4. 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.
4.1 Property, Plant and Equipment (‘PPE')
An item is recognised as an asset, if and only if, it is probable that the future economic benefits associated with the
item will flow to the Company and its cost can be measured reliably. PPE are stated at actual cost less accumulated
depreciation and impairment loss, if any. Actual cost is inclusive of freight, installation cost, duties, taxes and other
incidental expenses for bringing the asset to its working conditions for its intended use (net of tax credit, if any)
and any cost directly attributable to bring the asset into the location and condition necessary for it to be capable of
operating in the manner intended by the Management. It includes professional fees and borrowing costs for qualifying
assets.
Property, Plant and Equipment and intangible assets are not depreciated or amortized once classified as held for
sale.
Significant Parts of an item of PPE (including major inspections) having different useful lives & material value or other
factors are accounted for as separate components. All other repairs and maintenance costs are recognized in the
statement of profit and loss as incurred.
Depreciation of these PPE commences when the assets are ready for their intended use. The estimated useful
lives and residual values are reviewed on an annual basis and if necessary, changes in estimates are accounted for
prospectively. Depreciation on subsequent expenditure on PPE arising on account of capital improvement or other
factors is provided for prospectively over the remaining useful life.
Depreciation is provided pro-rata to the period of use on the straight-line method based on the estimated useful life
of the assets. The residual values are not more than 5% of the original cost of the assets. The useful life of property,
plant and equipment are as follows:
Note:
(a) Depreciation on the amount capitalized on up-gradation of the existing assets is provided over the balance life
of the original asset.
(b) An item of PPE is de-recognized upon disposal or when no future economic benefits are expected to arise
from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of PPE
is determined as the difference between the sales proceeds and the carrying amount of the asset and is
recognized in the Statement of Profit and Loss.
4.2 Intangible assets
Intangible assets are recognised when it is probable that the future economic benefits that are attributable to the asset
will flow to the enterprise and the cost of the asset can be measured reliably. Intangible assets are stated at original
cost net of tax/duty credits availed, if any, less accumulated amortisation and cumulative impairment. Administrative
and other general overhead expenses that are specifically attributable to acquisition of intangible assets are allocated
and capitalised as a part of the cost of the intangible assets.
De-recognition of intangible assets
An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or
disposal. Gains or losses arising from de-recognition of an intangible asset, measured as the difference between the
net disposal proceeds and the carrying amount of the asset, and are recognized in the Statement of Profit and Loss
when the asset is derecognized.
Amortization: Intangible assets are amortised on straight line basis over a period ranging between 2-5 years which
equates its economic useful life.
The amortization period and the amortization method are reviewed at least at each financial year end. If the expected
useful life of the asset is different from previous estimates, the change is accounted for prospectively as a change in
accounting estimate.
4.3 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. The financial instruments are recognised in the balance sheet when the Company
becomes a party to the contractual provisions of the financial instrument. The Company determines the classification
of its financial instruments at initial recognition.
Financial Assets
Initial recognition and measurement
All financial assets are recognised 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 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 following categories based on business
model of the entity:
• Debt instruments at amortized 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 amortized cost
A 'debt instrument' is measured at the amortized cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash
flows, and
b) 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 amortized cost using the effective
interest rate (EIR) method.
Debt instrument at FVTOCI
A 'debt instrument' is classified as at the FVTOCI if both of the following criteria are met:
a) The objective of the business model is achieved both by collecting contractual cash flows and selling the
financial assets, and
b) 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 the other comprehensive income (OCI). However, the Company
recognizes interest income, impairment losses & reversals and foreign exchange gain or loss in the P&L. On
derecognition of the asset, cumulative gain or loss previously recognized in OCI is reclassified from the equity to
P&L. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
Debt instrument at FVTPL
Any debt instrument, that does not meet the criteria for categorization as at amortized cost or as FVTOCI, is classified
as at FVTPL.
In addition, the Company may elect to designate a debt instrument, which otherwise meets amortized cost or FVTOCI
criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement
or recognition inconsistency (referred to as 'accounting mismatch'). The Company has not designated any debt
instrument as at FVTPL.
Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the
P&L.
Equity investments (Other than investment in subsidiary)
All other equity investments are measured at fair value. For Equity instruments, the Company may make an irrevocable
election to present in other comprehensive income subsequent changes in the fair value. The Company makes such
election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument,
excluding dividends, are recognized in the OCI. This amount is not recycled from OCI to P&L, even on sale of
investment. However, the Company may transfer the cumulative gain or loss within equity.
Financial assets are measured at fair value through profit or loss unless they are measured at amortised cost or
at fair value through other comprehensive income on initial recognition. The transaction costs directly attributable
to the acquisition of financial assets and liabilities at fair value through profit or loss are immediately recognised in
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.
Investments in Mutual Funds
Investments in mutual funds are measured at fair value through profit or loss (FVTPL).
Cash and cash equivalents
The Company considers all highly liquid financial instruments, which are readily convertible into known amounts 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. Cash and cash equivalents consist of balances with banks which
are unrestricted for withdrawal and usage.
De-recognition
A financial asset is de-recognized only when
• The Company has transferred the rights to receive cash flows from the financial asset or
• retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual
obligation to pay the cash flows to one or more recipients.
Where the Company has transferred an asset, it evaluates whether it has transferred substantially all risks and
rewards of ownership of the financial asset. In such cases, the financial asset is de-recognized.
Where the Company has neither transferred a financial asset nor retains substantially all risks and rewards of
ownership of the financial asset, the financial asset is de-recognised if the Company has not retained control of the
financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognised to
the extent of continuing involvement in the financial asset.
Impairment of financial assets
The Company assesses at each date of balance sheet whether a financial asset or a group of financial assets is
impaired. Ind AS 109 requires expected credit losses to be measured through a loss allowance. In determining the
allowances for doubtful trade receivables, the Company has used a practical expedient by computing the expected
credit loss allowance for trade receivables based on a provision matrix. The provision matrix considers historical
credit loss experience and is adjusted for forward looking information. For all other financial assets, expected credit
losses are measured at an amount equal to the 12-months expected credit losses or at an amount equal to the life
time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the
statement of profit and loss (P&L).
Financial liabilities
Financial liabilities and equity instruments issued by the company are classified according to the substance of the
contractual arrangements entered into and the definitions of a financial liability and an equity instrument.
Initial recognition and measurement
Financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument.
Financial liabilities are initially measured at the amortised cost unless at initial recognition, they are classified as fair
value through profit and loss.
Subsequent measurement
Financial liabilities are subsequently measured at amortised cost using the effective interest rate method. Financial
liabilities carried at fair value through profit or loss are measured at fair value with all changes in fair value recognised
in the statement of profit and loss.
Trade and Other Payables
These amounts represent liabilities for goods and services provided to the Company prior to the end of financial
period which are unpaid. Trade and other payables are presented as current liabilities unless payment is not due
within 12 months after the reporting period. They are recognized initially at their fair value and subsequently measured
at amortised cost using the effective interest method.
Loans and Borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using
the EIR method. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as
through the EIR amortization process.
Financial Guarantee Contracts
Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that
are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the
amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognised less
cumulative amortisation.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
4.4 Borrowing Costs
Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying asset are
capitalized as part of cost of such asset. Other borrowing costs are recognized as an expense in the period in which
they are incurred.
Borrowing costs consists of interest and other costs that an entity incurs in connection with the borrowing of funds.
4.5 Impairment of Non-Financial Assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any
indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset's
recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's (CGU) fair
value less costs of disposal and its value in use.
Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are
largely independent of those from other assets or group of assets.
When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and
is written down to its recoverable amount.
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.
In determining fair value less costs of disposal, recent market transactions are considered. If no such transactions
can be identified, an appropriate valuation model is used. Impairment losses of continuing operations, including
impairment on inventories, are recognized in the statement of profit and loss.
