2 MATERIAL ACCOUNTING POLICIES
A summary of the material accounting policies
applied in the preparation of the financial
statements are as given below. These accounting
policies have been applied consistently to all
periods presented in the financial statements.
(I) Basis of Preparation
These financial statements are prepared on
going concern basis following accrual basis
of accounting and comply with the Indian
Accounting Standards (Ind AS) notified
under Section 133 of the Companies
(Indian Accounting Standards) Rules, 2015
and subsequent amendments thereto, the
Companies Act, 2013 (to the extent notified
and applicable).
The preparation of financial statements
requires judgments, estimates and
assumptions that affect the reported
amount of assets and 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.
(II) Basis of Measurement
The financial statements have been prepared
on accrual basis under the historical cost
basis except for certain financial assets and
liabilities that are measured at fair value.
(III) Measurement of Fair Values
A number of Company’s accounting policies
and disclosures require the measurement
of fair values, for both financial and non¬
financial assets and liabilities. The Company
has established policies and procedures with
respect to the measurement of fair values.
Fair values are categorised into different
levels in a fair value hierarchy based on the
inputs used in the valuation techniques as
follows:
- Level 1: Quoted prices (unadjusted) in
active markets for identical assets and
liabilities.
- Level 2: Inputs other than quoted prices
included in Level 1 that are observable
for the asset or liability, either directly or
indirectly.
- Level 3: Inputs for the asset or liability that
are not based on observable market data
(unobservable inputs).
(IV) Functional and Presentation Currency
These financial statements are presented in
Indian Rupees (INR), which is the Company’s
functional currency. All amounts disclosed
in the Financial Statements and notes have
been rounded off to the nearest lakhs (with
two places of decimal) as per the requirement
of Schedule III, unless otherwise stated.
(V) Current and Non-Current Classification of
Assets and Liabilities
The Company presents assets and liabilities
in the balance sheet based on current/non-
current classification. It has been classified as
current or non-current as per the Company's
normal operating cycle and other criteria as
set out in the Division II of Schedule III of the
Companies Act, 2013.
An asset is current when it is:
- Expected to be realized or intended to be
sold or consumed in normal operating
cycle;
- Held primarily for the purpose of trading;
- Expected to be realized within twelve
months after the reporting period; or
- 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 current when:
- It is expected to be settled in normal
operating cycle;
- It is held primarily for the purpose of
trading;
- It is due to be settled within twelve months
after the reporting period; or
- There is no unconditional right to defer
settlement of the liability for at least twelve
months after the reporting period.
- All other liabilities are classified as non¬
current. Deferred tax assets/liabilities are
classified as non current.
Operating cycle
The operating cycle is the time between the
acquisition of assets for processing and their
realization in cash and cash equivalents. The
Company has identified twelve months as
its operating cycle. All Assets and Liabilities
have been classified as current or non¬
current as per the operating cycle and other
criteria set out in Ind AS 1 ‘Presentation of
Financial Statements’ and Schedule III of the
Companies Act, 2013.
(VI) Property, Plant and Equipment
(A) Initial recognition and measurement
An item of property, plant and equipments
recognized 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. Items of property, plant
and equipment are initially recognized at
cost. Subsequent measurement is done
at cost less accumulated depreciation/
amortization (other than freehold land)
and accumulated impairment losses.
Cost includes expenditure that is directly
attributable to bringing the asset to the
location and condition, inclusive of non¬
refundable taxes & duties, necessary for it
to be capable of operating in the manner
intended by management.
When parts of an item of property, plant
and equipment have different useful
lives, they are recognized separately.
Items of spare parts, stand-by equipment
and servicing equipment which meet
the definition of property, plant and
equipment are capitalized. Other spare
parts are carried as inventory and
recognized in the statement of profit
and loss on consumption.
(B) Subsequent costs
Subsequent expenditure is recognized
as an increase in the carrying amount
of the asset when it is probable that
future economic benefits deriving
from the cost incurred will flow to the
enterprise and the cost of the item can
be measured reliably.
"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. All other
expenses on existing property, plant
and equipment, including day-to-day
repair and maintenance expenditure
and cost of replacing parts, are charged
to profit and loss account for the period
in which such expense are incurred.”
