Significant accounting policies
2 Basis of accounting and preparation of financial statements
The financial statements of the Company have been prepared
to comply with the Indian Accounting Standards (IND AS)
notified under Section 133 of the Companies Act, 2013
(Companies Indian Accounting Standard Rules, 2015) and other
relevant provisions of the Act.
2.1 Historical Cost Convention
The financial statements have been prepared on the historical
cost basis, except for Certain financial assets and liabilities
that is measured at fair value.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions. These estimates,
judgements and assumptions effect the application of
accounting policies and the reported amounts of assets and“
liabilities, the disclosures of contingent assets and liabilities at
the date of financial statements and reported amounts of
revenues and expenses during the period. Accounting estimates
could change from period to period. Actual results could differ
from those estimates. Appropriate changes in estimates are
made as management becomes aware of circumstances
surrounding the estimates. Changes in estimates are reflected
in the financial statement in the period in which changes are
made and if material, their effects are disclosed in the notes to
the financial statements.
2.2 Current and non-current Classification
The Company presents assets and liabilities in the balance
sheet based on current/ non-current classification.
An asset is current when:
It is expected to be realised or intended to be sold or
consumed in normal operating cycle or
It is held primarily for the purpose of trading or
It is expected to be realised within twelve months after the
reporting period, or
It is cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least twelve
months after the reporting period.
All other assets are classified as non-current.
A liability is current when :
It is expected to be settled in normal operating cycle or
It is held primarily for the purpose of trading or
It is due to be settled within 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.
The Company classifies all other liabilities as non-current.
2.3 Inventories
a) Raw Materials, Work-In-Progress and Finished Goods are
valued at lower of the cost or net realisable value. Cost of
raw materials comprises cost of purchase. Cost of
inventories also include all other costs incurred in bringing
the inventories to their present location and condition.
b) Net realisable value is the estimated selling price in the
ordinary course of business less the estimated costs of
completion and the estimated costs necessary to make
the sale.
c) The basis of determining the cost is
Raw Materials :Weighted average cost
Stores and spares :Weighted average cost
Work in process and finished goods :Material cost plus
appropriate share of labour
and related overhead.
2.4 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.
Subsequent costs are included in the asset's carrying amount
or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with the
item will flow to the entity and the cost can be measured reliably.
Depreciation is recognised 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. Estimated useful life of the assets are as
follows:
Gains or losses arising from derecognition of a property, plant and
equipment are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognised
in the Statement of Profit and Loss when the asset is derecognised.
2.5 Revenue recognition
Ind AS 115 recognises revenue on transfer of the Control of
goods or services, either over a period of time or at a
point in time, at an amount that the entity expects to be
entitled in exchange for those goods or Services. The
company has adopted Ind AS 115 from FY 2018-19 and
recognised revenue accordingly.
a) Export sales: Export sales are recognized on the date of
Bill of Lading. However, final adjustments are made in the
year of receipt of discharge port analysis.
b) Domestic sales: Domestic sales are accounted on the date
of Forwarding Note (Rail dispatches / Lorry receipt /Delivery
challan). However, in case of spot auction under electronic
mode, the sale is recognized on conclusion of the auction.
c) Scrap sales: Income is accounted on realization basis in
respect of used / surplus /obsolete / unserviceable
materials / waste products and scrap
2.6 Expenditure
Expenses are accounted on accrual basis and provision is made
for all known losses and liabilities.
2.7 Intangible Assets
Product development expenses that are directly attributable to
development and testing of new products are recognised as
intangible assets when the expenditure attributable to the
product during its development can be reliably measured . Such
cost includes purchase price, borrowing costs, and any cost
directly attributable to bringing the asset to its working condition
for the intended use, net charges on foreign exchange contracts
and adjustments arising from exchange rate variations
attributable to the intangible assets.
Subsequent costs are included in the asset's carrying amount
or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with the
item will flow to the entity and the cost can be measured reliably.
Amortisation is recognised on a straight line basis over their
estimated useful life. The estimated useful life and amortisation
method are reviewed at the end of each reporting period, with
the effect of any changes in estimate being accounted for on a
prospective basis.
Gains or losses arising from derecognition of an intangible asset
are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are
recognised in the Statement of Profit and Loss when the asset
is derecognised.
2.8 Capital work-in-progress:
Projects under which assets are not ready for their intended
use and other capital work-in-progress are carried at cost,
comprising direct cost, related incidental expenses and
attributable interest.
2.9 Interest Free Sales Tax Loan:
The sales tax collected on domestic sales of Company's
products is treated as interest free sales tax loan from the AP
State Government in accordance with the State Government
incentive scheme. The amount credited to the loan account is
based on the amounts collected as sales tax. The liability is
measured at its fair value considering the discounting rate as
8% and is shown at is fair value in statement of assets and
liabilities and the gain/(loss) is accounted as Other
Comprehensive Income.
2.10 Foreign Exchange Transaction:
All the Foreign Exchange transactions entered into during the
current financial year are accounted at the exchange rate
prevailing on the date of documentation/invoicing. Foreign
Exchange Fluctuation on transactions entered into during the
current financial year and received/paid during the year are
accounted in the current financial year. The outstanding foreign
currency debtors are restated at the Foreign Currency Rates
prevailing at the end of the year and the Foreign Exchange
Fluctuation on the same is also recognised at the end of the
year in conformity with Indian Accounting Standards and foreign
currency debtors which are doubtful at the end of the year are
not restated at the foreign currency rates prevailing at the end
of the year.
