(A) Significant accounting policies
1. Current/non-current classification
The Company presents assets and liabilities in asset are treated as current
when it is:
a) Expected to be realized or intended to be sold or consumed in 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 treated as current when it is:
a) expected to be settled in normal operating cycle;
b) Held primarily for the purpose of trading;
c) Due to be settled within twelve months after the reporting period ;or
d) There is noun condition alright to defer the settlement of the liability for at
least twelve months after the reporting period.
All other liabilities are classified as noncurrent.
Deferred tax assets and liabilities are classified as non-current assets and
liabilities.
The operating cycle is the time between the acquisition of assets/materials for
processing and their realization in cash and cash equivalents. As the Company's
normal operating cycle is not clearly identifiable, it is assumed to be twelve
months.
2. Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement
date. The fair value measurement is based on the presumption that the
transaction to sell the asset or transfer the liability takes place either:
a) In the principal market for the asset or liability, or
b) In the absence of a principal market, in the most advantageous market for
the asset or liability. The principal or the most advantageous market must
be accessible by the Company.
The fair value of an asset or a liability should be measured using the
assumptions that market participants would use when pricing the asset or
liability, assuming that market participants act in their economic best
interest.
A fair value measurement of a non-financial asset takes in to account
a market participant’s ability to generate economic benefits by using the
asset in its highest and best use or by selling it to another market participant
that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the
circumstances and for which sufficient data are available to measure fair
value, maximizing the use of relevant observable inputs and minimizing the
use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed
in the financial statements are categorized within the fair value hierarchy,
described as follows, based on the lowest level in put that is significant to
the fair value measurement as a whole:
a) Level 1 — Quoted (unadjusted) market prices in active markets for
identical assets or liabilities;
b) Level 2 — Valuation techniques for which the lowest level input that is
significant to the fair value measurement is directly or indirectly observable;
and
c) Level 3 — Valuation techniques for which the lowest level input that is
significant to the fair value measurement is unobservable.
For assets and liabilities that are recognized in the financial statements
on a recurring basis, the Company determines whether transfers have
occurred between levels in the hierarchy by re-assessing categorization (based
on the lowest level input that is significant to the fair value measurement
as a whole)at the end of each reporting period.
At each reporting date, the Company analyses the movements in the
values of assets and liabilities which are required to be re measured or
re- assessed as per the Company’s accounting policies. For this analysis,
the Company verifies the major inputs applied in the latest valuation by
agreeing the information in the valuation computation to contracts and other
relevant documents. The Company also compares the change in the fair value
of each asset and liability with relevant external sources to determine whether
the change is reasonable.
For the purpose of fair value disclosures, the Company has determined
classes of assets and liabilities on the basis of the nature, characteristics
and risks of the asset or liability and the level of the fair value hierarchy as
explained above.
This note summarizes accounting policy for fair value measurement. Other
fair value related disclosures are given in the relevant notes.
3. Property, plant and equipment
All the items of property, plant and equipment are stated at cost, net of
accumulated depreciation and accumulated impairment losses, if any. Depreciation is
calculated on a straight-line basis over the estimated useful lives of the assets
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.
4. 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.
5. Intangible Assets
Intangible assets acquired separately are measured, on initial
recognition, at cost. Following the initial recognition, intangible assets are carried
at cost less any accumulated amortization and accumulated impairment losses.
The useful economic life of intangible assets is five years. The amortization
expense on intangible assets is recognized in the statement of profit and loss.
Intangible assets are derecognized either when they have been disposed of or
when they are permanently withdrawn from use and no future economic benefit is
expected from their disposal. The difference between the net disposal proceeds
and the carrying amount of the asset is recognized in profit or loss in the
period of de recognition.
6. Impairment of non-financial assets
The Company assesses, at each reporting date, whether there is
any indication that an asset may be impaired. If any indication exists, or when
annual impairment testing for an asset is required, the Company estimates the
asset’s recoverable amount. An asset’s recoverable amount is the higher of
an asset’s or cash-generating units (CGU) fair value less costs of disposal and its
value in use. Recoverable amount is determined for an individual asset, unless
the asset does not generate cash in flows that are largely independent of
those from other assets or groups of assets. When the carrying amount of
an asset or CGU exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount. 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. In determining fair value less
costs of disposal, recent market transactions are taken in to account. If no such
transactions can be identified, an appropriate valuation model is used. These
calculations are corroborated by valuation multiples, quoted share prices for
publicly traded companies or other available fair value indicators. The Company
bases its impairment calculation on detailed budgets and forecast calculations.
