actuarial valuations being
carried out at each balance sheet date.
Defined benefit costs are categorized as follows:
• Service cost (including current service cost, past
service cost, as well as gains and losses on
curtailments and settlements)
• Net interest expense or income; and
• Re-measurement expense or income
The company presents the first two components of
defined benefit costs in profit or loss in the line item
'Employee benefits expense'.
Past service cost is recognized in profit or loss in the
period of a plan amendment.
Net interest is calculated by applying the discount
rate at the beginning of the period to the net defined
benefit liability or asset.
Re-measurement, comprising actuarial gains and
losses, the effect of the changes to the asset
ceiling (if applicable) and the return on plan assets
(excluding net interest), is reflected immediately in the
balance sheet with a charge or credit recognized in
other comprehensive income in the period in which
they occur. Re-measurement recognized in other
comprehensive income is reflected immediately in
retained earnings and is not reclassified to profit or
loss.Defined benefit plans comprise gratuity payable
to eligible employees on the exit due to retirement
or otherwise. Contributions paid/payable to defined
contribution plans comprising of Superannuation
and Provident Funds for certain employees covered
under the respective Schemes are recognized in the
Statement of Profit and Loss each year.
A liability for a termination benefit is recognized at the
earlier of when the entity can no longer withdraw the
offer of the termination benefit and when the entity
recognizes any related restructuring costs.
(b) Short-term and other long-term employee
benefits
A liability is recognized for benefits accruing to
employees in respect of wages and salaries in the
period the related service is rendered.
Liabilities recognized in respect of short-term
employee benefits are measured at the undiscounted
amount of the benefits expected to be paid in
exchange for the related service.
Liabilities recognized in respect of other long-term
employee benefits are measured at the present value
of the estimated future cash outflows expected to
be made by the Company in respect of the services
provided by employees up to the reporting date.
1.8 Earnings per Share
The Company presents basic and diluted earnings per
share (EPS) data for its equity shares. Basic EPS is
calculated by dividing the profit or loss attributable to
equity shareholders by the weighted average number
of equity shares outstanding during the period. Diluted
EPS is determined by adjusting the profit or loss
attributable to equity shareholders and the weighted
average number of equity shares outstanding for the
effects of all dilutive potential equity shares.
1.9 Taxation
Income tax expense represents the sum of the tax
currently payable net of MAT (Minimum Alternate Tax)
credit utilization and deferred tax.
a. Current tax
The tax currently payable is based on taxable profit
for the year. Taxable profit differs from 'profit before
tax' as reported in the statement of profit and loss
because of items of income or expense that are
taxable or deductible in other years and items that
are never taxable or deductible. The Company's
current tax is calculated using tax rates that have
been enacted or substantively enacted by the end
of the reporting period. Company offsets current
tax assets and current tax liabilities, where it has
a legally enforceable right to set off the recognized
amounts and where it intends either to settle on a net j
basis or to realize the assets and settle the liabilities
simultaneously.
b. Deferred tax
Deferred tax is recognized on temporary differences
between the carrying amounts of assets and liabilities
in the financial statements and the corresponding
tax bases used in the computation of taxable profit.
Deferred tax liabilities are generally recognized for all
taxable temporary differences. Deferred tax assets
are generally recognized for all deductible temporary
differences to the extent that it is probable that taxable
profits will be available against which those deductible
temporary differences can be utilized. Such deferred
tax assets and liabilities are not recognized if the
temporary difference arises from the initial recognition
(other than in a business combination) of assets
and liabilities in a transaction that affects neither the
taxable profit nor the accounting profit. In addition,
deferred tax liabilities are not recognized if the
temporary difference arises from the initial recognition
of goodwill.
Deferred tax assets arising from deductible temporary
differences associated with such investments and
interests are only recognized to the extent that it is
probable that there will be sufficient taxable profits
against which to utilize the benefits of the temporary
differences and they are expected to reverse in the
foreseeable future.
The carrying amount of deferred tax assets is
reviewed at the end of each reporting period and
reduced to the extent that it is no longer probable
that sufficient tax profits will be available to allow all
or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at
the tax rates that are expected to apply in the period
in which the liability is settled or the asset realized,
based on tax rates (and tax laws) that have been
enacted or substantively enacted by the end of the
reporting period.
