6. Significant Accounting Policies
6.1. Property, Plant and Equipment
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated
at cost less accumulated depreciation and impairment loss, if any.
Cost includes purchase price, borrowing costs if capitalization criteria are met and directly attributable
cost of bringing the asset to its working condition for the intended use.
Such cost includes the cost of replacing part of the plant and equipment and borrowing costs for
long-term construction projects if the recognition criteria are met. When significant parts of plant and
equipment are required to be replaced at intervals, the Company depreciates these components
separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost
is recognized in the carrying amount of the 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 or loss as incurred.
Capital work-in-progress in respect of assets which are not ready for their intended use are carried at
cost, comprising of direct costs, related incidental expenses and attributable interest, if any.
Property, plant and equipment are derecognized either on disposal or when the asset retires from
active use. Losses arising in the case of the retirement of property, plant and equipment and gains or
losses arising from disposal of property, plant and equipment are recognized in the statement of profit
and loss in the year of occurrence.
Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its
estimated residual value. Depreciation on the property, plant and equipment is provided on straight
line method, over the useful life of the assets, as specified in Schedule II to the Companies Act, 2013.
Property, plant and equipment which are added / disposed of during the year, depreciation is provided
on pro-rata basis.
The assets' residual values, useful lives and methods of depreciation are reviewed at each financial
year end and adjusted prospectively, if appropriate.
6.2. Financial Instruments
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.
Financial Assets
Classification:
The Company classifies financial assets as subsequently measured at amortized cost, fair value
through other comprehensive income or fair value through profit or loss, on the basis of its business
model for managing the financial assets and the contractual cash flow characteristics of the financial
asset.
Initial recognition and measurement:
All financial assets (not measured subsequently at fair value through profit or loss) are recognized
initially at fair value plus transaction costs that are attributable to the acquisition of the financial asset.
Subsequent measurement:
For the purpose of subsequent measurement, financial assets are classified in two broad categories:
• Financial assets at fair value ( FVTPL /FVTOCI)
• Financial assets at amortized cost
When assets are measured at fair value, gains and losses are either recognized in the statement of
profit and loss (i.e. fair value through profit or loss (FVTPL)), or recognized in other comprehensive
income (i.e. fair value through other comprehensive income (FVTOCI)).
Financial Assets measured at amortized cost (net of write down for impairment, if any):
Financial assets are measured at amortized cost when asset is held within a business model, whose
objective is to hold assets for collecting contractual cash flows and contractual terms of the asset give
rise on specified dates to cash flows that are solely payments of principal and interest. Such financial
assets are subsequently measured at amortized cost using the effective interest rate (EIR) method
less impairment, if any. The losses arising from impairment are recognized in the Statement of profit
and loss.
Financial Assets measured at Fair Value through Other Comprehensive Income (“FVTOCI”):
Financial assets under this category are measured initially as well as at each reporting date at fair
value, when asset is held within a business model, whose objective is to hold assets for both collecting
contractual cash flows and selling financial assets. Fair value movements are recognized in the other
comprehensive income.
Financial Assets measured at Fair Value through Profit or Loss (“FVTPL”):
Financial assets under this category are measured initially as well as at each reporting date at fair
value with all changes recognized in profit or loss.
Investment in Subsidiary:
Investment in equity instruments of Subsidiaries are measured at cost. In the financial statements,
investment in subsidiaries is carried at cost. The carrying amount is reduced to recognize any
impairment in the value of investment.
Derecognition of Financial Assets:
A financial asset is primarily derecognized when the rights to receive cash flows from the asset have
expired or the Company has transferred its rights to receive cash flows from the asset.
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 financial assets that are debt instruments
and trade receivables.
Financial Liabilities:
Classification:
The Company classifies all financial liabilities as subsequently measured at amortized cost or FVTPL.
Initial recognition and measurement:
All financial liabilities are recognized initially at fair value and, in the case of loans, borrowings and
payables, net of directly attributable transaction costs.
Financial liabilities include trade and other payables, loans and borrowings including bank overdrafts
and derivative financial instruments.
Subsequent measurement:
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. Interest¬
bearing loans and borrowings are subsequently measured at amortized cost using the Effective
Interest Rate (EIR) method. Gains and losses are recognized in profit or loss when the liabilities are
derecognized as well as through EIR amortization process. Amortized cost is calculated by taking into
account any discount or premium on acquisition and fees or costs that are an integral part of the EIR.
The EIR amortization is included as finance costs in the Statement of Profit and Loss.
Derecognition of Financial Liabilities:
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or
expires. 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.
6.3. Inventories
Raw materials and packing materials are valued at lower of cost and the net realizable value, cost
of which includes duties and taxes (net of Goods and Service Tax wherever applicable). Cost of
imported raw materials and packing materials lying in warehouse includes the amount of customs
duty. Finished products and work- in-progress are valued at lower of cost and net realizable value.
Cost is arrived on moving weighted average basis.
The cost of Inventories have been computed to include all cost of purchases, cost of conversion,
appropriate share of fixed production overheads based on normal operating capacity and other related
cost incurred in bringing the inventories to their present location and condition.
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated
costs of completion and selling expenses necessary to make the sale.
6.4. Cash and Cash Equivalents
Cash and Cash Equivalents comprise of cash on hand and cash at bank including fixed deposit/highly
liquid investments with original maturity period of three months or less that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short¬
term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral
part of the Company's cash management.
6.5. Cash Flow Statement
Cash flows are reported using the indirect method, whereby net profit before tax is adjusted for the
effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash
receipts or payments and item of income or expenses associated with investing or financing cash
flows. The cash flow from operating, investing and financing activities of the Company is segregated.
