2 Significant Accounting Policies
(A) Basis of Preparation
(i) Compliance with Ind AS
These financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as notified by Ministry of Company Affairs under Section 133 of Companies Act, 2013 ("the Act"), read together with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 as amended and other relevant provisions of the Act.
(ia) Financial and presentation currency
The financial statements are presented in Indian Rupees (INR), which is also the company's functional currency.
(ii) Basis of measurement
These financial statements have been prepared on an accrual and historical cost basis, except for the following:
* Certain financial assets and liabilities (including derivative instruments) that are measured at fair value;
* Non current investment in equity shares of unlisted companies have been measured at their respective break up value as on 1 st April of the current accounting year.
* Accounting policies have been consistently applied except where a newly-issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
(iii) Use of estimates and judgements
In preparing the financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively.
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 a relevant notes together with information about the basis of calculation for each affected line item in the financial statements.
a. Judgements
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management exercise judgement in applying the Company's accounting policies.
b. Assumptions and estimation uncertainties The areas involving critical estimates are:
Recognition and measurement of provisions and contingencies;
Estimation of defined benefit obligation;
Estimated useful life of tangible and intangible assets;
Impairment test of non-financial assets; and Impairment of trade receivables and other financial assets.
Estimates and judgements are continually evaluated. They are based on historical experience and other factors including expectation of future events that may have a financial impact on the company and they are believed it be reasonable under the circumstances.
(iv) Current versus non-current classification
The company presents assets and liabilities in the Balance Sheet based on the current/non-current classification.
An asset is treated as current when:
It is expected to be realised or intended to be sold or consumed in normal operating cycle;
* It is held primarily for the purpose of trading;
* It is expected to be realised within twelve months after the reporting period; or
* It is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
Current assets include the current portion of non-current financial assets. The company classifies all other assets as noncurrent.
A liability is treated 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 the settlement of the liability for at least twelve months after the reporting period.
Current liabilities include current portion of non-current financial liabilities. The company classify all other liabilities as noncurrent.
Deferred tax assets and liabilities are classified as non-current assets and liabilities respectively.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The company has identified twelve months as its operating cycle for the purpose of current/ non-current classification of assets and liabilities.
(v) Measurement of fair values
The fair value of an asset or liability is measured using the assumption that market participants would use when pricing the asset or liability, assuming that market participants act in their best economic interest.
The company uses valuation technique that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1- Where fair value is based on quoted prices from active market.
Level 2- Where fair value is based on significant direct or indirect observable market inputs.
Level 3- Where fair value is based on one or more significant input that is not based on observable market data.
The company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
Further the information about the assumptions made in measuring fair values is included in the respective notes.
(vi) Foreign currency transactions
Transactions in foreign currencies are translated into the functional currency of company at the exchange rates at the dates of transactions or an average rate if the average rate approximates the actual rate at the date of transaction.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non monetary assets and liabilities that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of transaction. Exchange differences are recognised in profit or loss.
(vii) Financial instruments
Financial instruments (assets and liabilities) are recognized when the company becomes a party to a contract that gives rise to a financial asset of the entity and a financial liability or equity instrument of another entity.
a. Initial recognition and measurement
Trade receivables and debt securities issued are initially recognised when they are originated. All other financial assets and liabilities are initially recognized when the company becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities , other than those designated as fair vale through profit or loss (FVTPL), are added to or deducted from the fair value of the financial assets or financial liabilities , as appropriate, on initial recognition. Transaction cost directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized immediately in statement of profit and loss.
b. Classification and subsequent measurement Financial assets
On initial recognition, financial assets are classified as measured at: amortised cost
FVOCI - equity investment and Investment in LLP; or FVTPL
Financial assets are not reclassified subsequent to their initial recognition, except if and in the period the Company changes its business model or managing financial assets.
A financial asset is measured at amortised cost if it meets both of following conditions and is not designated as at FVTPL:
- the asset is held within a business model whose objective is to hold assets to collect contractual cash flow; and
- the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on principal amount outstanding."
On initial recognition of an equity investment that is not held for trading , the company may irrevocably elect to present subsequent changes in the investment's fair value in OCI (designated as FVOCI-equity investment). This election is made on an investment-by-investment basis.
All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. Financial assets: Subsequent measurement and gains and losses
Financial assets at FVTPL : These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss.
