2 SIGNIFICANT ACCOUNTING POLICIE
a Basis of Preparation
The financial statements of the company have been prepared in accordance with generally
accepted accounting principles in India (Indian GAAP). The financial statements have been prepared
to comply in all material respects with the Accounting Standards notified under the section 133 of
the Companies Act, 2013 read together with rule 7 of the Companies (Accounts) Rules 2014 and
Companies (accounting standards) amendment rules 2016. The financial statements have been
prepared on an accrual basis and under the historical cost convention. The accounting policies have
been consistently applied by the company and are consistent with those used in the previous year.
TheCompanyisaSmallandMediumSizedCompany(SMC)asdefinedintheGeneralInstructionsinrespectof
AccountingStandardsnotifiedaspersub-section(1)ofsection129oftheCompaniesAct,2013.Accordingly,the
Companyhas compliedwith the Accounting Standards as applicable to a Small and Medium Sized Company.
All the amounts included in the Financial Statements are presented in Indian Rupees ('Rupees' or 'Rs.' Or
'INR') and are rounded to the nearest Lakhs, except per share data and unless stated otherwise
b Use of Estimates
The preparation of financial statements in conformity with the Indian GAAP requires the management
of the Company to make estimates and assumptions that affect the reported balances of assets and
liabilities and disclosures relating to the contingent liabilities as at the date of the financial statements
and reported amounts of income and expense during the year. Examples of such estimates include
provisions for doubtful receivables, provision for income taxes, the useful lives of depreciable fixed
assets and provision for impairment. Future results could differ due to changes in these estimates and
the difference between the actual result and the estimates are recognised in the period in which the
results are known / materialise.
c Property, Plant and Equipment
Property, plant and equipment are carried at cost less accumulated depreciation and any accumulated
impairment, if any. Property, plant and equipment is depreciated on a written-down value basis to its
residual value over its estimated useful life.
Cost directly attributable to acquisition are capitalised until the property, plant and equipment are ready
for use, as intended by the management.
Subsequent costs are capitalised on the carrying amount or recognised as a separate asset,
as appropriate, only when future economic benefits associated with the item are probable to
flow to the Company and cost of the item can be measured reliably. When significant parts of
property, plant and equipment are required to be replaced at intervals, the Company depreciates
them separately based on their specific useful lives. The carrying amount of any component
accounted for as a separate asset is derecognised when replaced. All repair and maintenance
are charged to statement of profit and loss during the reporting period in which they are incurred.
The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is
determined as the difference between the sales proceeds and the carrying amount of the asset and is
recognised in the statement of profit and loss on the date of disposal or retirement.
d Depreciation and amortization
Depreciation and amortisation are provided using the written-down value method and charged to
statement of profit and loss as per the useful life prescribed under Schedule II of the Companies Act, 2013.
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.
e Impairment of assets
At each balance sheet date, the management reviews the carrying amounts of its assets included in
each cash generating unit to determine whether there is any indication that those assets were impaired.
If any such indication exists, the recoverable amount of the asset is estimated in order to determine the
extent of impairment. Recoverable amount is the higher of an asset's net selling price and value in use.
In assessing value in use, the estimated future cash flows expected from the continuing use of the asset
and from its disposal are discounted to their present value using a pre-tax discount rate that reflects
the current market assessments of time value of money and the risks specific to the asset. Reversal of
impairment loss is recognised as income in the statement of profit and loss.
f Leases
Assets taken on lease by the Company in its capacity as lessee, where the Company has substantially
all the risks and rewards of ownership are classified as finance lease. Such a lease is capitalised at the
inception of the lease at lower of the fair value or the present value of the minimum lease payments and
a liability is recognised for an equivalent amount. Each lease rental paid is allocated between the liability
and the interest cost so as to obtain a constant periodic rate of interest on the outstanding liability for
each year.
Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest
with the lessor, are recognised as operating leases. Lease rentals under operating leases are recognised
in the statement of profit and loss on a straight-line basis.
g Investment
i) Investments, which are readily realizable and intended to be held for not more than one year from the date on
which such investments are made, are classified as current investments. All other investments are classified as
long-term investments.
ii) On initial recognition, all investments are measured at cost. The cost comprises purchase price and directly
attributable acquisition charges such as brokerage, fees and duties.
iii) Current investments are carried in the financial statements at lower of cost and fair value determined on an
individual investment basis. Long-term investments are carried at cost. However, provision for diminution in
value is made to recognize a decline other than temporary in the value of the investments.
iv) On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged
or credited to the statement of profit and loss.
h Inventories
i) Raw materials, packing materials and stores & spares are valued at lower of cost and net realizable value. Cost
of raw materials, packing materials are determined on First in First out (FIFO) basis and cost of stores & spares
are determined on weighted average cost method.
i Cash and cash equivalents
The Company considers all highly liquid financial instruments, which are readily convertible into known
amount of cash that are subject to an insignificant risk of change in value and having original maturities
of three months or less from the date of purchase, to be cash equivalents.
j Earnings/ (loss) per share (EPS)
Basic EPS amounts are calculated by dividing the profit/ (loss) for the year attributable to
equity holders by the weighted average number of Equity shares outstanding during the year.
Diluted EPS amounts are calculated by dividing the profit/ (loss) attributable to equity holders by the
weighted average number of Equity shares outstanding during the year plus the weighted average
number of Equity shares that would be issued on conversion of all the dilutive potential Equity shares
into Equity shares."" "
k Revenue recognition
Revenue is measured based on the consideration specified in a contract with a customer net of variable
consideration e.g. discounts, volume rebates, any payments made to a customer (unless the payment is
for a distinct good or service received from the customer) and excludes amounts collected on behalf of third
parties. The Company recognises revenue when it transfers control over a product or service to a customer.
Revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur.
The Company provides incentives to its users in various forms. Incentives which are consideration
payable to the customer that are not in exchange for a distinct good or service are generally recognized
as a reduction of revenue.
Where the Company acts as an agent for selling goods or services, only the commission income is
included within revenue. The specific revenue recognition criteria described below must also be met
before revenue is recognized. Typically, the Company has a right to payment before or at the point
that services are delivered. Cash received before the services are delivered is recognised as a contract
liability. The amount of consideration does not contain a significant financing component as payment
terms are less than one year."
Sale of Goods
Revenue from sale of goods is recognized when all the significant risks and rewards of ownership of the
goods have been passed to the buyer. Sales are presented net of Excise duty collected on behalf of the
Government, trade discounts and returns, as applicable.
Sale of services
Revenue from services is recognized when the control in services is transferred as per the terms of the
agreement with customer i.e. as and when services are rendered. Revenues are disclosed net of the
Goods and Service tax charged on such services. In terms of the contract, excess of revenue over the
billed at the year-end is carried in the statement of assets and liabilities as unbilled revenue under other
financial assets where the amount is recoverable from the customer without any future performance
obligation. Cash received before the services are delivered is recognised as a contract liability.
Other operating revenue
Where the Company is contractually entitled to receive claims/compensation in case of non-discharge
of obligations by customers, such claims/compensations are measured at amount receivable from
such customers and are recognised as other operating revenue when there is a reasonable certainty
that the Company will be able to realize the said amounts.
Interest income
Interest income is recognised on a time proportion basis taking into account the amount outstanding
and the applicable interest rate. Interest income is included under the head "other income" in the
statement of profit and loss account.
l Retirement and other employee benefits
For defined benefit plans, the liability or asset recognised in the statement of assets and liabilities on the
basis of actuarial valuation at each year-end. Separate actuarial valuation is carried out for each plan
using the projected unit credit method. Actuarial gains and losses for both defined benefit plans are
recognized in full in the period in which they occur in the statement of profit and loss.
The Company's contributions to defined contribution plans (provident fund) are recognized in statement
of profit and loss when the employee renders related service. The Company has no further obligations
under these plans beyond its periodic contributions.
Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled
wholly within 12 months after the end of the period in which the employees render the related service are
recognised in respect of employees' services up to the end of the reporting period and are measured at
the amounts expected to be paid when the liabilities are settled. The liabilities are presented as salary
and wages payable under other current liabilities in the statement of assets and liabilities.
The company has implemented a gratuity policy for its employees, ensuring that they receive gratuity
benefits as per the applicable laws and regulations. However, it should be noted that the company
does not have a leave encashment policy. The company's leave policy stipulates that leaves cannot be
carried forward to the next year, and therefore, any unused leave will not be carried forward.
m Foreign currency transactions
Functional and presentation currency
Items included in the Financial Information of the Company are measured using the currency of the
primary economic environment in which it operates i.e. the "functional currency". The Company's
financial information is presented in INR.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Company's at their respective functional
currency at exchange rates prevailing 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. Exchange differences arising on settlement or
translation of monetary items are recognised in statement of profit and loss.
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.
Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates
at the date when the fair value is determined. The gain or loss arising on translation of non-monetary
items measured at fair value is treated in line with the recognition of the gain or loss on the change in
fair value of the item (i.e. translation differences on items whose fair value gain or loss is recognised in
statement of profit and loss)."
n Taxation
Current tax
Current income 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 in the India where the Company operates and generates taxable income.
Management periodically evaluates positions taken in the tax returns with respect to situations in which
applicable tax regulations are subject to interpretation and considers whether it is probable that a
taxation authority will accept an uncertain tax treatment. The Company measures its tax balances either
based on the most likely amount or the expected value, depending on which method provides a better
prediction of the resolution of the uncertainty."
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 recognised for all taxable temporary differences.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused
tax credits and any unused tax losses. Deferred tax assets are recognised 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 utilised, 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 utilised.
Unrecognised deferred tax assets are reassessed at each reporting date and are recognised 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 realised 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 assets and deferred tax liabilities are offset if a legally enforceable right exists to set off
current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity
and the same taxation authority.
Minimum alternate tax
Credit of MAT is recognised as deferred tax asset only when it is probable that taxable profit will be
available against which the credit can be utilised. In the year in which the MAT credit becomes eligible
to be recognised as an asset, the said asset is created by way of a credit to the restated statement of
profit and loss account. The Company reviews the same at each balance sheet date and writes down
the carrying amount of MAT credit entitlement to the extent it is no longer probable that the Company
will pay normal income tax during the specified period."
Taxes paid on acquisition of assets or on incurring expenses
Assets are recognised net of the amount of GST paid, except when the tax incurred on a purchase of
assets is not recoverable from the taxation authority, in which case, the tax paid is recognised as part of
the cost of acquisition of the asset.
Expenses are recognised net of the amount of GST paid, except when the tax incurred on a purchase
of services is not recoverable from the taxation authority, in which case, the tax paid is expensed off in
statement of profit and loss.
The net amount of tax recoverable from, or payable to, the taxation authority is included as part of other
current/ non- current assets or other current liabilities in the statement of assets and liabilities.
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