II Significant Accounting Policies
1 Basis of preparation:
The Financial Statements have been prepared in accordance
with Indian Generally Accepted Accounting Principles (IGAAP)
under historical cost convention on the accrual basis. GAAP
comprises mandatory accounting standards prescribed by the
Companies (Accounting Standards) Rules, 2021.
2 Revenue recognition:
a) Sale of Goods
Revenue from sale of goods is recognized when the
Company has transferred to the buyer the property in
the goods for a price or all significant risks and rewards
of ownership have been transferred to the buyer and
the Company retains no effective control of the goods
transferred to a degree usually associated with ownership;
and no significant uncertainty exists regarding the
amount of the consideration that will be derived from
the sale of the goods.
b) Sale of services:
Revenue from service transactions is usually recognised
as the service is performed by the proportionate
completion method. The revenue recognised under this
method would be determined on the basis of contract
value, associated costs, number of acts or other suitable
basis. For practical purposes, when services are provided
by an indeterminate number of acts over a specific
period of time, revenue is recognised on a straight line
basis over the specific period.(The revenue is recognised
under this method would be when the sole or final act
takes place and the service becomes chargeable.) Such
performance should be regarded as being achieved when
no significant uncertainty exists regarding the amount of
the consideration that will be derived from rendering the
service.
c) Other Income
Revenue arising from the use by others of enterprise
resources yielding interest, royalties and dividends should
only be recognised when no significant uncertainty as to
measurability or collectability exists. These revenues are
recognised on the following bases:
(i) Interest: on a time proportion basis taking into
account the amount outstanding and the rate
applicable.
(ii) Royalties: on an accrual basis in accordance with
the terms of the relevant agreement.
(iii) Dividends from: when the owner's right to receive
payment is established by investments in shares.
3 Property Plant and Equipment including Intangible assets:
Property Plant and Equipment's are stated at cost, less
accumulated depreciation. Cost includes cost of acquisition
including material cost, freight, installation cost, duties and
taxes, and other incidental expenses, incurred up to the
installation stage, related to such acquisition. Property Plant
and Equipment's purchased in India in foreign currency are
recorded in Rupees, converted at the exchange rate prevailed on
the date of purchase. Intangible assets that are acquired by the
Company are measured initially at cost. After initial recognition,
an intangible asset is carried at its cost less any accumulated
amortisation and any accumulated impairment loss.
4 Depreciation & Amortisation:
The Company has applied the estimated useful lives as
specified in Schedule II of the Companies Act 2013 and
calculated the depreciation as per the Written Down Value
(WDV) method. Depreciation on new assets acquired during
the year is provided at the rates applicable from the date of
acquisition to the end of the financial year.
Intangible assets are amortised on a straight-line basis over
the estimated useful life as specified in Schedule II of the
Companies Act 2013. The amortisation expense on intangible
assets with finite lives is recognised in the statement of
profit and loss. In respect of the assets sold during the year,
amortisation is provided from the beginning of the year till the
date of its disposal.
5 Impairment of assets:
The Management periodically assesses using, external and
internal sources, whether there is an indication that an asset
may be impaired. An impairment loss is recognised wherever
the carrying value of an asset exceeds its recoverable amount.
The recoverable amount is higher of the asset's net selling
price and value in use, which means the present value of
future cash flows expected to arise from the continuing use
of the asset and its eventual disposal. Reversal of impairment
loss is recognised immediately as income in the profit and loss
account.
6 Inventories:
Inventories includes raw material, semi finished goods, stock-
in-trade, finished goods, stores & spares, consumables, packing
materials, goods for resale and commercial premises are valued
at lower of cost and net realizable value. Materials in transit is
valued at cost incurred till date.
Raw Material and Components - Cost include cost of purchases
and other costs incurred in bringing the inventories to their
present location and condition. Cost is determined using
weighted average valued at cost incurred till date.
Finished/Semi-Finished Goods - cost includes cost of direct
material, labour, other direct cost (Including variable costs) and
a proportion of fixed manufacturing overheads allocated based
on the normal operating capacity but excluding borrowing
costs. Cost is determined on weighted average cost basis.
Stock-in-trade - cost includes cost of purchase and other costs
incurred in bringing the inventories to their present location
and conditions
Stores, Spare Parts, Consumables, Packing Materials etc. - cost
is determined on FIFO basis.
Commercial Premises - Cost includes cost of land, premium for
development rights, construction cost, materials, services and
allocated interest and expenses incidental to the construction
business.
Net realisable value is the estimated selling price in the ordinary
course of business less the estimated cost of completion and
the estimated costs necessary to make the sale.
Adequate allowance is made for obsolete and slow-moving
items.
7 Use of estimates:
The preparation of the financial statements in conformity
with Generally Accepted Accounting Principles requires the
Management to make estimates and assumptions that affect
the reported balances of assets and liabilities and disclosures
relating to contingent assets and liabilities as at the date of
the financial statements and the reported amounts of income
and expenses during the year. Examples of such estimates
include provisions for doubtful debts, income taxes, post - sales
customer support and the useful lives of Property Plant and
Equipment's and intangible assets.
8 Foreign currency transactions:
Domestic Operation:
I. Initial recognition :
A foreign currency transaction should be recorded, on
initial recognition in the reporting currency, by applying
to the foreign currency amount the exchange rate
between the reporting currency and the foreign currency
at the date of the transaction.
II. Measurement :
Foreign currency monetary items should be reported
using the closing rate.
Non-monetary items which are carried in terms of
historical cost denominated in a foreign currency should
be reported using the exchange rate at the date of the
transaction
Non-monetary items which are carried at fair value or
other similar valuation denominated in a foreign currency
should be reported using the exchange rates that existed
when the values were determined.
III. Treatment of Foreign exchange :
Exchange differences arising on settlement/restatement
of foreign currency monetary assets and liabilities of the
Company are recognised as income or expenses in the
Statement of Profit and Loss.
9 Employee Benefits:
A. Short - term employee benefits:
Leave encashment:
The leave encashment liability upon retirement would not
arise as the accumulated leave is reimbursed every year and
accounted at actual.
B. Post-Employment benefits:
Defined benefit plan:
Gratuity liability is a defined benefit obligation and is unfunded.
The Company accounts for liability for future gratuity benefits
based on the actuarial valuation using Projected Unit Credit
Method carried out as at the end of each financial year.
Defined contribution Plan:
Provident Fund: Eligible employees receive benefit from
provident fund covered under the Provident Fund Act. Both
the employee and the company make monthly contributions.
The employer contribution is charged off to Profit & Loss
Account as an expense.
10 Taxes on Income:
Income Tax expense is accounted for in accordance with AS-
22 "Accounting for Taxes on Income" for both Current Tax and
Deferred Tax stated below:
A. Current Tax:
Provision for current tax is made in accordance with the
provisions of the Income Tax Act, 1961.
B. Deferred Tax:
Deferred tax is recognised, subject to the consideration of
prudence, as the tax effect of timing difference between the
taxable income and accounting income computed for the
current accounting year using the tax rates and tax laws that
have been enacted or substantially enacted by the balance
sheet date.
Deferred tax assets are recognised and carried forward to the
extent that there is a reasonable certainty, except arising from
unabsorbed depreciation and carried forward losses, that
sufficient future taxable income will be available against which
such deferred tax assets can be realised.
11 Research & Development:
Expenditure of intangible asset on the research phase are
recognised as an expense when it is incurred and expenditure
on development phase are recognised if it is probable that
the future economic benefits that are attributable to the asset
will flow to the enterprise and the cost of the asset can be
measured reliably.
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