Note 2: Summary of material accounting
policies
This note provides a list of the material accounting policies
adopted in the preparation of these financial statements.
These policies have been consistently applied to all the
years presented, unless otherwise stated. The financial
statements are for the Company.
a) Basis for preparation
The financial statements comply in all material aspects
with the Indian Accounting Standards (Ind AS) notified
under Section 133 of the Companies Act, 2013 ('the
Act') [Companies (Indian Accounting Standards) Rules,
2015] and other relevant provisions of the Act.
The financial statements have been prepared on a
historical cost basis, except for the following:
• certain financial assets and liabilities and
contingent consideration is measured at fair value
• defined benefit plans - plan assets measured at
fair value
b) Statement of Compliance
These financial statements of the Company have
been prepared in accordance with Indian Accounting
Standard (Ind AS) under the historical cost convention
on the accrual basis except for certain financial
instruments which are measured at fair values, the
provisions of the Companies Act, 2013 ('the Act')
(to the extent notified). The Ind AS are prescribed
under Section 133 of the Act read with Rule 3 of the
Companies (Indian Accounting Standards) Rules, 2015
and relevant amendment rules issued thereafter.
c) Use of estimates and judgement
The preparation of financial statements in conformity
with Ind AS requires management to make judgements,
estimates and assumptions that affect the application
of accounting policies and the reported amount of
assets and liabilities, revenues and expenses and
disclosure of contingent liabilities. Such estimates and
assumptions are based on management's evaluation
of relevant facts and circumstances as on the date of
financial statements. The actual outcome may diverge
from these estimates.
The estimates and underlying assumptions are reviewed
on an on-going basis. Revisions to accounting estimates
are recognised in the period in which the estimate is
revised if the revision affects only that period, or in the
period of the revision and future periods if the revision
affects both current and future periods.
(i) Useful lives of property, plant and
equipment:
The Company reviews the useful life of property,
plant and equipment at the end of each reporting
period. This re-assessment may result in change
in depreciation expense in future periods.
(ii) Fair value of financial assets and liabilities
and investments:
The Company measures certain financial assets
and liabilities on fair value basis at each balance
sheet date or at the time they are assessed for
impairment. Fair value measurement that are
based on significant unobservable inputs (Level 3)
requires estimates of operating margin, discount
rate, future growth rate, terminal values, etc.
based on management's best estimate about
future developments.
(iii) Provisions and contingent liabilities
Provisions: A provision is recognised when the
Company has a present obligation as a result of past
events and it is probable that an outflow of resources
will be required to settle the obligation, in respect of
which a reliable estimate can be made. The amount
recognised as a provision is the best estimate of
the consideration required to settle the present
obligation at the end of the reporting period, taking
into account the risks and uncertainties surrounding
the obligation. When a provision is measured using
the cash flows estimated to settle the present
obligation, its carrying amount is the present value
of those cash flows (when the effect of time value of
money is material).
Contingent liabilities: Contingent liabilities
are not recognised but are disclosed in notes
to accounts.
d) Functional and presentation currency
Items included in the financial statements of the
Company are measured using the currency of the primary
economic environment in which the Company operates
(i.e. "the functional currency"). The financial statements
are presented in Indian Rupee, the national currency of
India, which is the functional currency of the Company.
e) Revenue recognition
i) Sale of goods: Revenue from the sale of goods is
recognized at the point in time when control over
the goods sold is transferred to the customer.
Revenue is measured based on the transaction
price, which is the consideration, net of discounts,
variable considerations, other similar charges,
as specified in the contract with the customer.
Additionally, revenue excludes taxes collected
from customers, which are subsequently remitted
to governmental authorities.
ii) Interest income: Interest income from a financial
asset is recognised when it is probable that the
economic benefits will flow to the Company and
the amount of income can be measured reliably.
Interest income is accrued on a time basis, by
reference to the principal outstanding and at
the effective interest rate applicable, which is
the rate that exactly discounts estimated future
cash receipts through the expected life of the
financial asset of that asset's net carrying amount
on initial recognition.
iii) Service Income: Service income is recognized on
rendering of services based on the agreements /
arrangements with the concerned parties.
f) Leases
The Company's lease asset classes consist of leases for
buildings. The Company, at the inception of a contract,
assesses whether the contract is a lease or not a lease.
A contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset for a
time in exchange for a consideration. This policy has
been applied to contracts existing and entered into
on or after April 1, 2019 (standard effective date).
The Company recognises a right-of-use asset and
a lease liability at the later of lease commencement
date or April 01, 2019. The right-of-use asset is initially
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, less any lease incentives received. The
right-of-use asset is subsequently depreciated using
the straight-line method from the commencement
date to the end of the lease term. The lease liability
is initially measured at the present value of the lease
payments that are not paid at the commencement
date, discounted using the Company's incremental
borrowing rate. It is premeasured when there is a
change in future lease payments arising from a change
in an index or rate, if there is a change in the Company's
estimate of the amount expected to be payable under
a residual value guarantee, or if the Company changes
its assessment of whether it will exercise a purchase,
extension or termination option.