The measurement of deferred tax liabilities and assets
reflects the tax consequences that would follow
from the way the Company expects, at the end of
the reporting period, to recover or settle the carrying
amount of its assets and liabilities.
c. MAT Credit
It is the difference between the amount paid as per
book profit tax under section 115JB of the Income tax
Act, 1961 and the tax as per regular provisions of the
Income Tax Act, 1961.MAT credit is a tax credit and
as per IndAS 12 tax credits are treated as deferred
tax assets.
d. Current and deferred tax for the year
Current and deferred tax are recognized in profit
or loss, except when they relate to items that are
recognized in other comprehensive income or directly
in equity, in which case, the current and deferred tax
are also recognized in other comprehensive income
or directly in equity respectively.
1.10 Property, Plant and Equipment
Land and buildings held for use in the production
or supply of goods or services, or for administrative
purposes, are stated in the balance sheet at cost
less accumulated depreciation and accumulated
impairment losses. Freehold land is not depreciated.
Properties during construction for production,
supply or administrative purposes are carried out
at cost, less any recognized impairment loss. Cost
includes professional fees and, for qualifying assets,
borrowing costs are capitalized in accordance with the
Company's accounting policy. Such properties are
classified into the appropriate categories of property,
plant and equipment when completed and ready for
intended use. Depreciation of these assets, on the
same basis as other property assets, commences
when the assets are ready for their intended use.
Fixtures and equipment are stated at cost less
accumulated depreciation and accumulated
impairment losses.
Depreciation is recognized so as to write off the cost
of assets (other than freehold land and properties
under construction) less their residual values over
their useful lives, using the straight-line method.
The estimated useful lives, residual values and
depreciation method are reviewed at the end of each
reporting period, with the effect of any changes in
estimate accounted for on a prospective basis.
Estimated useful lives of the assets are as follows:
Useful lives applied as above are based on Schedule
II to the Companies Act, 2013 except certain items
of Buildings for which the useful life has been taken
based on internal technical evaluation.
Assets costing ' 5,000 and below are depreciated
over a period of one year.An item of property, plant
and equipment is de-recognized upon disposal or
when no future economic benefits are expected to
arise from the continued use of the asset. Any gain
or loss arising from the disposal or retirement of an
item of property, plant and equipment is determined
as the difference between the sales proceeds and
the carrying amount of the asset and is recognized
in profit or loss.
1.11 Investment Property
Investment properties are properties held to earn
rentals and/or for capital appreciation (including
property under construction for such purposes).
Investment properties are measured initially at cost
including transactions costs. After initial recognition,
investment properties are measured in accordance
with Ind AS 16's requirement for cost model.
An investment property is derecognized upon disposal
or when the investment property is permanently
withdrawn from use and no future economic benefits
are expected from the disposal. Any gain or loss
arising on de-recognition of the property (calculated
as the difference between the net disposal proceeds
and the carrying amount of the asset) is included in
profit or loss in the period in which the property is
de-recognized.
1.12 Intangible Assets
a. Intangible assets acquired separately
Intangible assets with finite useful lives that
are acquired separately are carried at cost less
accumulated amortization and accumulated
impairment losses. Amortization is recognized on a
straight-line basis over their estimated useful lives.
The estimated useful life and amortization methods
are reviewed at the end of each reporting period, with
the effect of any changes in estimate being accounted
for on a prospective basis. Intangible assets with
indefinite useful lives that are acquired separately are
carried at cost less accumulated impairment losses.
b. De-recognition of intangible assets
An intangible asset is de-recognized on disposal,
or when no future economic benefits are expected
from use or disposal. Gains or losses arising from
de-recognition of an intangible asset, measured as
the difference between the net disposal proceeds and
the carrying amount of the asset, and arerecognized
in profit or loss when the asset is de-recognized.
c. Useful lives of intangible assets
Estimated useful lives of the intangible assets are not
more than 6 years.
1.13 Inventories
Inventories are stated at the lower of cost and net
, realizable value. Net realizable value represents
the estimated selling price for inventories less all
estimated costs of completion and costs necessary
to make the sale.
Cost of inventory comprises of purchase price, cost
of conversion and other directly attributable costs that
have been incurred in bringing the inventories to their
respective present location and condition. Borrowing
costs are not included in the value of inventories.
The cost of inventories is computed on a weighted
average basis. Inventories are written down on a
case-by-case basis if the anticipated net realizable
value declines below the carrying amount of the
inventories. Such write downs are recognized in the
Statement of Profit and Loss. When the reason for
a write-down of the inventories ceases to exist, the
write-down is reversed.
|