Financial assets at amortised cost : These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost reduced by impairment losses, if any. Interest income, and impairment are recognised in profit or loss. Any gains and losses on derecognition is recognised in profit or loss .
Equity Investment at FVOCI : These assets are subsequently measured at fair value. Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of investment. Other net gains and losses are recognised in OCI and are not reclassified to profit or loss.
Investment in LLP at FVOCI : These assets are subsequently measured at fair value by taking effect of proportionate share in profit/loss for the period.
Financial liabilities: Classification, subsequent measurement and gains and losses
Financial liabilities are classified, as measured at amortised cost or FVTPL. A financial liability is classified as FVTPL if it is held - for - trading, or it is a derivative or it is designated as FVTPL on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expenses , are recognised in statement of profit and loss. Other financial liabilities are subsequently measured at amortised cost. Interest expenses and any gain or loss on derecognition are recognised in statement of profit and loss .
c. Derecognition:
Financial Assets: The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expires or the same is transferred.
Financial Liabilities: A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
d. Offsetting
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on net basis or to realise the assets and settle the liabilities simultaneously.
(B) Property, plant and equipment
(i) Recognition and measurement
Property, plant and equipment are measured at cost, less accumulated depreciation and impairment losses, if any. The cost includes the purchase price and expenditure that is directly attributable to its working condition for the intended use.
Any gain or losses on disposal of an item of property, plant and equipment is recognised in profit or loss.
(ii) Transition to Ind AS
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its property, plant and equipment recognised as at 1 April 2017, measured as per the previous GAAP, and use that carrying value as the deemed cost of such property, plant and equipment.
Subsequent costs are capitalised only when it is probable that future economic benefits associated with the item will flow to the Company. The useful lives as estimated for tangible assets are in accordance with the useful lives as indicated in Schedule II of the Companies Act, 2013.
(iii) Depreciation
Depreciation is calculated on cost of items of property, plant and equipment less their estimated residual values over their estimated useful lives using the WDV method .
Useful lives as estimated for tangible assets are in accordance with the useful lives as indicated in schedule II of the Companies Act, 2013 as detailed below:-
The residual values, useful lives and method of depreciation are reviewed at the end of each financial year.
Though the Company measures investment property using cost based measurement, the fair value of investment property is disclosed in the notes. Fair values are determined based on an annual evaluation performed by an accredited external independent valuer applying a valuation model recommended by the International Valuation Standards Committee.
De-recognition
Investment properties are de-recognised either when they have been disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in profit or loss in the period of de-recognition.
(C) Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in first-out formula, and includes expenditure incurred in acquiring the inventories, conversion costs and other costs incurred in bringing them to their present location and condition.
(D) Impairment of financial assets:
The company makes the impairment provisions for financial assets on assumptions about risk of default and expected loss rates. The company uses judgement in making these assumptions and selecting the inputs to the impairment calculations, based on the company's past history, existing market conditions as well as forward looking estimates at the end of each reporting period.
(E) Impairment of non-financial assets
The Company assesses at each reporting date whether there is any 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 fair value less costs of disposal and its value in use. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
Impairment losses of continuing operations, including impairment on inventories, are recognised in the statement of profit and loss.
An assessment is made at each reporting date as to whether there is any indication that previous recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the asset's recoverable amount. A previously recognised impairment loss 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 recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been, had no impairment loss been recognised. Such reversal is recognised in the statement of profit and loss.
(F) Employee Benefits
I. Short-term employee benefits.
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount are expected to be paid e.g., under short-term cash bonus, if the company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the amount of obligation can be estimated reliably.
II. Defined Contribution Plan
A defined contribution plan is a post employment benefit plan. The company does not operate post employment scheme hence the company does not have any liability of defined contribution plan.
III. Defined Benefit Plan
As the provisions of the Provident Fund Act, Gratuity Act, ESI Act etc. are not applicable on the company and it does not provide post employment benefits hence there is no liability of the company for defined benefit plan.
(G) Cash and cash equivalents
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
(H) Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.
(I) Revenue Recognition
Revenue is recognized to the extent that it is probability that the economic benefits will flow to the company and the revenue can be reliably measured. The Following specific criteria must also be met before revenue is recognized.
Trading of Jewellery and Fabrics
Revenue from trading of Jewellery and Fabrics have been taken on accrual basis.