When the lease liability is remeasured 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 Company has elected not to recognise right-of-
use assets and lease liabilities for short-term leases
that have a lease term of 12 months or less and leases
of low-value assets. The Company recognises the lease
payments associated with these leases as an expense
over the lease term.
g) Foreign currencies
Transactions in currencies other than the entity's
functional currency (foreign currencies) are recognized
at the rates of exchange prevailing at the date of the
transaction. At the end of each reporting period,
monetary items denominated in foreign currencies are
retranslated at the rates prevailing at that date. Non¬
monetary items that are measured in terms of historical
cost in a foreign currency are not retranslated. Exchange
differences on monetary items are recognised in the
statement of profit and loss in the period in which they
arise except for exchange differences on transactions
designated as fair value hedge, if any.
h) Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets, which
are assets that necessarily take a substantial period
of time to get ready for their intended use or sale are
added to the cost of those assets, until such time the
assets are substantially ready for their intended use or
sale. All other borrowing costs are recognised in profit
or loss in the period in which they are incurred.
i) Gold metal loan
The company has an arrangement with its banker for
lifting gold under metal loan terms against a limit
under "price unfixed basis" and opts to fix the price
for gold taken under loan within 180 days at delivery.
However, based on business expediencies the
Company fixes the price within 180 days, whenever the
price is favourable and carried the transaction under
the forward cover to be settled for payment of money
on the specified date. The price difference arising
out of such transactions are bifurcated into weight to
foreign currency and foreign currency to INR. The same
are accounted to the head of purchase and foreign
exchange fluctuation respectively. The interest if any
payable to bankers on such outstanding is treated as
expenses on accrual basis.
The outstanding metal loan position if any as on
reporting date is special purpose at marked to market
price and the resulting difference if any is accounted to
the purchase account and foreign exchange fluctuation.
j) Advance from customers
The Company accepts advances from customers for
future sales subject to terms and conditions of the
respective schemes and can be broadly classified
as rupee schemes, where customer pays 11 monthly
instalments and is eligible to buy jewellery at the
prevailing rate without any making charges and value
addition and as quantity scheme, where customer can
make an one-time payment either through amount or
old gold and a credit will be given for a quantity on the
prevailing gold rate at the time of receipt.
Amounts collected as advances from customers is
recognized as a liability in the year of collection and
the any liability towards the customer advances as
quality scheme the same are restated at the balance
sheet date based on the prevailing gold rate.
k) Employee benefits
Leave Encashment: Compensatory absence which
accrue to the employees which are expected to be
availed or encashed within twelve months after the
end of the period in which the employees render
the related service are short- term in nature. These
compensatory absences require measurement on an
actual basis and not on actuarial basis.
Defined contribution plan: The Company makes
defined contribution to Provident Fund and Employee
State Insurance which are recognized in the statement
of Profit and Loss on accrual basis.
Defined benefit plan: The Company's liability towards
gratuity is determined on the basis of year end actuarial
valuations applying the Projected Unit Credit Method
done by an independent actuary as on the Balance
sheet date. The actuarial valuation method used by
the independent actuary for measuring the liability
is the projected unit credit method. Actuarial losses
and gains are recognized in Other Comprehensive
Income (OCI) and are not reclassified to the statement
of profit and loss in any subsequent periods. Changes
in the present value of the defined benefit obligation
resulting from plan amendments or curtailments are
recognized immediately in the statement of profit and
loss as past service costs.
l) Taxation
I ncome tax expense represents the sum of the tax
currently payable and deferred tax.
Current tax: Current tax is the amount of tax payable
on the taxable income for the year as determined
in accordance with the applicable tax rates and the
provisions of the Income Tax Act, 1961.
Minimum alternate tax (MAT): paid in accordance with
the tax laws, which gives future economic benefits in
the form of adjustment to future income tax liability,
is considered as an asset if there is convincing
evidence that the Company will pay normal income
tax. Accordingly, MAT is recognised as an asset in
the Balance Sheet when it is highly probable that
future economic benefit associated with it will flow to
the Company.
Deferred tax: Deferred tax is recognized using the
balance sheet approach. Deferred tax assets and
liabilities are recognised on temporary differences
between the carrying amounts of assets and liabilities
in the financial statements and the corresponding
tax bases used in the computation of taxable profit.
