2. Summary of Material Accounting Policies
On March 31, 2023, the Ministry of Corporate Affairs notified Companies (Indian Accounting Standards)
Amendment Rules, 2023 amending the Companies (Indian Accounting Standards) Rules, 2015. The
amendments come into force with effect from April 01, 2023, i.e., Financial Year 2023-24. One of the
major changes is in Ind AS 1 'Preparation of Financial Statements, which requires companies to disclose
in their financial statements 'material accounting policies' as against the erstwhile requirement to
disclose 'significant accounting policies'. The word 'significant' is substituted by 'material'.
Accounting policy information is expected to be material if users of an entity's financial statements
would need it to understand other material information in the financial statements.
The Company applied the guidance available under paragraph 117B of Ind AS 1, Presentation of
Financial Statements in evaluating the material nature of the accounting policies.
The following are the material accounting policies for the Company:
2.1 Foreign Currency Transactions and Balances
Transactions in foreign currencies are initially recorded by the Company at their respective
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. Exchange differences arising on settlement
or translation of monetary items are recognised in the statement of profit and loss.
Non-monetary items that are measured based on historical cost in a foreign currency are
translated at the exchange rate at the date of the initial transaction.
Non-monetary items that are measured at fair value in a foreign currency are translated using
the exchange rates at the date when the fair value was measured.
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 other comprehensive income
("OCI") or profit or loss are also recognised in OCI or profit or loss, respectively).
2.2 Property Plant and Equipment
The cost of an item of property, plant and equipment are recognised as an asset if, and only if it
is probable that future economic benefits associated with the item will flow to the Company and
the cost of the item can be measured reliably.
Freehold land is carried at historical cost less any accumulated impairment losses.
Items of property, plant and equipment (including capital-work-in progress) are stated at cost of
acquisition or construction less accumulated depreciation and impairment loss, if any.
Cost includes expenditures that are directly attributable to the acquisition of the asset i.e.,
freight, non-refundable duties and taxes applicable and other expenses related to acquisition
and installation.
Directly attributable costs include.
• Cost of Employee Benefits arising directly from Construction or acquisition of PPE.
• Cost of Site Preparation.
• Initial Delivery & Handling costs.
• Professional Fees and
• Costs of testing whether the asset is functioning properly, after deducting the net proceeds
from selling any item produced while bringing the asset to that location and condition (such
as samples produced when testing equipment).
When parts of an item of property, plant and equipment have different useful lives, they are
accounted for as separate items (major components) of property, plant and equipment.
The cost of self-constructed assets includes the cost of materials and other costs directly
attributable to bringing the asset to a working condition for its intended use.
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.
Items of property, plant and equipment acquired through exchange of non-monetary assets are
measured at fair value, unless the exchange transaction lacks commercial substance or the fair
value of either the asset received or asset given up is not reliably measurable, in which case the
asset exchanged is recorded at the carrying amount of the asset given up.
Any gain or loss on disposal of an item of property, plant and equipment is recognised in
profit or loss. Gains and losses upon disposal of an item of property, plant and equipment are
determined by comparing the proceeds from disposal with the carrying amount of property,
plant and equipment and are recognized net within the statement of profit and loss.
Subsequent expenditure
Subsequent expenditure is capitalized only if it is probable that the future economic benefits
associated with the expenditure will flow to the Group and the cost of the item can be measured
reliably.
Depreciation
Depreciation on items of PPE is provided on Written down value basis, computed on the basis of
useful lives as mentioned in Schedule II to the Companies Act, 2013. Depreciation on additions
/ disposals is provided on a pro-rata basis i.e. from / up to the date on which asset is ready for
use / disposed-off.
The residual values, useful lives and method of depreciation are reviewed at each financial year
end and adjusted prospectively, if appropriate.
The cost of replacing part of an item of property, plant and equipment is recognized in the
carrying amount of the item if it is probable that the future economic benefits embodied within
the part will flow to the Company and its cost can be measured reliably. The carrying amount of
the replaced part will be derecognized. The costs of repairs and maintenance are recognized in
the statement of profit and loss as incurred.
Items of stores and spares that meet the definition of Property, plant and equipment are
capitalized at cost, otherwise, such items are classified as inventories.
Advances paid towards the acquisition of property, plant and equipment outstanding at each
reporting date is disclosed as capital advances under other assets. The cost of property, plant
and equipment not ready to use before such date are disclosed under capital work-in-progress.
2.3 Investment Property
Properties that are held for long-term rental yields or for capital appreciation or both, and that
are not occupied by the Company, are classified as investment property.
