4 MATERIAL ACCOUNTING POLICIES INFORMATION
i. Property, plant and equipment
Property, plant and equipment held for use in the production or supply of goods or services or for administrative purposes are
stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses, if any. Cost of acquisition
is inclusive of freight, duties, taxes (net of credits taken) and other incidental expenses. Freehold land is not depreciated.
Property, plant and equipment in the course of construction for production, supply or administrative purposes are carried at cost,
less any recognised impairment loss. Cost includes items directly attributable to the construction or acquisition of the item of
property, plant and equipment and for qualifying assets, borrowing costs capitalised in accordance with the Company's accounting
policy. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready
for intended use. Property, Plant and Equipments are capitalized when they are ready for their intended use.
Subsequent expenditure relating to property, plant and equipment is capitalised only when it is probable that future economic
benefits associated with these will flow to the Company and the cost of the item can be measured reliably. Repairs and
maintenance costs are recognized in the statement of profit and loss when incurred.
Depreciation is recognised so as to write off the cost of assets (other than freehold land and properties under construction) less
their residual values over their useful lives, using the straight line method. The estimated useful lives, residual values and
depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for
on a prospective basis.
Depreciation is charged on a pro-rata basis at the straight line method over estimated economic useful lives of its property, plant
and equipment generally in accordance with that provided in the Schedule II to the Act. Estimated useful lives of these assets
are as under:
An item of property, plant and equipment is derecognised 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 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.
ii. Intangible assets
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and
accumulated impairment losses, if any. Amortisation is recognised on a straight line basis over a period of 3 to 10 years. The
estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes
in estimate being accounted for on a prospective basis.
Intangible assets are derecognised on disposal or when no future economic benefits are expected from use or disposal. Gains
or losses arising from derecognition of an intangible asset are determined as the difference between the net disposal proceeds
and the carrying amount of the asset and recognised in the Statement of Profit and Loss when the asset is derecognised.
iii. 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.
When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount
of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified,
corporate assets are also allocated to individual cash-generating units or otherwise they are allocated to the smallest group of
cash-generating units for which a reasonable and consistent allocation basis can be identified.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) 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 (or a
cash-generating unit) 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
(or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the Statement of Profit
and Loss.
iv. 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. The cost of
Investment property includes the cost of replacing parts and borrowing costs for long-term construction projects if the recognition
criteria are met. When significant parts of the investment property are required to be replaced at intervals, the Company
depreciates them separately based on their specific useful lives. All other repair and maintenance costs are recognised in
Statement of Profit and Loss as incurred.
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 Statement of Profit and
Loss in the period in which the property is derecognised.
v. Investment in subsidiary
The Company records the investment in subsidiary at cost less impairment loss, if any. Where an indication of impairment exists,
the carrying amount of investment is assessed and written down immediately to its recoverable amount. On disposal of investment
in subsidiary, the difference between net disposal proceeds and the carrying amounts are recognized in the Statement of Profit
and Loss.
vi. Inventories
Inventories other than scrap are stated at the lower of cost and net realisable value. Costs of inventories are determined on a
moving weighted average. Finished goods and work-in-progress (along with Stock in transit) include appropriate proportion of
overheads. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and
costs necessary to make the sale.
Scrap is valued at estimated net realisable value.
Inventory of stores and spare parts is valued at weighted average cost or net realisable value, whichever is lower.
Provisions are made for obsolete and non-moving inventories.
vii. Revenue & Other Income Recognition
The Company earns revenue primarily from sale of products.
(a) Sale of products
Revenues are recognized when the Company satisfies the performance obligation by transferring a promised products to
a customer. A product is transferred when the customer obtains control of that product, which is at the point of transfer of
custody to customers where usually the title is passed, provided that the contract price is fixed or determinable and
collectability of the receivable is reasonably assured.
Revenue is measured at the transaction price of the consideration received or receivable duly adjusted for variable
consideration, price concession and represents amounts receivable for products and services provided in the normal
course of business, net off Goods and Services Tax (GST), etc.
The Company recognizes the price difference payable/receivable to/from parties, where settlement is pending for final
negotiation. It is provided on the basis of best estimates and management's assessment, considering the past trend and
various other factors. These provisions are reviewed on a regular basis and adjusted with respective element with statement
of profit and loss from the adequacy and reasonability point of view.