A previously recognized impairment loss (except for goodwill) is reversed only if there has been a change in the
assumptions used to determine the asset's recoverable amount since the last impairment loss was recognized. The
reversal is limited to the carrying amount of the asset.
4.6 Revenue recognition
The Company recognizes revenue in accordance with Ind- AS 115. Revenue is recognized upon transfer of control of
promised products or services to customers in an amount that reflects the consideration that the Company expects
to receive in exchange for those products or services.
Revenues in excess of invoicing are classified as contract assets (which may also refer as unbilled revenue) while
invoicing in excess of revenues are classified as contract liabilities (which may also refer to as unearned revenues).
The Company presents revenues net of indirect taxes in its Statement of Profit and loss.
The specific recognition criteria from various stream of revenue is described below:
(i) Revenue from Services is recognized when respective service is rendered and accepted by the customer
(i.e. when performance obligation is satisfied) at the amount of transaction price (net of variable consideration)
allocated to that performance obligation. The transaction price of services rendered is net of, returns and
allowances, trade discounts and volume rebates offered by the Company as part of the contract.
(ii) Insurance claims are accounted for as and when admitted by the concerned authority.
(iii) Interest Income: For all debt instruments measured either at amortized cost or at fair value through other
comprehensive income, interest income is recorded using the effective interest rate (EIR).
(iv) Dividend Income: Dividend income on investments is recognised when the right to receive dividend is
established.
(v) Other Income: Other Income is accounted for on accrual basis except, where the receipt of income is uncertain.
4.7 Employees Benefits
Short term employee benefits: -
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 recognized 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 current employee benefit obligations in the balance sheet.
Long-Term employee benefits:-
Compensated expenses which are not expected to occur within twelve months after the end of period in which
the employee renders the related services are recognized as a liability at the present value of the defined benefit
obligation at the balance sheet date.
Post-employment obligations
i. Defined contribution plans
Provident Fund and employees' state insurance schemes
All employees of the Company are entitled to receive benefits under the Provident Fund, which is a
defined contribution plan. Both the employee and the employer make monthly contributions to the plan at
a predetermined rate (presently 12%) of the employees' basic salary. These contributions are made to the
fund administered and managed by the Government of India. In addition, some employees of the Company
are covered under the employees' state insurance schemes, which are also defined contribution schemes
recognized and administered by the Government of India.
The Company's contributions to both these schemes are expensed in the Statement of Profit and Loss. The
Company has no further obligations under these plans beyond its monthly contributions.
ii. Defined benefit plans
Gratuity
The Company provides for gratuity obligations through a defined benefit retirement plan (the 'Gratuity Plan')
covering all employees. The Gratuity Plan provides a lump sum payment to vested employees at retirement
or termination of employment based on the respective employee salary and years of employment with the
Company. The Company provides for the Gratuity Plan based on actuarial valuations in accordance with Indian
Accounting Standard 19 (revised), “Employee Benefits “. The present value of obligation under gratuity is
determined based on actuarial valuation using Project Unit Credit Method, which recognizes each period of
service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to
build up the final obligation.
Defined retirement benefit plans comprising of gratuity, un-availed leave, post-retirement medical benefits
and other terminal benefits, are recognized based on the present value of defined benefit obligation which is
computed using the projected unit credit method, with actuarial valuations being carried out at the end of each
annual reporting period. These are accounted either as current employee cost or included in cost of assets as
permitted.
Leave Encashment
The Company has provided for the liability at period end on account of un-availed earned leave as per the
actuarial valuation as per the Projected Unit Credit Method.
iii. Actuarial gains and losses are recognized in OCI as and when incurred.
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.
Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if
applicable) and the return on plan assets (excluding net interest as defined above),are recognized in other
comprehensive income except those included in cost of assets as permitted in the period in which they occur
and are not subsequently reclassified to profit or loss.
The retirement benefit obligation recognized in the Financial Statements represents the actual deficit or surplus
in the Company's defined benefit plans. Any surplus resulting from this calculation is limited to the present value
of any economic benefits available in the form of reductions in future contributions to the plans.
