2 SIGNIFICANT ACCOUNTING POLICIES
a Basis of Preparation
These financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles (GAAP) under the
historical cost convention on the accrual basis. GAAP comprises mandatory accounting standards as prescribed under Section 133
of The Companies Act, 2013 ("the Act") read with Rule 7 of The Companies (Accounts) Rules, 2014, the provisions of the Act. The
accounting policies adopted in the preparation of financial statements have been consistently applied. All assets and liabilities have
been classified as current or non-current as per the company's normal operating cycle and other criteria set out in the Schedule III
to The Companies Act, 2013. Based on the nature of operations and time difference between the provision of services and
realization of cash and cash equivalents, the company has ascertained its operating cycle as 12 months for the purpose of
current and non-current classification of assets and liabilities.
The financial statements are presented in Indian Rupees (INR) and are rounded off to the nearest lakhs, except share and per
share data, which is not rounded off. Due to rounding off, the numbers presented throughout the document may not add up
precisely to the totals and percentages may not precisely reflect the absolute figures.
b Use of Estimates
The preparation of financial statements in conformity with Indian GAAP requires judgments, estimates and assumptions to be made
that affect the reported amount of assets and liabilities, disclosure of contingent liabilities on the date of the financial statements
and the reported amount of revenues and expenses during the reporting period. Difference between the actual
results and estimates are recognized in the period in which the results are known / materialized.
c Cash Flow Statement
Cash flows are reported using indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash
nature and any deferrals or accruals of past or future cash receipts or payments. The cash flow from regular revenue generating,
financing and investing activities of the Company is segregated.
d Property, Plant and Equipment
Items of Property, plant and equipment are measured at its cost less any accumulated depreciation and any accumulated
impairment losses. The cost comprises its purchase price including import duties and non- refundable purchase taxes after
deducting trade discounts and rebates and any cost directly attributable to bringing the assets to its working condition for its
intended use.
Subsequent expenditures related to an item of tangible asset are added to its book value only if they increase the future
economic benefits from the existing asset beyond its previously assessed standard of performance.
Capital assets (including expenditure incurred during the construction period) under erection / installation are stated in the
Balance Sheet as "Capital Work in Progress."
e Intangible assets
Intangible assets are carried at cost less accumulated amortization and impairment losses, if any. The company has capitalized all
costs relating to acquisition and installation of intangible assets.
f Depreciation and amortization
Depreciation on Property, Plant and Equipment is provided to the extent of depreciable amount on the written down value
method. Depreciation is provided based on useful life of the assets as prescribed in Schedule II to the Companies Act 2013, which
is given in the table below.
The Intangible assets are amortized using straight line method over their estimated useful lives, which is given below. The
estimated useful life is reviewed annually by the management.
Depreciation is not recorded on capital work-in progress until construction and installation is completed and the asset is for
intended use.
g Impairment of assets
Assessment for impairment is done at each Balance Sheet date as to whether there is any indication that a non-financial asset,
other than inventory and deferred tax, may be impaired. For the purpose of assessing impairment, the smallest identifiable group
of assets that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or
groups of assets is considered as a cash generating unit.
If any indication of impairment exists, an estimate of the recoverable amount of the individual asset/cash generating unit is
made. Asset/cash generating unit whose carrying value exceeds their recoverable amount are written down to the recoverable
amount by recognising the impairment loss as an expense in the statement of profit and loss.
h Leases
Leases are classified into Finance Lease and Operating Lease at the inception of lease and accounted for accordingly. Leases where
substantially all the risks and rewards of ownership are transferred to the lessee, even though legal ownership may not be
transferred are identified as Finance Leases. All other leases i.e. Leases where the lessor retains the risks and rewards of
ownership are considered as Operating Leases. The Company is primarily a Lessee.
Under a finance lease, the leased asset and a corresponding liability are recognised at the present value of the minimum lease
payments. Under an operating lease, the lease payments other than refundable deposits are recognised as an expense over the
lease term.
i Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is arrived at by applying weighted average method. Costs
comprise direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the
inventories to their present location and condition. Net realisable value is the price at which the inventories can be realised in the
normal course of business after allowing for the cost of conversion from their existing state to a finished condition.
j Cash and cash equivalents
Cash and cash equivalents comprise cash and cash on deposit with banks. The Company considers all highly liquid investments with
a remaining maturity at the date of purchase of three months or less and that are readily convertible to known amounts of cash to
be cash equivalents.
k Revenue recognition
Revenue from sale of goods is recognized when all the significant risks and rewards of ownership in the goods are transferred to
the buyer as per the terms of the contract, the Company retains no effective control of the goods transferred to a degree usually
associated with ownership and no significant uncertainty exists regarding the amount of the consideration that will be derived
from the sale of goods. Sales are recognized net of trade discounts, rebates and Goods and Service Tax.