Deferred tax liabilities are generally recognised for all
taxable temporary differences. Deferred tax assets
are generally recognised for all deductible temporary
differences to the extent that it is probable that taxable
profits will be available against which those deductible
temporary differences can be utilised. The carrying
amount of deferred tax assets is reviewed at the end
of each reporting period and reduced to the extent
that it is no longer probable that sufficient taxable
profits will be available to allow all or part of the asset
to be utilised. Deferred tax liabilities and assets are
measured at the tax rates that are expected to apply in
the period in which the liability is settled or the asset
realised, based on tax rates (and tax laws) that have
been enacted or substantively enacted by the end of
the reporting period. The measurement of deferred
tax liabilities and assets reflects the tax consequences
that would follow from the manner in which the
Company expects, at the end of the reporting period,
to recover or settle the carrying amount of its assets
and liabilities.
m) Property, plant and equipment
Land and buildings held for use in the production
or supply of goods or services, or for administrative
purposes, are stated at cost less accumulated
depreciation and accumulated impairment losses.
Freehold land is carried at historical cost.
Property, plant and equipment are carried at cost less
accumulated depreciation and impairment losses,
if any. The cost of property, plant and equipment
comprises its purchase price/ acquisition cost, net of
any trade discounts and rebates, any import duties
and other taxes (other than those subsequently
recoverable from the tax authorities), any directly
attributable expenditure on making the asset ready
for its intended use, other incidental expenses and
interest on borrowings attributable to acquisition of
qualifying property, plant and equipment up to the
date the asset is ready for its intended use. Subsequent
expenditure on property, plant and equipment after
its purchase / completion is capitalised only if such
expenditure results in an increase in the future benefits
from such asset beyond its previously assessed
standard of performance.
Depreciation on Property, plant and equipment
(other than freehold land) has been provided on the
straight-line method as per the useful life prescribed
in Schedule II to the Companies Act, 2013, except in
the case of fixtures at stores, has been provided based
on the lease period of the respective premises. The
estimated useful life of the tangible assets and the
useful life are reviewed at the end of the each financial
year and the depreciation period is revised to reflect
the changed pattern, if any. An item of property, plant
and equipment is derecognised upon disposal or when
no future economic benefits are expected to arise from
continued use of the asset. Any 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. Any leasehold improvements is depreciated
over the lease term.
n) Capital work-in-progress
Capital work in progress includes, cost of assets not
yet commissioned and incidental expenses during
the construction period. Certain directly attributable
pre-operative expenses during construction period
are included under Capital Work in Progress. These
expenses are allocated to the cost of Fixed Assets
when the same are ready for intended use.
o) Investment properties
Investment properties are properties held to earn rentals
and/or for capital appreciation (including property
under construction for such purposes). Investment
properties are measured initially at cost, including
transaction costs. Subsequent to initial recognition,
investment properties are measured in accordance with
Ind AS 16's requirements for cost model. An investment
property is derecognised upon disposal or when the
investment property is permanently withdrawn from
use and no future economic benefits are expected from
the disposal. Any gain or loss arising on derecognition
of the property (calculated as the difference between
the net disposal proceeds and the carrying amount of
the asset) is included in profit or loss in the period in
which the property is derecognised. The depreciation
on Investment property (other than freehold land)
are provided on the straight-line method as per the
useful life prescribed in Schedule II to the Companies
Act, 2013.
p) Intangible assets
I ntangible assets are stated at cost less accumulated
amortisation and impairment. Intangible assets are
amortised over their respective estimated useful
lives on a straight line basis, from the date that they
are available for use. The estimated useful life of an
identifiable intangible asset is based on a number of
factors including the effects of obsolescence, demand,
competition and other economic factors (such as the
stability of the industry and known technological
advances) and the level of maintenance expenditures
required to obtain the expected future cash flows from
the asset. Estimated useful lives of the intangible assets
is 6 years which contains Software. The estimated
useful life of the intangible assets and the amortisation
period are reviewed at the end of the each financial
year and the amortisation period is revised to reflect
the changed pattern, if any.
q) Impairment of tangible and intangible assets
At the end of each reporting period, the Company
reviews the carrying amounts of its tangible and
intangible assets to determine whether there is
any indication that those assets have suffered an
impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order
to determine the extent of the impairment loss (if any).
Recoverable amount is the higher of fair value less
costs of disposal and value in use. 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 for which the
estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset is estimated to
be less than its carrying amount, the carrying amount
of the asset is reduced to its recoverable amount.
An impairment loss is recognised immediately in the
Statement of profit and loss.
When an impairment loss subsequently reverses,
the carrying amount of the asset is increased to the
revised estimate of its recoverable amount, but so that
the increased carrying amount does not exceed the
carrying amount that would have been determined
had no impairment loss been recognised for the
asset in prior years. A reversal of an impairment loss
is recognised immediately in the Statement of profit
and loss.
r) Inventories
Inventories are stated at the lower of cost or net
realizable value. Cost is determined for raw material;
work-in-progress; and finished goods on 'weighted
average' basis. The cost of inventories includes all cost
of purchase, cost of conversion and other cost incurred
in bringing the Inventories to their present location
and condition.
Packing materials and Gift items are valued at cost on
FIFO basis.
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