Impairment losses are recognized in the statement of profit or loss.
An assessment is made at each reporting date to determine whether
there is an indication that previously recognized impairment losses on assets no
longer exist or have decreased. If such indication exists, the Company estimates
the asset’s or CGU’s recoverable amount. A previously recognized impairment
loss is reversed only if there has been a change in the assumptions used to
determine the asset’s recoverable amount since the last impairment loss was
recognized. The reversal is limited so that the carrying amount of the asset does
not exceed its recoverable amount, nor exceed the carrying amount that would
have been determined, net of depreciation, had no impairment loss been
recognized for the asset in prior years. Such reversal is recognized in the
statement of profit or loss.
7. Revenue recognition
The Company adopted Ind AS 115 "Revenue from contracts with
customers”, with effect from 1st April, 2018. Ind AS 115 establishes principles for
reporting information about the nature, amount, timing and uncertainty of revenues
and cash flows arising from the contracts with its customers and replaces Ind AS
18 Revenue and Ind AS 11 Construction Contracts.
The Company recognises revenue when it passes control to the customer
based on completion of performance obligations. An entity has recognised revenue
for a performance obligation satisfied over time only if the entity is able to
reasonably measure its progress towards complete satisfaction of the performance
obligation.
Dividend income from investments is recognised when the right to receive
payment has been established (provided that 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 that asset’s net carrying amount on initial recognition.
8. 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
Initial recognition and measurement
All financial assets, except investment in subsidiaries and associate, should be
recognized initially at fair value plus, 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. 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)
should be recognized 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 should
be primarily classified in three categories:
a) Debt instruments at amortized cost;
b) Debt instruments at fair value through other comprehensive income
(FVTOCI); and c) Other financial instruments measured at fair value
through profit or loss (FVTPL).
a) Debt instruments at amortized cost
A ‘debt instrument’ should be measured at the amortized cost if both
the following conditions are met:
i) The asset is held within a business model whose objective is to
hold assets for collecting contractual cash flows, and
ii) Contractual terms of the asset give rise on specified dates to cash
flows that are solely payments of principal and interest (SPPI) on
the principal amount outstanding.
After initial measurement, such financial assets should be subsequently
measured at amortized cost using the effective interest rate (EIR) method.
Amortized cost is calculated by taking in to account any discount or
premium on acquisition and fees or costs that are an integral part of the
EIR. The EIR amortization is included in finance income in the statement
of profit or loss. The losses arising from impairment are recognized in the
statement of profit or loss. This category generally applies to trade and other
receivables.
b) Debt instruments at fair value through other comprehensive income
(FVTOCI)
A ‘debt instrument’ should be classified as at the FVTOCI if both of the
following criteria are met:
i) The objective of the business model is achieved both by collecting
contractual cash flows and selling the financial assets; and
ii) The asset’s contractual cash flows represent SPPI. Debt
instruments included within the FVTOCI category are measured initially as
well as at each reporting date at fair value. Fair value movements are
recognized in the other comprehensive income (OCI).However, the company
recognizes interest income, impairment losses & reversals and foreign
exchange gain or loss in the statement of Profit and Loss. On de recognition of
the asset, cumulative gain or loss previously recognized in OCI is
reclassified from the equity to statement of Profit and Loss. Interest earned
whilst holding FVTOCI debt instrument is reported as interest income using
the EIR method.
c) Other financial instruments measured at fair value through profit
and loss (FVTPL)
Any financial asset that does not qualify for amortised cost
measurement or measurement at FVTOCI must be measured subsequent to
initial recognition at FVTPL.
The management has changed the estimates in regard to
classification of certain of its assets from current assets to non current assets,
looking to the expectation of receipt of payments. Those financial assets have
been measured at fair value. Discounted cash flow technique which is one of
the recognised techniques to measure any financial instrument at fair value has
been applied for fair valuation of those financial assets.
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 following financial assets and credit risk
exposure:
A) Financial assets that are debt instruments, and are measured at amortised cost e.g.,
loans, debt securities, deposits, trade receivables and bank balance;
B) Financial assets that are debt instruments and are measured as at FVTOCI;
C) Lease receivables under Ind AS 116; and
D) Financial guarantee contracts which are not measured as at FVTPL.