Revenue from rendering of services is recognised when the performance of agreed contractual task has been completed.
Interest income is recognised on accrual basis on the Bank Deposit balance outstanding as at end of financial year.
l Employee Benefits
Post-employment benefit plans
(i) Defined Contribution Plan are post-employment benefit plans under which an enterprise pays fixed contributions into a separate
entity (a fund) and will have no obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee
benefits relating to employee service in the current and prior periods. The Company contributes to the Provident Fund of the
employees operated by the Regional Provident Fund Commissioner, which qualifies to be a defined contribution plan.
(ii) Defined Benefit Plan are post-employment benefit plans other than defined contribution plans. Gratuity (defined befit plan) :
The Company provides for Gratuity, covering eligible employees under Company Gratuity Scheme. On reporting date, liabilities
with respect to gratuity plan as determined by an independent actuarial valuation and actuarial gains/losses are charged to the
Statement of Profit and Loss Account. The Company has obtained an insurance policy to cover the Gratuity Liabilities of the
Company.
Other employee benefits
Short-term Employees Benefits: All employee benefits payable within twelve months of rendering the service are classified as short¬
term benefits. Such benefits include salaries, wages, bonus, short term compensated absences, awards, ex-gratia, performance pay
etc. in the period in which the employee renders the related service. A liability is recognized for the amount expected to be paid
when there is a present obligation to pay this amount as a result of past service provided by the employee and the obligation can
be estimated reliably.
m Foreign currency transactions
The transactions in foreign currency are recorded at the rate of exchange in force at the time the transactions are effected. At the
end of each reporting period, monetary items denominated in foreign currencies are translated at the closing exchange rate
prevailing at the balance sheet date. Gains / Losses arising out of fluctuations in the exchange rate at the time of settlement or
restatement, are recognized as Income / Expense in the period in which they arise.
n Taxation
The accounting treatment for the Income Tax in respect of the Company's income is based on the Accounting Standard on
Accounting for Taxes on Income" (AS-22). The provision made for Income Tax in Accounts comprises both, the current tax and
deferred tax. Provision for Current Tax is made on the assessable Income Tax rate applicable to the relevant assessment year
after considering various deductions available under the Income Tax Act, 1961.
Deferred tax is recognized for all timing differences; being the differences between the taxable income and accounting income that
originate in one period and are capable of reversal in one or more subsequent periods. Such deferred tax is quantified using the tax
rates and laws enacted or substantively enacted as on the Balance Sheet date. The carrying amount of deferred tax asset/liability
is reviewed at each Balance Sheet date and consequential adjustments are carried out. Deferred tax assets are only recognised to
the extent that it is probable that future taxable profits will be available against which the temporary differences
can be utilised.
Minimum Alternate Tax credit is recognized as an asset only when and to the extent there is convincing evidence that the Company
will pay normal income tax during the specified period. The Company reviews the same at each balance sheet date and writes down
the carrying amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the effect
that the Company will pay normal Income Tax during the specified period.
o Segment accounting
The company identifies distinguishable components of the business as business segments based on the business's internal
organization and the way they are managed. A segment is considered reportable if its revenue, segment result (profit or loss), or
total segment assets are 10% or more of the corresponding totals for all segments. If the total revenue from reportable segments
is less than 75% of the company's overall revenue, additional segments are identified as reportable until 75% of the revenue is
covered.
The revenues and expenses are allocated to different segments either based on direct attribution or reasonable allocation based
on sales to external customers. The assets and liabilities are allocated to each segment based on factors like the segment's direct
use of assets and liabilities, and the nature of the segment's operations. Segment liabilities would exclude borrowings and other
liabilities incurred for financing purposes.
For secondary segmentation, the company identifies the distinguishable geographic segment that is engaged in providing an
individual product or service or a group of related product or services within a specific environment and subject to risks and
returns exclusive of other segments, primarily domestic and exports.
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