2.1. Material Accounting Policy Information
The Material Accounting Policy Information adopted in the preparation of these financial
statements are detailed hereafter. These policies have been consistently applied to all the
years presented, unless otherwise stated.
2.2. Segment Reporting
The company is operated in single segment and reported in a manner consistent with the
internal reporting provided to the Chief Operating Decision Maker. The Whole Time Director
has been identified as the Chief Operating Decision Maker. Refer Note 32 for the segment
information presented.
2.3. Foreign currency transactions
a) 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 entity operates ('the functional currency').
Indian Rupees is the functional currency of the company. The financial statements and all
financial information is presented in Indian rupee (INR).
b) Transactions and balances
Foreign currency transactions are translated into functional currency using the exchange rates
at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement
of such transactions and from the translation of monetary assets and liabilities denominated
in foreign currencies at year-end exchange rates are generally recognised in the statement of
profit and loss. Non-monetary items that are measured in terms of historical cost in a foreign
currency, using the exchange rate at the date of the 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 determined. Translation differences on assets and liabilities
carried at fair value are reported as part of the fair value gain or loss.
2.4. Use of estimates, assumptions and judgements
The preparation of financial statements requires the use of accounting estimates which, by
definition, will seldom equal the actual results. Management also needs to exercise judgement
in applying the Company's accounting policies.
This note provides an overview of the areas that involved a higher degree of judgement or
complexity, and of items which are more likely to be materially adjusted due to estimates and
assumptions turning out to be different than those originally assessed. Detailed information
about each of these estimates and judgements is included in relevant notes together with
information about the basis of calculation for each affected line item in the financial statements.
The areas involving critical estimates or judgements are:
• Estimation of expected credit loss on financial assets - Note 28(A) (I).
• Useful life of Property, Plant & Equipment - Note 2.7
• Recognition and measurement of defined benefit obligations - Note 2.14
• Estimation of current tax expense and payable
2.5. Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts
disclosed as revenue are net of returns, trade allowances, rebates, value-added taxes, goods
and service tax (GST) and amounts collected on behalf of third parties.
Revenue is recognized when the amount of revenue can be reliably measured: probable that
future economic benefits will flow to the entity and specific criteria for each of the activities
as described below has been met.
Sale of Goods - Recognition& Measurement
Revenue from the sale of goods is recognized when the significant risks and rewards of
ownership of the goods have passed to the buyer, usually on delivery of the goods.
Revenue from the sale of goods is measured at the fair value of the consideration received or
receivable, net of returns and allowances, trade discounts and volume rebates. Revenue also
excludes taxes collected from customers.
Dividend Income
Dividend income on investments is accounted for when the right to receive the same is
established. Dividend income will be included in Other Income in the Statement of Profit and
Loss.
Interest Income
Interest income on all financial assets measured at amortised cost, interest income is recognised
using the effective interest rate (EIR) method, is recognised in the statement of profit and loss
as part of other income.
Interest income is calculated by applying the effective interest rate to the gross carrying amount
of the financial asset except for financial assets that subsequently become credit impaired.
For credit impaired financial assets, the effective interest rate is applied to the net carrying
amount of the financial asset (after deduction of the expected credit loss).
2.6. Leases
As a lessee
The Company accounts for each lease component within the contract as a lease separately
from non-lease components of the contract and allocates the consideration in the contract to
each lease component on the basis of the relative stand-alone price of the lease component
and the aggregate stand-alone price of the non-lease components.
The Company recognises right-of-use asset representing its right to use the underlying asset
for the lease term at the lease commencement date. The cost of the right-of-use asset measured
at inception shall comprise of the amount of the initial measurement of the lease liability
adjusted for any lease payments made at or before the commencement date less any lease
incentives received, plus any initial direct costs incurred and an estimate of costs to be incurred
by the lessee in dismantling and removing the underlying asset or restoring the underlying
asset or site on which it is located. The right-of-use assets is subsequently measured at cost
less any accumulated depreciation, accumulated impairment losses, if any and adjusted for
any remeasurement of the lease liability. The right-of-use assets is depreciated using the
straight-line method from the commencement date over the shorter of lease term or useful
life of right-of-use asset. The estimated useful lives of right-of use assets are determined on
the same basis as those of property, plant and equipment. Right-of-use assets are tested for
impairment whenever there is any indication that their carrying amounts may not be
recoverable. Impairment loss, if any, is recognised in the statement of profit and loss.