(C) De-recognition
Property, plant and equipment is
derecognized when no future economic
benefits are expected from their use or
upon their disposal. Gains and losses on
de-recognition of an item of property,
plant and equipment are determined by
comparing the proceeds from disposal,
if any, with the carrying amount of
property, plant and equipment, and are
recognized in the statement of profit
and loss.
(D) Capital work-in-progress
The cost of self-constructed assets
includes the cost of materials &
direct labour, any other costs directly
attributable to bringing the assets to
the location and condition necessary
for it to be capable of operating in the
manner intended by management
and borrowing costs. Expenses directly
attributable to construction of property,
plant and equipment incurred till they
are ready for their intended use are
identified and allocated on a systematic
basis on the cost of related assets.
Depreciation is not recorded on capital
work-in-progress until construction and
installation is complete and the asset is
ready for its intended use.
(E) Depreciation
The depreciation on Property, Plant &
Equipment has been provided on the
written down value method as per the
useful life prescribed in Schedule II to
the Companies Act, 2013. Depreciation
on the property, plant & equipment
added / disposed off / discarded during
the year has been provided on pro
rata basis with reference to the date
of addition / disposition /discardation.
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.
(Vll)Intangible assets
(A) Initial recognition and measurement
An intangible asset is recognized if and
only if it is probable that the expected
future economic benefits that are
attributable to the asset will flow to the
company and the cost of the asset can
be measured reliably.
Intangible assets that are acquired
by the Company, which have finite
useful lives, are recognized at cost.
Subsequent measurement is done at
cost less accumulated amortization
and accumulated impairment losses.
Cost includes any directly attributable
incidental expenses necessary to make
the assets ready for its intended use.
(B) Subsequent costs
Subsequent expenditure is recognized
as an increase in the carrying amount
of the asset when it is probable that
future economic benefits deriving
from the cost incurred will flow to the
enterprise and the cost of the item can
be measured reliably.
(C) De-recognition
An intangible asset is derecognized when
no future economic benefits are expected
from their use or upon their disposal.
Gains & losses on de-recognition of an
item of intangible assets are determined
by comparing the proceeds from
disposal, if any, with the carrying amount
of intangible assets and are recognized in
the statement of profit and loss.
(D) Amortization
Intangible assets are amortised over
a period of estimated useful life as
determined by the management.
(VIII)Borrowing Costs
Borrowing costs that are directly
attributable to the acquisition, construction
or production of qualifying assets are
capitalized as part of cost of such asset until
such time the assets are substantially ready
for their intended use. Qualifying assets are
assets which necessarily take substantial
period of time to get ready for their intended
use or sale.
Capitalization of borrowing costs ceases
when substantially all the activities
necessary to prepare the qualifying assets
for their intended uses are complete.
Borrowing costs consist of (a) interest
expense calculated using the effective
interest method as described in Ind AS 109
- ‘Financial Instruments’ (b) finance charges
in respect of finance leases recognized
in accordance with Ind AS 116 - ‘Leases’
and (c) exchange differences arising from
foreign currency borrowings to the extent
that they are regarded as an adjustment to
interest costs. Income earned on temporary
investment of the borrowings pending
their expenditure on the qualifying assets is
deducted from the borrowing costs eligible
for capitalization.
All other borrowing costs are recognized
as an expense in the year in which they are
incurred.
(IX) Inventories
Raw materials, stores, work-in-progress
and finished goods are stated at the lower
of cost and net realisable value. Cost of
raw materials and stores comprises cost
of purchases. Cost of work-in-progress,
finished goods and semi-finished goods
comprises direct materials, direct labour
and an appropriate proportion of variable
and fixed overhead expenditure, the latter
being allocated on the basis of normal
operating capacity.
Costs of inventories also include all other
costs incurred in bringing the inventories to
their present location and condition. Cost of
raw materials are calculated on the basis of
FIFO method whereas cost of finished goods
and semi-finished goods are calculated on
the basis of weighted average cost. Costs
of purchased inventory are determined
after deducting rebates and discounts. Net
realisable value is the estimated selling
price in the ordinary course of business less
the estimated costs of completion and the
estimated costs necessary to make the sale.
(X) Cash and Cash Equivalents
Cash and cash equivalents in the balance
sheet comprise cash at banks, cash on hand
and short-term deposits with an original
maturity of three months or less, which are
subject to an insignificant risk of changes in
value.
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