2.11 Employee Benefits:
Contribution to “Defined Contribution Schemes” such as
Provident Fund is charged to the profit and loss account as
incurred. Provident Fund contribution is made to the
Government Administered Provident Fund. Company has no
further obligation beyond this contribution charged in financial
statement.
Company also provides for Retirement Benefits in the form of
Gratuity. Such Benefits are provided for, based on valuation,
as at the Balance Sheet date, made by independent actuaries.
Short term employee benefits including leave are recognized
as an expense at the un discounted amount in the profit and
loss account of the year in which the related services are
rendered.
The company provides for gratuity for employees in India as
per the Payment of Gratuity Act, 1972. Employees who are in
continuous service for a period of 5 years are eligible for gratuity.
The amount of gratuity payable on retirement/ termination is
the employees last drawn basic salary per month computed
proportionately for 15 days salary multiplied for the number of
years of service. The Gratuity plan is a non funded plan.
2.12Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets, which are assets
that necessarily take a substantial period of time 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.
All other borrowing costs are recognised in Statement of Profit
and Loss in the period in which they are incurred.
2.13 Financial Assets & Financial Liabilities
Initial recognition and measurement
All financial assets and liabilities are recognised initially at fair
value.
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 asset is treated as cost of acquisition.
Purchases or sales of financial assets that require delivery of
assets within a time frame established by regulation or
convention in the market place (regular way trades) are
recognised on the trade date, i.e., the date that the Company
commits to purchase or sell the asset.
Subsequent Measurement
For purposes of subsequent measurement, financial assets are
classified in four categories:
• Debt instruments at amortised cost
• Debt instruments at fair value through other comprehensive
income (FVTOCI)
• Debt instruments, derivatives and equity instruments at
fair value through profit or loss (FVTPL)
• Equity instruments measured at fair value through other
comprehensive income (FVTOCI)
Financial liabilities are subsequently carried at amortized cost
using the effective interest method, except for contingent
consideration recognized in a business combination which is
subsequently measured at fair value through profit and loss.
For trade and other payables maturing within one year from
the Balance Sheet date, the carrying amounts approximate fair
value due to the short maturity of these instruments.
2.14 Earnings per share
Basic earnings per share is calculated by dividing the net profit
or loss for the year attributable to equity shareholders by the
weighted average number of Equity Shares outstanding during
the period.
For the purpose of calculating diluted earning per share, the
net profit for the year attributable to equity shareholders and
the weighted average number of Equity Shares outstanding
during the period are adjusted for the effects of all dilutive
potential equity shares.
Calculation of earnings per share:
Disclosure as required by Accounting Standard - Ind AS 33
Earning Per Share of the Companies (Indian Accounting
Standards) Rules 2015.
The earning per share is calculated by dividing the profit after
tax by weighted average number of shares outstanding for basic
and diluted EPS.
2.15 Taxes on income
Current Tax :
The income tax expense or credit for the period is the tax payable
on the current period's taxable income based on the applicable
income tax rate for each jurisdiction adjusted by changes in
deferred tax assets and liabilities attributable to temporary
differences and to unused tax losses. The current income tax
charge is calculated on the basis of the tax laws enacted or
substantively enacted at the end of the reporting period in the
countries where the company and its subsidiaries and
associates operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with respect
to situations in which applicable tax regulation is subject to
interpretation. It establishes provisions where appropriate on
the basis of amounts expected to be paid to the tax authorities.
Deferred Tax :
Deferred income tax is provided in full, using the liability method,
on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the
standalone financial statements. However, deferred tax liabilities
are not recognised if they arise from the initial recognition of
goodwill. Deferred income tax is also not accounted for if it
arises from initial recognition of an asset or liability in a
transaction other than a business combination that at the time
of the transaction affects neither accounting profit nor taxable
profit (tax loss). Deferred income tax is determined using tax
rates (and laws) that have been enacted or substantially enacted
by the end of the reporting period and are expected to apply
when the related deferred income tax asset is realised or the
deferred income tax liability is settled. Deferred tax assets are
recognised for all deductible temporary differences and unused
tax losses only if it is probable that future taxable amounts will
be available to utilise those temporary differences and losses.
Current and deferred tax is recognised in profit or loss, except
to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the
tax is also recognised in other comprehensive income or directly
in equity, respectively. For items recognised in OCI or equity,
deferred/ current tax is also recognised in OCI or equity. “MAT
Credit" Minimum Alternate Tax (MAT) paid in a year is charged
to the Statement of Profit and Loss as current tax. The Company
recognises MAT credit available as an asset only to the extent
that there is reasonable certainty that the Company will pay
normal income tax during the specified period, i.e., the period
for which MAT credit is allowed to be carried forward. The MAT
credit to the extent there is reasonable certainty that the
Company will utilise the credit is recognised in the Statement
of Profit and Loss and corresponding debit is done to the
Deferred Tax Asset as unused tax credit.
2.16 Impairment of assets
Assets subject to amortization/ depreciation are tested for
impairment provided that an event or change in circumstances
indicates that their carrying amount might not be recoverable.
An impairment loss is recognized in the amount by which the
asset's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher between an asset's fair value
less sale costs and value in use. For the purposes of assessing
impairment, assets are grouped together at the lowest level for
which there are separately identifiable cash flows (cash¬
generating units). Nonfinancial assets other than goodwill for
which impairment losses have been recognized are tested at
each balance sheet date in the event that the loss has reversed.
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