The Company measures the lease liability at the present value of the lease payments that are
not paid at the commencement date of the lease. The lease payments are discounted using the
interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be
readily determined, the Company uses incremental borrowing rate. For leases with reasonably
similar characteristics, the Company, on a lease by lease basis, may adopt either the incremental
borrowing rate specific to the lease or the incremental borrowing rate for the portfolio as a
whole. The lease payments shall include fixed payments, variable lease payments, residual
value guarantees, exercise price of a purchase option where the Company is reasonably certain
to exercise that option and payments of penalties for terminating the lease, if the lease term
reflects the lessee exercising an option to terminate the lease. The lease liability is subsequently
remeasured by increasing the carrying amount to reflect interest on the lease liability, reducing
the carrying amount to reflect the lease payments made and remeasuring the carrying amount
to reflect any reassessment or lease modifications or to reflect revised in-substance fixed lease
payments. The company recognises the amount of the re-measurement of lease liability due
to modification as an adjustment to the right-of-use asset and statement of profit and loss
depending upon the nature of modification. Where the carrying amount of the right-of-use
asset is reduced to zero and there is a further reduction in the measurement of the lease
liability, the Company recognises any remaining amount of the re-measurement in statement
of profit and loss.
As a lessor
At the inception of the lease the Company classifies each of its leases as either an operating
lease or a finance lease. The Company recognises lease payments received under operating
leases as income on a straight- line basis over the lease term. In case of a finance lease, finance
income is recognised over the lease term based on a pattern reflecting a constant periodic rate
of return on the lessor's net investment in the lease. When the Company is an intermediate
lessor it accounts for its interests in the head lease and the sub-lease separately. It assesses the
lease classification of a sub-lease with reference to the right-of-use asset arising from the head
lease, not with reference to the underlying asset. If a head lease is a short-term lease to which
the Company applies the exemption described above, then it classifies the sub-lease as an
operating lease.
2.7. Property, Plant and Equipment
i) Recognition and measurement
The initial cost of property, plant and equipment comprises its purchase price, including
import duties and non-refundable purchase taxes, and any directly attributable costs of
bringing an asset to working condition and location for its intended use. It also includes the
initial estimate of the costs if any of dismantling and removing the item and restoring the site
on which it is located. Items such as spares are capitalized when they meet the definition of
property, plant and equipment. If significant parts of an item of property, plant and equipment
have different useful lives, then they are accounted for as separate items (major components)
of property, plant and equipment. Likewise, expenditure towards major inspections and
overhauls are identified as a separate component and depreciated over the expected period
till the next overhaul expenditure.
ii) Subsequent expenditure
Subsequent costs are included in the asset's carrying amount or recognised as a separate
asset, as appropriate in property, plant and equipment the cost of replacing part of such an
item when the cost is incurred if the recognised criteria are met. The carrying amount of any
component accounted for as separate asset is derecognised when replaced. All other repairs
and maintenance are charged to profit or loss during the reporting period in which they are
incurred.
iii) Derecognition
An item of property, plant and equipment is derecognised upon disposal or when no future
economic benefit is expected to arise from the continued use of the asset. Any gain or loss
arising on de-recognition of the asset (calculated as the difference between the net disposal
proceeds and the carrying amount of the item) is recognised in profit and loss in the period
the item is derecognised.
iv) Depreciation expense
Depreciation is charged on straight line basis so as to write off the depreciable amount of the
asset over the useful lives specified in Schedule II to the Act. The useful life of the assets is
periodically reviewed and re-determined based on a technical evaluation and expected use.
The Company reviews the residual value, useful lives and depreciation method annually
and, if expectations differ from previous estimates, the change is accounted for as a change in
accounting estimate on a prospective basis.
2.8. Financial Instruments
Classification, initial recognition, and measurement
A financial instrument is any contract that gives rise to a financial asset for one entity and a
financial liability or equity instrument for another entity. Financial instruments are recognized
on the balance sheet when the Company becomes a party to the contractual provisions of the
instrument.
(i) Financial Assets
Classification:
The Company classifies its financial assets in the following measurement categories:
• those to be measured subsequently at fair value (either through other comprehensive
income, or through profit or loss), and
• those measured at amortised cost.
The classification depends on the entity's business model for managing the financial assets
and the contractual terms of the cash flows. For assets measured at fair value, gains and
losses will either be recorded in profit or loss or other comprehensive income. For investments
in debt instruments, this will depend on the business model in which the investment is held.
For investments in equity instruments, this will depend on whether the Company has made
an irrevocable selection at the time of initial recognition to account for the equity investment
at fair value through other comprehensive income.