Termination benefits
Termination benefits are recognized as an expense in the period in which they are incurred.
4.8 Investments in subsidiaries
The Company records the investments in subsidiaries at cost less accumulated impairment losses, if any. Where an
indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to
its recoverable amount.
When the Company issues financial guarantees on behalf of subsidiaries, initially it measures the financial guarantees
at their fair values and subsequently measures at the higher of the amount of loss allowance determined as per
impairment requirements of Ind AS 109 and the amount recognized less cumulative amortization.
The Company records the initial fair value of financial guarantee as deemed investment with a corresponding liability
recorded as deferred revenue. Such deemed investment is added to the carrying amount of investment in subsidiaries
Deferred revenue is recognized in the Statement of Profit and Loss over the remaining period of financial guarantee
issued.
The Company reviews its carrying value of investments carried at cost (net of impairment, if any) annually, or more
frequently when there is indication for impairment. If the recoverable amount is less than its carrying amount, the
impairment loss is accounted for in the statement of profit and loss.
4.9 Taxation
The income tax expense or credit for the period is the tax payable on the current period's taxable income based on
the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary
differences and to unused tax losses, if any.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end
of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in
which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis
of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the Standalone Financial Statement. However, deferred
tax liabilities are not recognized if they arise from the initial recognition of goodwill. Deferred income tax is also
not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting profit nor taxable profit (tax loss). Deferred
income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of
the reporting period and are expected to apply when the related deferred income tax asset is realized or the deferred
income tax liability is settled.
The carrying amount of deferred tax assets are reviewed at the end of each reporting period and are recognized only
if it is probable that future taxable amounts will be available to utilize those temporary differences and losses.
Deferred tax liabilities are not recognized for temporary differences between the carrying amount and tax bases
of investments in subsidiaries, where the Company is able to control the timing of the reversal of the temporary
differences and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets are not recognized for temporary differences between the carrying amount and tax bases of
investments in subsidiaries, associates and interest in joint arrangements where it is not probable that the differences
will reverse in the foreseeable future and taxable profit will not be available against which the temporary difference
can be utilized.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax
liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis,
or to realize the asset and settle the liability simultaneously.
4.10 Leases
As a lessee
The Company's lease asset classes primarily consist of leases for land and buildings. The Company assesses
whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess
whether a contract conveys the right to control the use of an identified asset, the Company assesses whether:
i. the contract involves the use of an identified asset
ii. the Company has substantially all of the economic benefits from use of the asset through the period of the
lease and
iii. the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognizes a right-of-use asset (“ROU”) and a corresponding
lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less
(short-term leases) and low value leases. For these short-term and low value leases, the Company recognizes the
lease payments as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term.
ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted
for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any
lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the
lease term and useful life of the underlying asset. Right of use assets are evaluated for recoverability whenever
events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of
impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is
determined on an individual asset basis unless the asset does not generate cash flows that are largely independent
of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU)
to which the asset belongs.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The
lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using
the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a
corresponding adjustment to the related right of use asset if the Company changes its assessment if whether it will
exercise an extension or a termination option.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been
classified as financing cash flows.
The company's lease labilities are included in Other financial liabilities.
Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have
a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies
the lease of low-value assets recognition exemption to leases that are considered to be low value. Lease payments
on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the
lease term.
4.11 Segment Reporting
Identification of segments:
Operating segments are reported in a manner consistent with the internal financial reporting provided to the Chief
Operating Decision Maker (CODM) i.e. Board of Directors. CODM monitors the operating results of all product
segments separately for the purpose of making decisions about resource allocation and performance assessment.
Segment performance is evaluated based on profit and loss and is measured consistently with profit and loss in the
financial statements. The primary reporting of the Company has been performed on the basis of business segments.
The analysis of geographical segments is based on the areas in which the Company's products are sold or services
are rendered.
Allocation of common costs:
Common allocable costs are allocated to each segment according to the relative contribution of each segment to the
total common costs.
Unallocated items:
The Corporate and other segment include general corporate income and expense items, which are not allocated to
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