3 MATERIAL ACCOUNTING POLICIES:
Pursuant to the Companies (Indian Accounting Standards)
Amendment Rules, 2023 effective April 01, 2023, the
Company is required to disclose ‘material accounting
policy Information’ in lieu of the earlier requirement of
disclosing ‘significant accounting policies’. All accounting
policies followed by the company are in accordance with
the Indian Accounting Standards (Ind AS) notified u/s
133 of the Companies Act, 2013 read with the Companies
(Indian Accounting Standards) Rules, 2015 and conform
to Schedule III to the Companies Act, 2013 as applicable.
Specific disclosure of material accounting policy information
where Ind AS permits options is made hereunder: The
company has assessed the materiality of the accounting
policy information, which involves exercising judgement
and considering both quantitative and qualitative factors by
taking into account not only the size and nature of the item
or condition but also the characteristics of the transactions,
events or conditions that could make the information more
likely to impact the decisions of the users of the financial
statements.
3.1 Current versus non-current classification
The Company presents assets and liabilities in the balance
sheet based on current/non-current classification. An asset is
classified current when it is:
(a) Expected to be realized or intended to be sold or
consumed in the normal operating cycle
(b) Held primarily for the purpose of trading
(c) Expected to be realized within twelve months after the
reporting period; or
(d) 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 classified current when:
(a) It is expected to be settled in the normal operating
cycle;
(b) It is held primarily for the purpose of trading;
(c) It is due to be settled within twelve months after the
reporting period; or
(d) 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.
Deferred tax assets and liabilities are always classified as
non-current assets and liabilities.
3.2 Financial instruments
(a) Recognition and initial measurement
Trade receivables and debt securities issued are
initially recognized when they are originated. All other
financial assets and financial liabilities are initially
recognized when the Company becomes a party to the
contractual provisions of the instrument.
A financial asset or financial liability is initially
measured at fair value plus, for an item not at fair value
through profit and loss (FVTPL), transaction costs that
are directly attributable to its acquisition or issue.
(b) Classification and subsequent measurement
Financial assets
On initial recognition, a financial asset is classified as
measured at
- amortized cost;
- Fair value through profit or loss (FVTPL) or
Fair value through other comprehensive income
('FVOCI')
Financial assets are not reclassified subsequent to
their initial recognition, except if and in the period the
Company changes its business model for managing
financial assets. A financial asset is measured at
amortized cost if it meets both of the following
conditions and is not designated as at FVTPL:
- the asset is held within a business model whose
objective is to hold assets 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.
A financial asset is measured at fair value through
other comprehensive income ('FVOCI') if it meets
both of the following conditions and is not designated
as at FVTPL:
- the asset is held within a business model whose
objective is to hold assets to collect contractual
cash flows and cash flows from sales; 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.
All financial assets not classified as measured at
amortized cost as described above are measured at
FVTPL. This includes all derivative financial assets.
On initial recognition, the Company may irrevocably
designate a financial asset that otherwise meets the
requirements to be measured at amortized cost as at
FVTPL if doing so eliminates or significantly reduces
an accounting mismatch that would otherwise arise.
Equity instruments are always classified fair value
through profit and loss, except in cases where the
Company has elected an irrevocable option of
designating the same as fair value through other
comprehensive income (FVOCI).
Financial assets: Subsequent measurement and
gains and losses
Financial assets at FVTPL :
These assets are subsequently measured at fair value.
Net gains and losses, including any interest or dividend
income, are recognized in profit or loss.
Financial assets at amortized cost:
These assets are subsequently measured at amortized
cost using the effective interest method. The amortized
cost is reduced by impairment losses. Interest income,
foreign exchange gains and losses and impairment
are recognized in profit or loss. Any gain or loss on
derecognition is recognized in profit or loss.
Financial assets at FVOCI :
These assets are subsequently measured at fair value
through other comprehensive income i.e., subsequent
changes in fair value of the instrument is recognized in
other comprehensive income. Any dividend received
on such instruments are recognized in Statement of
Profit and Loss.
Financial liabilities: Classification, subsequent
measurement and gains and losses
Financial liabilities are classified and measured
at amortized cost or FVTPL. A financial liability
is classified as at FVTPL if it is classified as
held-for-trading, or it is a derivative or it is designated
as such on initial recognition. Financial liabilities
at FVTPL are measured at fair value and net gains
and losses, including any interest expense, are
recognized in profit or loss. Other financial liabilities
are subsequently measured at amortized cost using
the effective interest method. Interest expense and
foreign exchange gains and losses are recognized in
profit or loss. Any gain or loss on derecognition is also
recognized in profit or loss.