The Company reclassifies debt investments when and only when its business model for
managing those assets changes.
At initial recognition
The Company measures a financial asset at its fair value plus, in the case of a financial asset
not at fair value through profit or loss, transaction costs that are directly attributable to the
acquisition of the financial asset. Transaction costs of financial assets carried at fair value
through profit or loss are expensed in profit or loss.
Subsequent measurement - Debt instruments
Subsequent measurement of debt instruments depends on the Company's business model
for managing the asset and the cash flow characteristics of the asset. There are three
measurement categories into which the group classifies its debt instruments:
i. At amortised cost : Financial assets having contractual terms that give rise on specified
dates to cash flows that are solely payments of principal and interest on the principal
outstanding and that are held within a business model whose objective is to hold such
assets in order to collect such contractual cash flows are classified in this category.
Subsequently, these are measured at amortized cost using the effective interest method
less any impairment losses.
ii. At fair value through other comprehensive income (FVOCI): Financial assets are
measured at fair value through other comprehensive income if these financial assets are
held within a business whose objective is achieved by both collecting contractual cash
flows on specified dates that are solely payment of principal and interest on the principal
amount outstanding and selling financial assets.
iii. At fair value through profit or loss (FVTPL): Financial assets are measured at fair value
through profit or loss unless it is 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 at fair value through profit or loss are
immediately recognised in profit or loss.
Other Equity Investments
All other equity investments are measured at fair value, with value changes recognized in
Statement of Profit and Loss, except for those equity investments for which the Company has
elected to present the value changes in 'Other Comprehensive Income'.
Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and 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.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and
short-term deposits, as defined above, net of outstanding bank over drafts as they are
considered an integral part of the Company's cash management.
Trade receivables
Trade receivables are recognized initially at fair value and subsequently measured at amortized
cost using the effective interest method, less provision for impairment.
(ii) Financial liabilities
Classification, initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value
through profit or loss, loans and borrowings, or payables, 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.
Subsequent measurement
Financial liabilities are carried at amortized cost using the effective interest method. For trade
and other payables maturing within one year from the balance sheet date, the carrying amounts
approximate fair value due to the short maturity of these instruments.
Trade and other payables
Trade and other payables represent liabilities for goods and services prior to the end of financial
year 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 amortized cost
using the effective interest method.
Loans and borrowings
Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings
are subsequently measured at amortized cost. Any difference between the proceeds (net of
transaction costs) and the redemption amount is recognized in profit or loss over the period
of the borrowings using the effective interest method. Fees paid on the establishment of loan
facilities are recognized as transaction costs of the loan to the extent that it is probable that
some or all of the facility will be drawn down. In this case, the fee is deferred until the draw
down occurs. To the extent there is no evidence that it is probable that some or all of the
facility will be drawn down, the fee is capitalized as a prepayment for liquidity services and
amortized over the period of the facility to which it relates.
De-recognition of financial instruments
The Company derecognizes a financial asset when the contractual rights to the cashflows
from the asset expire, or when it transfers the financial asset and substantially all the risks
and rewards of ownership of the asset to another party. On de-recognition of a financial asset
the difference between the carrying amount and the consideration received is recognized in
the statement of profit and loss.
The Company derecognizes financial liabilities when, and only when, the Company's
obligations are discharged, cancelled or have expired. On de-recognition of a financial liability
the difference between the carrying amount of the financial liability derecognized and the
consideration paid and payable is recognized in the statement of profit and loss.
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet
where there is a legally enforceable right to offset the recognised amounts and there is an
intention to settle on a net basis or realize the asset and settle the liability simultaneously. The
legally enforceable right must not be contingent on future events and must be enforceable in
the normal course of business and in the event of default, insolvency or bankruptcy of the
group or the counter party.
Financial guarantee contracts
The fair value of financial guarantees is determined as the present value of the difference in
net cash flows between the contractual payments under the debt instrument and the payments
that would be required without the guarantee or the estimated amount that would be payable
to a third party for assuming the obligations.
As Guarantor
Financial guarantee contracts are recognized as a financial liability at the time the guarantee
is issued. The liability is initially measured at fair value and subsequently at the higher of the
amount determined in accordance with Ind AS 109 and the amount initially recognized less
cumulative amortization, where appropriate.
Where guarantees in relation to loans or other payables of associates are provided for no
compensation, the fair values are accounted for as contributions and recognised as part of the
cost of the investment.