(b) Dividend and interest income
Dividend income from investments is recognised when the right to receive payment has been established.
Interest income from financial assets 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, 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 to that asset's net carrying amount on initial recognition.
(c) Other income
Other income is recognized on accrual basis except when realisation of such income is uncertain.
viii. Leases
As a lessee
The Company's lease assets primarily consist of leases for land, building and Plant and Machinery. 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:
- the contract involves the use of an identified asset;
- the Company has substantially all of the economic benefits from use of the asset through the period of the lease and
- the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognizes a 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 and corresponding
Right-of-use Asset . 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.
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 and adjusted for any remeasurement
of the lease liability.
Right-of-use Assets are depreciated on a straight line basis over the shorter of the lease term and useful life of the underlying
asset.
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.
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.
The Company has leased out its Investment Property classifying such lease as an Operating Lease, because it does not transfer
substantially all of the risks and rewards incidental to the ownership of such Investment Property. Note 4 (iv) sets out the
information about the said Investment Property.
ix. Foreign currency transactions
The functional currency of the Company is Indian Rupees which represents the currency of the primary economic environment
in which it operates.
In preparing the financial statements of the Company, transactions in currencies other than the company's functional currency
(foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. 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
(which includes advance received/paid) 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.
x. 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 as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in the Statement of Profit and Loss in the period in which they are incurred.
xi. Employee benefits
(a) Short-term employee benefits
Employee benefits payable wholly within twelve months of receiving employee services are classified as short-term
employee benefits. These benefits include salaries and wages, performance incentives and compensated absences which
are expected to occur in next twelve months. The undiscounted amount of short-term employee benefits to be paid in
exchange for employee services is recognized as an expense as the related service is rendered by employees.
(b) Post-employment benefits
(1) Defined contribution plan
Payments to defined contribution plans are recognised as an expense when employees have rendered service entitling
them to the contributions. The eligible employees of the Company are entitled to receive benefits in respect of provident
fund, for which both the employees and the Company make monthly contributions at a specified percentage of the
covered employees' salary.
(2) Defined benefit plan
Defined retirement benefit plans comprising of gratuity 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.
Net interest on the net defined liability is calculated by applying the discount rate at the beginning of the period to the
net defined benefit liability or asset and is recognised in the Statement of Profit and Loss except those included in cost
of assets as permitted.
Remeasurement of defined retirement benefit plans 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 recognised
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 the Statement of Profit and Loss.
The retirement benefit obligation recognised 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.
(c) Other long term employee benefits
The obligation for long term employee benefits such as long term compensated absences is measured at present value
of estimated future cash flows expected to be made by the company and is recognised in a similar manner as in the case
of defined benefit plans.
Long term employee benefit costs comprising current service cost, interest cost implicit in long term employee benefit cost
and gains or losses on curtailments and settlements, re-measurement including actuarial gains and losses are recognised
in the Statement of Profit and Loss as employee benefit expenses.
xii. Income taxes
Income tax expense represents the sum of the current tax and deferred tax.
(a) Current tax
Current tax is the amount of income taxes payable in respect of taxable profit for a period. Taxable profit differs from 'profit
before tax' as reported in the Statement of Profit and Loss because of items of income or expense that are taxable or
deductible in other years and items that are never taxable or deductible. The Company's current tax is calculated using
tax rates and laws that have been enacted or substantively enacted by the end of the reporting period.
(b) Deferred tax
Deferred tax is 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 deferred tax asset to be utilized.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against
current tax liabilities, and the deferred taxes relate to the same taxable entity and the same taxation authority.
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.
Deferred tax assets include Minimum Alternative Tax (MAT) paid in accordance with the tax laws in India, which is likely
to give future economic benefits in the form of availability of set off against future income tax liability. Accordingly, MAT is
recognised as deferred tax asset in the balance sheet when the asset can be measured reliably and it is probable that
the future economic benefit associated with asset will be realised.
(c) Current and deferred tax for the year
Current and deferred tax expense is recognised in the Statement of Profit and Loss, except when they relate to items that
are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also
recognised in other comprehensive income or directly in equity respectively.
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