2.3 Material Accounting Policies:
a) Overall Considerations :-
The financial statement have been prepared using significant accounting policies and measurement basis as
summarised below:-
b) Current versus non-current classification :-
The company presents assets and liabilities in the balance sheet on current and non-current classification:-
i) The asset/liability is expected to be realised/settled in normal operating cycle;
ii) The asset is intended for sale or consumption;
iii) The asset/liability is held primarily for purpose of trading;
iv) The asset/liability is expected to be realised/settled within twelve months after reporting period;
v) The asset is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at
least twelve months after reporting date;
f) In the case of a liability, there is no unconditional right to defer settlement of the liability for at least twelve months after
reporting date;
All other assets and liabilities are classified as non-current.
c) Cash Flow Statement-
Cash Flows are reported using the indirect method, whereby profit for the period is adjusted for the effects of the
transactions of no-cash nature, any deferrals or accruals past or future operating cash receipts or payments and any
items of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing
and financing activities
d) Property, Plant and Equipment and Intangible Assets:-
Property, Plant and Equipment
Recognition-
Property, Plant and Equipment are stated as cost less accumulated depreciation and impairment, if any. Cost directly
attributable to acquisition are capitalised until the property, plant and equipment are ready for use, as intended by the
management.
Subsequent measurement (depreciation and useful lives):-
The Company depreciates property, plant and equipment on a pro-rata basis over their estimated useful lives using the
straight line method. The estimated useful lives of the assets prescribed under the Schedule II of the Act, are as follows:
The Company reviews the residual value, useful lives and depreciation method annually and, if expectations differ from
previous estimates, the change is accounted for as a change in accounting estimate on a prospective basis. Subsequent
expenditures relating to property, plant and equipment are capitalised only when it is probable that the future economic
benefits associated with these will flow and the cost of the item can be measured reliably. Repairs and maintenance
costs are recognised in net profit in Statement of Profit and Loss when incurred. The costs and related accumulated
depreciation are eliminated from the financial statements upon sale or upon retirement of the asset and resultant gains
or losses recognised in the Statement of Profit and Loss.
De-recognition:-
An item of property, plant and equipment and any significant part initially recognised is de-recognised upon disposal or
when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the
asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognised
in the Statement of Profit and Loss, when the asset is de-recognised.
e) Taxation
Tax expense recognised in the Statement of Profit or Loss comprises the sum of the current tax and deferred tax except
the ones recognised in Other Comprehensive Income or directly in Equity.
i) Current Income Tax
Calculation of current tax is based on tax rates and tax laws that have been enacted for the reporting period. Current
Income Tax relating to items recognised outside the profit or loss is recognised either in Comprehensive Income or
in Equity.
Current Income Tax for the current and prior periods is recognised at the amounts expected to be paid to or received
from the tax authorities, using the tax rates and the tax laws enacted or substantively enacted by the Balance Sheet
date.
The Company off sets current tax assets and liabilities , where it has legally enforceable right to set off the recognised
amounts and where it intends either to settle on a net basis , or to realise the asset and settle the liability simultaneously.
ii) Deferred Tax
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the
asset is realized or the liability is settled based on the tax rate (and tax laws) that have been enacted or substantively
enacted at the end of the reporting period.
Deferred tax is recognised in respect of the temporary differences between the carrying amount of assets and
liabilities for the financial reporting purposes and the corresponding amounts used for taxation purposes (i.e. tax
base).
Deferred tax assets are recognised to the extent possible that the taxable profit will be available against which the
deductible temporary differences can be utilized.
Entire deferred tax asset to be utilized. Any reduction is reversed to the extent possible that it becomes probable that
sufficient taxable profit will be available.
Deferred tax relating to the items recognised outside the Statement of Profit and Loss is recognised either in other
comprehensive income or in equity. Deferred tax assets and liabilities are offset when there is legally enforceable
right to set off the non-current assets against non-current liabilities and when they relate to income taxes levied by
the same taxation authority and the Company intends to settle its non-current assets and liabilities on a net basis.
iii) Minimum Alternate Tax
Minimum Alternate tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form
of adjustment to future tax liability, is considered as an asset if there is convincing evidence that the Company will
pay normal income tax .MAT Credits are in form of unused tax credits that are carried forward by the Company for a
specified period of time. Accordingly, MAT Credit Entitlement has been grouped with deferred tax assets (net).
Correspondingly, MAT Credit Entitlement has been grouped with deferred tax in Statement of Profit and Loss.
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