Investment property is measured initially at cost, including transaction costs. Subsequent to
initial recognition, investment properties are stated at cost less accumulated depreciation and
accumulated impairment loss, if any. Subsequent expenditure related to investment properties
are added to its book value only when it is probable that future economic benefits associated
with the item will flow to the Company and the cost of the item can be measured reliably.
Though the Company measures investment property using cost based measurement, the fair
value of investment property is disclosed in the notes. Fair values are determined based on
periodical basis performed by an accredited external independent registered valuer applying a
valuation model recommended by the International Valuation Standards Committee.
Investment properties are depreciated using the written down value basis method over the
useful lives.
Investment properties are derecognised when either they have been disposed of or when the
investment property is permanently withdrawn from use and no economic benefit is expected
from its disposal. The difference between the net disposal proceeds and the carrying amount of
the asset is recognized in the Statement of Profit and Loss.
2.4 Intangible Assets
Acquired computer software is capitalized on the basis of the costs incurred to acquire and bring
to use the specific software. The Intangible assets that are acquired by the Company and that
have finite useful lives are measured at cost less accumulated amortization and accumulated
impairment losses.
Amortization
Amortization is recognized in the statement of profit and loss on a written down value basis over
the estimated useful lives of intangible assets or on any other basis that reflects the pattern in
which the asset's future economic benefit are expected to be consumed by the entity. Intangible
assets that are not available for use are amortized from the date they are available for use. The
estimated useful lives are as follows:
The Amortization period and the Amortization method for intangible assets with a finite useful
life are reviewed at each reporting date.
2.5 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.
a. Financial assets
Initial recognition and measurement
AH financial assets are 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) are 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 are classified in four categories:
• Debt instruments at amortised cost
• Debt instruments at fair value through other comprehensive income (FVTOCI)
• Debt instruments, derivatives and equity instruments at fair value through profit or
loss (FVTPL)
• Equity instruments measured at fair value through other comprehensive income
(FVTOCI)
Debt instruments at amortised cost
A 'debt instrument' is measured at the amortised cost, if both of 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 are subsequently measured at amortised
cost using the effective interest rate (EIR) method. Amortised 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 in finance income in the statement of profit
and loss. The losses arising from impairment are recognised in the statement of profit and
loss. This category generally applies to trade and other receivables.
Debt instrument at FVTOCI
A 'debt instrument' is classified as 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 OCI. However, the
Company recognizes interest income, impairment losses and foreign exchange gain or loss
in the statement of profit and loss.
On de-recognition of the asset, cumulative gain or loss previously recognised 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.
Debt instrument at FVTPL
FVTPL is a residual category for debt instruments. Any debt instrument, which does not
meet the criteria for categorization as at amortized cost or as FVTOCI, is classified as FVTPL.
Debt instruments included within the FVTPL category are measured at fair value with all
changes recognized in the statement of profit and loss.
Equity Instruments
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments
which are held for trading are classified as FVTPL. If the Company decides to classify an
equity instrument as FVTOCI, then all fair value changes on the instrument, excluding
dividends, are recognized in the OCI. There is no recycling of the amounts from OCI to
statement of profit and loss. Equity instruments included within the FVTPL category are
measured at fair value with all changes recognized in the statement of profit and loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar
financial assets) is primarily derecognized (i.e., removed from the Company's balance sheet)
when:
a) The rights to receive cash flows from the asset have expired, or
b) The Company has transferred its rights to receive cash flows from the asset or has
assumed an obligation to pay the received cash flows in full without material delay
to a third party under a 'pass-through' arrangement; and either (a) the Company has
transferred substantially all the risks and rewards of the asset, or (b) the Company has
neither transferred nor retained substantially all the risks and rewards of the asset, but
has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or
has entered into a pass- through arrangement, it evaluates if and to what extent it
has retained the risks and rewards of ownership. When it has neither transferred nor
retained substantially all of the risks and rewards of the asset, nor transferred control
of the asset, the Company continues to recognize the transferred asset to the extent of
the Company's continuing involvement. In that case, the Company also recognises an
associated liability. The transferred asset and the associated liability are measured on
a basis that reflects the rights and obligations that the Company has retained.
b. Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value
i.e., loans and borrowings, payables, or as derivatives designated as hedging instruments
in an effective hedge, as appropriate. All financial liabilities are recognized initially at fair
value and, in the case of loans and borrowings and payables, net of directly attributable
transaction costs.
The Company's financial liabilities include trade and other payables, loans and borrowings
including bank overdrafts, financial guarantee contracts.
Subsequent measurement
The measurement of financial liabilities depends on their classification.