(c) Derecognition
Financial assets
The Company derecognizes a financial asset when the
contractual rights to the cash flows from the financial
asset expire, or it transfers the rights to receive the
contractual cash flows in a transaction in which
substantially all of the risks and rewards of ownership
of the financial asset are transferred or in which the
Company neither transfers nor retains substantially
all of the risks and rewards of ownership and does not
retain control of the financial asset.
If the Company enters into transactions whereby it
transfers assets recognized on its balance sheet, but
retains either all or substantially all of the risks and
rewards of the transferred assets, the transferred assets
are not derecognized.
Financial liabilities
The Company derecognizes a financial liability when
its contractual obligations are discharged or cancelled,
or expire.
The Company also derecognizes a financial liability
when its terms are modified and the cash flows under
the modified terms are substantially different. In this
case, a new financial liability based on the modified
terms is recognized at fair value. The difference
between the carrying amount of the financial liability
extinguished and the new financial liability with
modified terms is recognized in profit or loss.
(d) Impairment of financial assets
Loss allowance for expected credit losses is recognized
for financial assets measured at amortized cost and
fair value through other comprehensive income.
The Company recognizes life time expected credit
losses for all trade receivables that do not constitute a
financing transaction.
For financial assets (apart from trade receivables that
do not constitute of financing transaction) whose
credit risk has not significantly increased since
initial recognition, loss allowance equal to twelve
months expected credit losses is recognized. Loss
allowance equal to the lifetime expected credit losses
is recognized if the credit risk of the financial asset has
significantly increased since initial recognition.
(e) Offsetting
Financial assets and financial liabilities are offset and
the net amount presented in the balance sheet when,
and only when, the Company currently has a legally
enforceable right to set off the amounts and it intends
either to settle them on a net basis or to realize the asset
and settle the liability simultaneously.
5 Revenue from contract with customers
Revenue from contracts with customers is recognized when
control of the goods/services are transferred to the customer
at an amount that reflects the consideration to which the
Company expects to be entitled in exchange for those goods/
services. Such revenue is recognized upon the Company’s
performance of its contractual obligations and on satisfying
all the following conditions:
(1) Parties to the contract have approved the contract and
undertaken to perform their respective obligations;
(2) Such contract has specified the respective rights
and obligations of the parties in connection with the
transfer of goods or rendering of services (hereinafter
the “Transfer”);
(3) Such contract contains specific payment terms in
relation to the Transfer;
(4) Such contract has a commercial nature, namely, it will
change the risk, time distribution or amount of the
Company’s future cash flow;
(5) The Company is likely to recover the consideration it
is entitled to for the Transfer to customers.
Revenue is recognized when no significant uncertainty
exists regarding the collection of the consideration. The
amount recognized as revenue is exclusive of all indirect
taxes and net of returns and discounts.
(a) Sale of goods
For contracts with customers for sale of goods, revenue
is recognized net of discount and rebates, at a point
in time when control of the asset is transferred to the
customer, which is when the goods are delivered to the
customers as per the terms of the contracts. Delivery
happens when the goods have been shipped or delivered
to the specific location, as the case may be, the risk of
loss has been transferred, and either the customer has
accepted the goods in accordance with the contracts or
the Company has objective evidence that all criteria
related for acceptance has been satisfied.
No element of significant financing is deemed present
as the sales are generally made with a credit term which
is consistent with the market practice. A receivable is
recognized when the goods are delivered and this is
the point in time that the consideration is unconditional
because only the passage of time is required before the
payment
(b) Sale of Services
Revenue from service contracts are recognized in the
accounting period in which the services are rendered.
Where the contracts include multiple performance
obligations, the transaction price is allocated to each
performance obligation based on the standalone selling
price and revenue is recognized over time as and when
the customer receives the benefit of the Company’s
performance based on the actual service provided to
as proportion of the total services to be provided. In
case, the service contracts include one performance
obligation revenue is recognized based on the actual
service provided to the end of the reporting period as
proportion of the total services to be provided. This is
determined based on the actual expenditure incurred to
the total estimated cost.
(c) Dividend and interest income
Dividend income is recognized when the company's
right to receive payment has been established and that
the economic benefits will flow to the Company and
amount of income can be measured reliably.