The Company follows ‘simplified approach’ for recognition of impairment loss
allowance on trade receivables. The application of simplified approach does not require
the Company to track changes in credit risk. Rather, it recognizes impairment loss
allowance based on life time ECLs at each reporting date, right from its initial
recognition.
The company has provided for Expected credit loss of amount Rs. Nil/- Lacs
For recognition of impairment loss on other financial assets and risk exposure, the
Company determines that whether there has been a significant increase in the credit
risk since initial recognition. If credit risk has not increased significantly, 12-month
ECL issued to provide for impairment loss. However, if credit risk has increased
significantly, life time ECL issued. If, in a subsequent period, credit quality of the
instrument improves such that there is no long era significant increase in credit risk
since initial recognition, then the entity reverts to recognizing impairment loss
allowance based on 12-month ECL.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair
value through profit or loss or as those measured at amortized cost.
The Company's financial liabilities include trade and other payables, loans and
borrowings including bank overdrafts and financial guarantee contracts.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as
described below:
A) Financial liabilities at fair value through profit or loss
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. Financial liabilities are classified as held for trading
if they are incurred for the purpose of repurchasing in the near term.
Gains or losses on liabilities held for trading are recognized in the profit or loss.
Financial liabilities designated upon initial recognition at fair value through profit or
loss are designated as such at the initial date of recognition, and only if the
criteria in Ind AS109 are satisfied. For liabilities designated as FVTPL, fair value
gains/losses attributable to changes in own credit risks are recognized in OCI.
These gains/ loss are not subsequently transferred to the statement of profit& loss.
However, the Company may transfer the cumulative gain or loss with inequity. All
other changes in fair value of such liability are recognized in the statement of profit or
loss. The Company has not designated any financial liability as at fair value
through profit and loss.
B) Financial liabilities at amortized cost
Financial liabilities at amortized cost include loans and borrowings and payables.
After initial recognition, interest- bearing loans and borrowings are subsequently
measured at amortised cost using the EIR method. Gains and losses are recognized in
profit or loss when the liabilities are derecognized as well as through the 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
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 de
recognition 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 or loss.
9. Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at banks and
on hand and term deposits with an original maturity of three months or less,
which are subject to an insignificant risk of changes in value.
10. Employee benefits
Retirement benefit in the form of contribution to provident fund is a
defined contribution scheme. The Company has no obligation, other than the
contribution payable to the provident fund. The Company recognizes contribution
payable to the provident fund scheme as an expense, when an employee renders
the related service. If the contribution payable to the scheme for service
received before the balance sheet date exceeds the contribution already paid,
the deficit payable to the scheme is recognized as a liability after deducting
the contribution already paid. If the contribution already paid exceeds the
contribution due for services received before the balance sheet date, then
excess is recognized as an asset to the extent that the pre-payment will lead
to, for example, a reduction in future payment or a cash refund.
The Company's liabilities towards gratuity and leave encashment
payable to its employees should be determined using the projected unit credit
method which considers each period of service as giving rise to an additional
unit of benefit entitlement and measures each unit separately to build up the final
obligation.
Remeasurements, comprising of actuarial gains and losses should be
recognized immediately in the balance sheet with a corresponding debit or
credit to retained earnings through OCI in the period in which they occur.
Remeasurements should not be reclassified to profit or loss in subsequent
periods.
Past service costs should be recognized in profit or loss on the
earlier of:
a) The date of the plan amendment or curtailment, and
b) The date that the Company recognizes related restructuring osts
Net interest should be calculated by applying the discount rate to
the net defined benefit liability or asset. The Company should recognize the
following changes in the net defined benefit obligation as an expense in the
standalone statement of profit and loss:
a) Service costs comprising current service costs, past-service costs, gains and
losses on curtailments and non- routine settlements; and
b) Net interest expense or Income.
However, the company has not provided for any defined benefit in
the financial statements.
11. Earnings Per Share
The basic earnings per share is computed by dividing the net profit
attributable to equity shareholders for the period by the weighted average number
of equity shares outstanding during the period. The number of shares used in
computing diluted earnings per share comprises the weighted averages ha
reconsidered for deriving basic earnings per share, and also the weighted average
number of equity shares which could be issued on the conversion of all dilutive
potential equity shares. Dilutive potential equity shares are deemed converted as of
the beginning of the period, unless they have been issued at a later date. In
computing dilutive earnings per share, only potential equity shares that are dilutive
and that would, if issued, either reduce future earnings per share or increase loss
per share, are included.
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