Sale / Purchase of Shares
Shares purchases / Sales in Capital Market segment has been taken on absolute basis. Derivative Segments transactions have been taken on difference bill basis.
Other Income
Interest income is accounted on accrual basis. Dividend income is accounted for when the right to receive it is established. Interest
Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate. Interest Income is included under the head "Other Income" in the statement of Profit and Loss.
Dividend
Dividend Income is recognized when the company's right to receive dividend is established, which is generally when shareholders of the investee approve the dividend.
Accounting for forward contracts
'Premium / discount on forward exchange contracts, which are not intended for trading or speculation purposes, are amortised over the period of the contracts if such contracts relate to monetary items as at the balance sheet date. Any profit or loss arising on cancellation or renewal of such a forward exchange contract is recognised as income or as expense in the period in which such cancellation or renewal is made.
(J) Investments
Long-term investments (excluding investment properties), are fair value measured and any gain or loss is shown through OCI. Current investments are carried individually, at the lower of cost and fair value. Cost of investments include acquisition charges such as brokerage, fees and duties.
(K) Segment reporting
The Company identifies primary segments based on the dominant source, nature of risks and returns and the internal organisation and management structure. The operating segments are the segments for which separate financial information is available and for which operating profit / loss amounts are evaluated regularly by the executive Management in deciding how to allocate resources and in assessing performance.
The accounting policies adopted for segment reporting are in line with the accounting policies of the Company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment.
Inter-segment revenue is accounted on the basis of transactions which are primarily determined based on market / fair value factors.
Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on reasonable basis have been included under “unallocated revenue / expenses / assets / liabilities”.
(L) Leases
The Company determines that a contract is or contains a lease, if the contract conveys right to control the use of an identified asset for a period of time in exchange for a consideration. At the inception of a contract which is or contains a lease, the Company recognises lease liability at the present value of the future lease payments for non-cancellable period of a lease which is not short term in nature except for lease of low value items. The future lease payments for such non-cancellable period is discounted using the Company’s incremental borrowing rate. Lease payments include fixed payments, i.e. amounts expected to be payable by the Company under residual value guarantee, the exercise price of a purchase option if the Company is reasonably certain to exercise that option and payment of penalties for terminating the lease if the lease term considered reflects that the Company shall exercise termination option. The Company also recognises a right of use asset which comprises of amount of initial measurement of the lease liability, any initial direct cost incurred by the Company and estimated dilapidation costs. Right of use assets is amortised over the period of lease. Payment made towards short term leases (leases for which non-cancellable term is 12 months or lesser) and low value assets (lease of assets worth less than '0.03 crores) are recognised in the statement of Profit and Loss as rental expenses over the tenor of such leases.
(M) Earning Per Shares
Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the year.
(N) Income T ax
Income tax comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to a business combination or to an item recognised directly in equity or in other comprehensive income.
Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax reflects the best estimate of the tax amount expected to be paid or tax rates (and tax laws) enacted or substantively enacted by reporting date.
Current tax assets and current tax liabilities are offset only if there is a legally enforceable right to set off the recognised amounts, and it is intended to realise the asset and settle the liability on a net basis or simultaneously.
Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and labilities for financial reporting purposes and the corresponding amounts used for taxation purposes. Deferred tax is also recognised in respect of carried forward tax losses and tax credits. Deferred tax is not recognised for :
- temporary differences arising on initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss at the time of the transaction;
- temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the company is able to control the timing of the reversal of the temporary differences and it is probable that will not reverse in the foreseeable future; and
- taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which they can be used. The existence of unused tax losses is strong evidence that future taxable profit may not be available. Therefore, in case of a history of recent losses, the company recognises a deferred tax assets only to the extent that it has sufficient taxable temporary differences or there is convincing other evidence that sufficient taxable profit will be available against which such deferred tax asset can be realised.
- unrecognised or recognised, are reviewed at each reporting date and are recognised / reduced to extent that it is probable / no longer probable respectively that the related tax benefit will be realised.
Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on the laws that have been enacted or substantively enacted by the reporting date.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relates to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
Deferred Tax Assets and Deferred Tax Liabilities are offset, if a legally enforceable right exists to set off current tax assets against current liabilities and the deferred tax assets and deferred tax liabilities relate to the same taxable entity and the same taxation authority.
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