Interest income from a financial asset 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 time
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 the
asset's net carrying amount on initial recognition.
3.4 Government grants
Government grants are recognized where there is reasonable
assurance that the grant will be received and all attached
conditions will be complied with. When the grant relates to
an expense item, it is recognized as income on a systematic
basis over the periods that the related costs, for which it
is intended to compensate, are expensed. When the grant
relates to an asset, it is recognized as income in equal
amounts over the expected useful life of the related asset.
3.5 Income Taxes Current tax
Current tax assets and liabilities are measured at the amount
expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute the
amount are those that are enacted or substantively enacted at
the reporting date.
Current tax relating to items recognized directly in equity
is recognized in equity and not in the statement of profit or
loss. 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.
Deferred tax assets are recognized for all deductible
temporary differences, 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.
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 profit or
loss is recognized outside profit or loss. Deferred tax items
are recognized in correlation to the underlying transaction
either in OCI or directly in equity.
The Company offsets deferred tax assets and deferred tax
liabilities if and only if it has a legally enforceable right
to set off current tax assets and current tax liabilities and
the deferred tax assets and deferred tax liabilities relate to
income taxes levied by the same taxation authority.
3.6 Foreign currencies
Items included in the financial statements are measured
using the currency of the primary economic environment
in which the entity operates ('the functional currency'). The
Company's financial statements are presented in Indian
Rupees, which is the Company’s functional and presentation
currency.
Transactions and balances
Transactions in foreign currencies are initially recorded by
the Company in its functional currency spot rates at the date
the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign
currencies are translated at the functional currency spot rates
of exchange at the reporting date. Differences arising on
settlement or translation of monetary items are recognized
in profit or loss unless they relates to the qualifying cash
flow hedges.
Non-monetary items that are measured in terms of historical
cost in a foreign currency are translated using the exchange
rates at the dates of the initial transactions.
In determining the spot exchange rate to use on initial
recognition of the related asset, expense or income (or part
of it) on the derecognition of a non-monetary asset or non¬
monetary liability relating to advance consideration, the date
of the transaction is the date on which the Company initially
recognizes the non-monetary asset or non-monetary liability
arising from the advance consideration. If there are multiple
payments or receipts in advance, the Company determines
the transaction date for each payment or receipt of advance
consideration.
3.7 Property, plant and equipment
Property, plant and equipment is stated at cost, net of
accumulated depreciation and accumulated impairment
losses, if any. Construction in progress is stated at cost, net
of accumulated impairment losses, if any.
Cost of Property, plant and equipment includes the costs
directly attributable to the acquisition or constructions of
assets, or replacing parts of the plant and equipment and
borrowing costs for qualifying assets, if the recognition
criteria are met. When significant parts of plant and
equipment are required to be replaced at intervals, the
Company depreciates them separately based on their specific
useful lives.
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
them will flow to the Company and the cost of the item can
measured reliably. All other repair and maintenance costs
are recognized in profit or loss as incurred.
Advance given for acquisition / construction of Property,
Plant and Equipment and Intangible assets are presented as
"Capital Advance" under Other Non-Current Assets. The
assets in the process of construction or acquisition but not
ready for management's intended use are included under
Capital Work in progress.
Depreciation is provided on Straight line method in the
manner and on the basis of useful lives prescribed in
Schedule II to the Companies Act, 2013. Depreciation on
addition / deduction is calculated pro-rata from/to the month
of addition / deduction.
An item of property, plant and equipment and any significant
part initially recognized is derecognized upon disposal (i.e.,
at the date the recipient obtains control) 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 or 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.
The estimated useful lives of the assets considered by the
Company is stated hereunder:
3.8 Leases
The Company assesses at contract inception whether a
contract is, or contains, a lease. That is, if the contract
conveys the right to control the use of an identified asset for
a period of time in exchange for consideration.
The Company as a lessee
The Company applies a single recognition and measurement
approach for all leases, except for short-term leases and
leases of low-value assets. The Company recognizes lease
liabilities to make lease payments and right-of-use assets
representing the right to use the underlying assets.
Right-of-use assets
The Company recognizes right-of-use assets at the
commencement date of the lease (i.e., the date the
underlying asset is available for use). Right-of-use assets
are measured at cost, less any accumulated depreciation
and impairment losses, and adjusted for any remeasurement
of lease liabilities. The cost of right-of-use assets includes
the amount of lease liabilities recognized, initial direct
costs incurred, and lease payments made at or before the
commencement date less any lease incentives received.