6.6. Foreign Currency Transactions
Transactions in foreign currencies are translated into the Company's functional currency at the
exchange rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional
currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are
measured at fair value in a foreign currency are translated into the functional currency at the exchange
rate when the fair value was determined. Non-monetary assets and liabilities that are measured based
on historical cost in a foreign currency are not translated. Foreign currency exchange differences are
generally recognized in the statement of profit and loss.
Exchange differences arising on the settlement of monetary items or on translating monetary items
at rates different from those at which they were translated on initial recognition during the period or in
previous Financial Statements are recognized in the Standalone Statement of Profit and Loss in the
period in which they arise.
6.7. Revenue Recognition
Under Ind AS 115, the Company recognized revenue when (or as) a performance obligation was
satisfied, i.e. when 'control' of the goods underlying the particular performance obligation were
transferred to the customer.
Sale of Goods
The Company applied Ind AS 115 using the modified retrospective approach. Revenue is measured
based on the transaction price adjusted for discounts and rebates, which is specified in a contract with
customer. Revenues are net of estimated returns and taxes collected from customers.
Revenue from sale of goods is recognized at point in time when control is transferred to the customer
and it is probable that consideration will be collected. Control of goods is transferred upon the shipment
of the goods to the customer or when goods are made available to the customer.
The transaction price is documented on the sales invoice and payment is generally due as per agreed
credit terms with customers.
The consideration can be fixed or variable. Variable consideration is only recognized when it is highly
probable that a significant reversal will not occur.
Sales return is variable consideration that is recognized and recorded based on historical experience,
market conditions and provided for in the year of sale as reduction from revenue. The methodology
and assumptions used to estimate returns are monitored and adjusted regularly in line with trade
practices, historical trends, past experience and projected market conditions.
Interest income
Interest income is recognizes with reference to the Effective Interest Rate method.
Income from Export Benefits and Other Incentives
Export benefit available under prevalent schemes are accrued as revenue in the year in which the
goods are exported and/ or services are rendered only when there is reasonable assurance that the
condition attached to them will be complied with and the amounts will be received.
6.8. Employee Benefit
Short term employee benefits are recognized as an expense at the undiscounted amount in the
statement of profit and loss for the year in which the related service is rendered;
Post-Employment Benefits
Defined contribution plans: Company's contribution to State governed Provident Fund Scheme is
recognized during the year in which the related service is rendered;
The company has not ascertained liability towards payment of gratuity and hence no provision has
been made in accounts. It is accounted for on the basis of payment.
All employee benefits payable wholly within twelve months rendering service are classified as short
term employee benefits. Benefits such as salaries, wages, short-term compensated absences,
performance incentives etc., and the expected cost of bonus, ex- gratia are recognized during the
period in which the employee renders related service. Retirement benefits are accounted as and
when the same become due for payment.
6.9. 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 capitalized
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. Borrowing cost also includes exchange differences to the extent regarded as an
adjustment to the borrowing costs.
6.10. Lease
Leases in which a significant portion of the risks and rewards of ownership are retained by the
lessor are classified as operating leases. Payments made under operating leases are charged to the
Statement of profit and loss on a straight line basis over the period of the lease in a manner which
is representative of the time pattern in which benefit derived from the use of the leased asset is
diminished.
6.11. Earing Per Share
Basic earnings per equity share are computed by dividing the net profit attributable to the equity
holders of the Company by the weighted average number of equity shares outstanding during the
period.
Diluted earnings per equity share is computed by dividing the net profit attributable to the equity
holders of the Company by the weighted average number of equity shares considered for deriving
basic earnings per equity share and also the weighted average number of equity shares that could
have been issued upon conversion of all dilutive potential equity shares. The dilutive potential equity
shares are adjusted for the proceeds receivable had the equity shares been actually issued at fair
value. Dilutive potential equity shares are deemed converted as of the beginning of the period, unless
issued at a later date. Dilutive potential equity shares are determined independently for each period
presented.
6.12. Income Taxes
Income tax expense comprises current and deferred income tax. Income tax expense is recognized
in net profit in the statement of profit and loss except to the extent that it relates to items recognized
directly in equity, in which case it is recognized in other comprehensive income. Current income tax
for current and prior periods is recognized at the amount expected to be paid to or recovered from the
tax authorities, using the tax rates and tax laws that have been enacted by the balance sheet date.
Deferred income tax assets and liabilities are recognized for all temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts in the financial statements.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realized.
Deferred income tax assets and liabilities are measured using tax rates and tax laws that have been
enacted or substantively enacted by the balance sheet date and are expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled.
The effect of changes in tax rates on deferred income tax assets and liabilities is recognized as
income or expense in the period that includes the enactment or the substantive enactment date. A
deferred income tax asset is recognized to the extent that it is probable that future taxable profit will
be available against which the deductible temporary differences and tax losses can be utilized. The
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 basis, or to realize the
asset and settle the liability simultaneously.
Minimum Alternate Tax ('MAT') credit is recognized as deferred tax asset only when and to the extent
there is convincing evidence that the Company will pay normal income tax during the period for which
the MAT credit can be carried forward for set-off against the normal tax liability. MAT credit recognized
as an asset is reviewed at each Balance Sheet date and written down to the extent the aforesaid
convincing evidence no longer exists.
6.13. Dividends to Shareholders
Annual dividend distribution to the shareholders is recognized as a liability for the previous year for
which the dividends are approved by the shareholders. Any interim dividend paid is recognized on
approval by Board of Directors. Dividend payable and corresponding tax on dividend distribution is
recognized directly in equity.
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