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 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. This category also includes derivative financial
instruments entered into by the Company that are not designated as hedging instruments
in hedge relationships as defined by Ind AS 109. Separated embedded derivatives are also
classified as held for trading, unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in the statement of profit and
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 AS
109 are satisfied. For liabilities designated as FVTPL, fair value gains / losses attributable
to changes in own credit risk are recognized in OCI. These gains / loss are not subsequently
transferred to the statement of profit and loss.
However, the Company may transfer the cumulative gain or loss within equity. All other
changes in fair value of such liability are recognised in the statement of profit and loss.
Loans and borrowings
Borrowings is the category most relevant to the Company. After initial recognition, interest¬
bearing borrowings are subsequently measured at amortised cost using the EIR method.
Gains and losses are recognised in the statement of profit and loss when the liabilities are
derecognised 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.
De-recognition
A financial liability is derecognised when the obligation under the liability is discharged
or cancelled or expired. 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 recognised in the statement of profit and loss.
Reclassification of financial assets and liabilities
The Company determines classification of financial assets and liabilities on initial recognition.
After initial recognition, no re-classification is made for financial assets which are equity
instruments and financial liabilities. For financial assets which are debt instruments, a re¬
classification is made only if there is a change in the business model for managing those
assets. A change in the business model occurs when the Company either begins or ceases to
perform an activity that is significant to its operations. If the Company reclassifies financial
assets, it applies the re-classification prospectively from the re-classification date, which
is the first day of the immediately next reporting period following the change in business
model. The Company does not restate any previously recognised gains, losses (including
impairment gains or losses) or interest.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the
balance sheet, if there is a currently enforceable legal right to offset the recognised
amounts and there is an intention to settle on a net basis, to realise the assets and settle
the liabilities simultaneously.
2.6 Investment in Subsidiaries
The company has accounted for its investments in equity shares of Subsidiaries, associates
and joint venture at cost less impairment loss (if any).
2.7 Cash & Cash Equivalents
Cash and bank balances comprise of cash balance in hand, in current accounts with banks,
and other short-term deposits. For this purpose, "short-term" means investments having
maturity of three months or less from the date of investment, and which are subject to
an insignificant risk of change in value. Bank overdrafts that are repayable on demand
and form an integral part of our cash management are included as a component of cash
and cash equivalents for the purpose of the statement of cash flows. The Margin money
deposits (we have not disclosed separately), balance in dividend accounts which are not
due and unclaimed dividend balances shall be disclosed as restricted cash balances.
2.8 Inventory
Inventories are valued at the lower of cost and net realizable value.
Inventories consisting of materials, stores and spares and loose tools are valued at cost or
net realizable value by using weighted average method.
Project and construction related work in progress is valued at cost.
Cost includes expenditures incurred in acquiring the inventories, production or conversion
costs and other costs incurred in bringing them to their existing location and condition.
In the case of finished goods and work-in-progress, cost includes an appropriate share of
overheads based on normal operating capacity. Stores and spares, that do not qualify to be
recognized as property, plant and equipment, consists of packing materials, engineering
spares (such as machinery spare parts) and consumables which are used in operating
machines or consumed as indirect materials in the manufacturing process.
Net realizable value is the estimated selling price in the ordinary course of business, less
the estimated costs of completion and selling expenses. The net realizable value of work-
in-progress is determined with reference to the selling prices of related finished products.
2.9 Impairment of Non-Financial Assets
The carrying amounts of the Company's non-financial assets, other than inventories and
deferred tax assets are reviewed at each reporting date to determine whether there is any
indication of impairment.
If any such indication exists, then the asset's recoverable amount is estimated.
For goodwill and intangible assets that have indefinite lives or that are not yet available for
use, an impairment test is performed each year at March 31.
The recoverable amount of an asset or cash-generating unit (as defined below) is the greater
of its value in use and its fair value less costs to sell.
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 or the cash-generating unit.
For the purpose of impairment testing, assets are grouped together into the smallest group
of assets that generates cash inflows from continuing use that are largely independent of
the cash inflow of other assets or groups of assets (the "cash-generating unit").
The Company bases its impairment calculation on detailed budgets and forecast
calculations, which are prepared separately for each of the Company's CGUs to which the
individual assets are allocated. These budgets and forecast calculations generally cover a
period of five years. For longer periods, a long-term growth rate is calculated and applied
to project future cash flows after the fifth year. To estimate cash flow projections beyond
periods covered by the most recent budgets / forecasts, the Company extrapolates cash
flow projections in the budget using a steady or declining growth rate for subsequent years,
unless an increasing rate can be justified. In any case, this growth rate does not exceed the
long-term average growth rate for the products, industries, or country in which the entity
operates, or for the market in which the asset is used.
An impairment loss is recognized in the statement of profit and loss if the estimated
recoverable amount of an asset or its cash-generating unit is lower than its carrying amount.