Right-of-use assets are depreciated on a straight-line basis
over the shorter of the lease term and the estimated useful
lives of the assets.
I f ownership of the leased asset transfers to the Company
at the end of the lease term or the cost reflects the exercise
of a purchase option, depreciation is calculated using the
estimated useful life of the asset.
Lease liabilities
At the commencement date of the lease, the Company
recognizes lease liabilities measured at the present value of
lease payments to be made over the lease term. The lease
payments include fixed payments (including in-substance
fixed payments) less any lease incentives receivable,
variable lease payments that depend on an index or a rate,
and amounts expected to be paid under residual value
guarantees. The lease payments also include payments of
penalties for terminating the lease, if the lease term reflects
the Company exercising the option to terminate.
Variable lease payments that do not depend on an index or
a rate are recognized as expenses (unless they are incurred
to produce inventories) in the period in which the event or
condition that triggers the payment occurs.
In calculating the present value of lease payments, the
Company uses its incremental borrowing rate at the lease
commencement date because the interest rate implicit in the
lease is not readily determinable. After the commencement
date, the amount of lease liabilities is increased to reflect
the accretion of interest and reduced for the lease payments
made. In addition, the carrying amount of lease liabilities is
remeasured if there is a modification, a change in the lease
term, a change in the lease payments.
The Company's lease obligations are presented on the face
of the Balance Sheet.
Short-term leases and leases of low value assets
The Company applies the short-term lease recognition
exemption to its short-term leases (i.e., those leases that have
a lease term of 12 months or less from the commencement
date). It also applies the lease of low-value assets recognition
exemption to leases of assets that are considered to be low
value. Lease payments on short-term leases and leases of
low-value assets are recognized as expense on a straight-line
basis over the lease term.
The Company as a lessor
Leases in which the Company does not transfer substantially
all the risks and rewards incidental to ownership of an asset
are classified as operating leases. Rental income arising is
accounted for on a straight-line basis over the lease terms
and is included in revenue in the statement of profit or loss
due to its operating nature. Initial direct costs incurred in
negotiating and arranging an operating lease are added to the
carrying amount of the leased asset and recognized over the
lease term on the same basis as rental income. Contingent
rents are recognized as revenue in the period in which they
are earned.
3.9 Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of an asset that necessarily takes
a substantial period of time to get ready for its intended use
or sale are capitalised as part of the cost of the asset. All
other borrowing costs are expensed in the period in which
they occur. Borrowing costs consist of interest and other
costs that an entity incurs in connection with the borrowing
of funds.
3.10 Intangible assets
Intangible assets acquired separately are measured on
initial recognition at cost. Subsequent to initial recognition,
intangible assets are carried at cost less any accumulated
amortization and accumulated impairment losses. Internally
generated intangibles, excluding capitalised development
costs, are not capitalised and the related expenditure
is reflected in profit or loss in the period in which the
expenditure is incurred.
Intangible assets are amortized over the useful economic life
(5 years for computer software) and assessed for impairment
whenever there is an indication that the intangible asset may
be impaired. The amortization period and the amortization
method for an intangible asset with a finite useful life are
reviewed at least at the end of each reporting period.
An intangible asset is derecognized upon disposal (i.e., at
the date the recipient obtains control) or when no future
economic benefits are expected from its use or disposal.
Any gain or loss arising upon 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 or Loss.
3.11 Impairment of assets (other than financial assets)
At each balance sheet date, the Company reviews the carrying
value of its property, plant and equipment and intangible
assets to determine whether there is any indication that
the carrying value of those assets may not be recoverable
through continuing use. If any such indication exists, the
recoverable amount of the asset is reviewed in order to
determine the extent of impairment loss, if any. Where the
asset does not generate cash flows that are independent from
other assets, the Company estimates the recoverable amount
of the cash generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset
for which the estimates of future cash flows have not been
adjusted. An impairment loss is recognized in the statement
of profit and loss as and when the carrying value of an asset
exceeds its recoverable amount.
Where an impairment loss subsequently reverses, the carrying
value of the asset (or cash generating unit) is increased to
the revised estimate of its recoverable amount so that the
increased carrying value does not exceed the carrying value
that would have been determined had no impairment loss
been recognized for the asset (or cash generating unit) in
prior years. A reversal of an impairment loss is recognized
in the statement of profit and loss immediately.
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