As Beneficiary
Financial guarantee contracts are recognised as a financial asset at the time the guarantee is
taken. The asset is initially measured at fair value and subsequently amortised over the
guarantee period. Where guarantees in relation to loans or other payables are provided by
company for no compensation, the fair values are accounted for as contributions and
recognised as part of equity.
2.9. Impairment of Assets
Financial assets
The Company assesses at each date of balance sheet impairment if any of a financial asset or
a group of financial assets. The company uses, in accordance with Ind AS109, 'Expected Credit
Loss' (ECL) model, for evaluating impairment of financial assets other than those measured
at fair value through profit and loss (FVTPL). Expected credit losses are measured through a
loss allowance at an amount equal to: The 12-months expected credit losses (expected credit
losses that result from those default events on the financial instrument that are possible within
12 months after the reporting date); or Full lifetime expected credit losses (expected credit
losses that result from all possible default events over the life of the financial instrument).
For trade receivables Company applies a 'simplified approach' which requires expected life
time losses to be recognized from the initial recognition of the receivables. The Company
uses historical default rates to determine impairment loss on the portfolio of trade receivables.
At every reporting date, these historical default rates are reviewed and changes in the forward¬
looking estimates are analysed.
For other assets, the Company uses 12-month ECL to provide for impairment loss where
there is no significant increase in credit risk. If there is significant increase in credit risk full
lifetime ECL is used.
Non-financial assets
Property, Plant and Equipment and Other intangible assets with finite life are evaluated for
recoverability when there is any indication that their carrying amounts may not be recoverable.
If any such indication exists, the recoverable amount (i.e. 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. If the recoverable amount of an asset or CGU is estimated to be less than its carrying
amount, the carrying amount of the asset or CGU is reduced to its recoverable amount and
impairment loss is recognized in the profit or loss.
2.10. Equity instruments
An equity instrument is a contract that evidences residual interests in the assets of the Company
after deducting all of its liabilities. Equity instruments issued by the Company are recorded
at the proceeds received, net of direct issue costs.
2.11. Inventories
Raw materials, stores, spares and consumables are valued at lower of cost, calculated on
Weighted Average basis and net realisable value. Items held for use in the production of
inventories are not written down below cost if the finished products in which these will be
incorporated, are expected to be sold at or above cost.
Finished goods and work-in-progress are valued at lower of cost and net realisable value
Cost includes materials, direct labour, and a proportion of appropriate over heads based on
normal operating capacity. Cost is determined on a Weighted Average basis.
Trading goods are valued at lower of cost and net realisable value.
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.
2.12. Tax expenses
Tax expense comprises of current tax and deferred tax. Current tax is measured at the amount
expected to be paid to the tax authorities, based on estimated tax liability computed after
taking credit for allowances and exemption in accordance with the prevailing tax laws for the
year.
Current and deferred tax are recognized in profit or loss, except when they relate to the items
that are recognized in other comprehensive income or directly in equity, in which case, the
income taxes are recognized in other comprehensive income or directly in equity, respectively.
Current tax assets and current tax liabilities are presented in the statement of financial position
after off-setting the taxes paid or deemed to be paid and current income tax expenses are the
year.
Deferred income taxes
Deferred tax is recognized using the balance sheet approach. Deferred income tax assets and
liabilities are recognized for deductible and taxable temporary differences arising between
the tax base of assets and liabilities and their carrying amount, except when the deferred
income tax arises from the initial recognition of goodwill or an asset or liability in a transaction
that is not a business combination and affects neither accounting nor taxable profit or loss at
the time of the transaction.
Deferred income tax asset are recognized to the extent it is probable that taxable profit will be
available against which the deductible temporary differences and the carry forward of unused
tax credits and unused tax losses can be utilized.
The carrying amount of deferred income tax assets is reviewed at each reporting date and
reduced to the extent that it is no longer probable that sufficient taxable profit will be available
to allow total or part of the deferred income tax asset to be utilized.
Deferred tax assets and liabilities are measured using substantively enacted tax rates expected
to apply to taxable income in the years in which the temporary differences are expected to be
received or settled.
Deferred tax assets include Minimum Alternative Tax (MAT) paid in accordance with the tax
laws in India, which gives rise to future economic benefits in the form of adjustment of future
income tax liability, is considered as an asset if there is probable evidence that the Company
will pay normal income tax after the tax holiday period.
Deferred tax assets and liabilities are offset when it relates to income taxes levied by the same
taxation authority and the relevant entity intends to settle its current tax assets and liabilities
on a net basis
The Company recognizes interest related to income tax in interest expenses.
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