Impairment losses recognized in respect of cash-generating units are allocated first to
reduce the carrying amount of any goodwill allocated to the units and then to reduce the
carrying amount of the other assets in the unit on a pro-rata basis.
Reversal of Impairment of Assets
An impairment loss in respect of goodwill is not reversed. In respect of other assets,
impairment losses recognized in prior periods are assessed at each reporting date for any
indications that the loss has decreased or no longer exists. An impairment loss is reversed
if there has been a change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset's carrying amount does
not exceed the carrying amount that would have been determined, net of depreciation or
amortization, if no impairment loss had been recognized.
2.10 Employee Benefits
Short term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability
is recognized for the amount expected to be paid if the Company has a present legal or
constructive obligation to pay this amount as a result of past service provided by the
employee and the obligation can be estimated reliably.
Defined contribution plans
The Company's contributions to defined contribution plans are charged to the statement of
profit and loss as and when the services are received from the employees.
Defined benefit plans
The liability in respect of defined benefit plans and other post-employment benefits is
determined by using the project unit credit method on the basis of the Actuarial Valuation
report issued by the qualified Actuary.
The current service cost of the defined benefit plan, recognized in the statement of profit
and loss in employee benefit expense, reflects the increase in the defined benefit obligation
resulting from employee service in the current year, benefit changes, curtailments and
settlements.
The Past service costs are recognized immediately in the statement of profit and loss.
The net interest cost is calculated by applying the discount rate to the net balance of the
defined benefit obligation and the fair value of plan assets. This cost is included in employee
benefit expense in the statement of profit and loss. Actuarial gains and losses arising from
experience adjustments and changes in actuarial assumptions for defined benefit obligation
and plan assets are recognized in OCI in the period in which they arise. When the benefits
under a plan are changed or when a plan is curtailed, the resulting change in benefit that
relates to past service or the gain or loss on curtailment is recognized immediately in the
statement of profit and loss. The Company recognizes gains or losses on the settlement of
a defined benefit plan obligation when the settlement occurs.
Termination benefits
Termination benefits are recognized as an expense in the statement of profit and loss when
the Company is demonstrably committed, without realistic possibility of withdrawal, to a
formal detailed plan to either terminate employment before the normal retirement date,
or to provide termination benefits as a result of an offer made to encourage voluntary
redundancy. Termination benefits for voluntary redundancies are recognized as an expense
in the statement of profit and loss if the Company has made an offer encouraging voluntary
redundancy, it is probable that the offer will be accepted, and the number of acceptances
can be estimated reliably.
Other long-term employee benefits
The Company's net obligation in respect of other long-term employee benefits is the
amount of future benefit that employees have earned in return for their service in the
current and previous periods. That benefit is discounted to determine its present value.
Re-measurements are recognised in the statement of profit and loss in the period in which
they arise.
2.11 Leases
Assets taken on lease are accounted as right-of-use assets and the corresponding lease
liability is recognised at the lease commencement date.
Initially the right-of-use asset is measured at cost which comprises the initial amount of
the lease liability adjusted for any lease payments made at or before the commencement
date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove
the underlying asset or to restore the underlying asset or the site on which it is located, as
reduced by any lease incentives received.
The Lease Liability is initially measured at the present value of the Lease payments, discounted
using the Company's incremental borrowing rate. It is remeasured when there is a change in
future lease payments arising from a change in an index or a rate, or a change in the estimate
of the guaranteed residual value, or a change in the assessment of purchase, extension or
termination option. When the lease liability is re-measured in this way, a corresponding
adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit
or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The right-of-use asset is measured by applying cost model i.e. right-of-use asset at cost
less accumulated depreciation and cumulative impairment, if any. The right-of-use asset
is depreciated using the straight-line method from the commencement date to the end of
the lease term or useful life of the underlying asset whichever is earlier. Carrying amount
of lease liability is increased by interest on lease liability and reduced by lease payments
made.
Lease payments associated with following leases are recognised as expense on straight¬
line basis:
(i) Low value leases; and
(ii) Leases which are short-term.
Assets given on Lease are classified either as operating Lease or as finance Lease. A lease is
classified as a finance lease if it transfers substantially all the risks and rewards incidental
to ownership of an underlying asset. Asset held under finance lease is initially recognised
in balance sheet and presented as a receivable at an amount equal to the net investment in
the lease. Finance income is recognized over the lease term, based on a pattern reflecting
a constant periodic rate of return on Company's net investment in the lease. A lease which
is not classified as a finance lease is an operating lease. The Company recognizes lease
payments in case of assets given on operating leases as income on a straight-line basis. The
Company presents underlying assets subject to operating lease in its balance sheet under
the respective class of asset.
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