2 Significant accounting and preparation of financial
statements
2.1 Statement of compliance
The financial statements have been prepared in
accordance with the Indian Accounting Standards
(Ind AS) specified under Section 133 of the
Companies Act, 2013, read with Rule 3 of the
Companies (Indian Accounting Standards) Rules,
2015, as amended.
2.2 Basis of accounting and preparation of financial
statements
These financial statements are prepared in
accordance with Indian Accounting Standards
(Ind AS) under the historical cost convention
on the accrual basis except for certain financial
instruments which are measured at fair values,
the provisions of the Companies Act, 2013 ('Act')
(to the extent notified) and guidelines issued by
the Securities and Exchange Board of India (SEBI).
The Ind AS are prescribed under Section 133 of
the Act read with Rule 3 of the Companies (Indian
Accounting Standards) Rules, 2015 and Companies
(Indian Accounting Standards) Amendment Rules,
2016. Historical cost is generally based on the fair
value of the consideration given in exchange for
goods and services.
Fair value is the price that would be received to
sell an asset or paid to transfer a liability in an
orderly transaction between market participants
at the measurement date, regardless of whether
that price is directly observable or estimated using
another valuation technique. In estimating the
fair value of an asset or a liability, the Company
takes into account the characteristics of the asset
or liability if market participants would take those
characteristics into account when pricing the asset
or liability at the measurement date. Fair value for
measurement and/ or disclosure purposes in these
financial statements is determined on such a basis,
except for share-based payment transactions
that are within the scope of Ind AS 102, leasing
transactions that are within the scope of Ind AS
17, and measurements that have some similarities
to fair value but are not fair value, such as a net
realisable value in Ind AS 2 or value in use in Ind AS
36.
In addition, for financial reporting purposes, fair
value measurements are categorised into Level
1, 2 or 3 based on the degree to which the inputs
to the fair value measurements are observable
and the significance of the inputs to the fair value
measurement in its entirety, which are described
as follows:
• Level 1 inputs are quoted prices (unadjusted)
in active markets for identical assets or
liabilities that the entity can access at the
measurement date;
• Level 2 inputs are other than quoted prices
included within Level 1, that are observable
for the asset or liability, either directly or
indirectly; and
• Level 3 inputs are unobservable inputs for
the asset or liability.
2.2.1 Revenue Recognition
Sale of goods is recognised at the point of
dispatch of goods to the customers.
Other income:
a) Interest income : Interest income from
a financial asset is recognised when it
is probable that the economic benefits
will flow to the company and the
amount of income can be measured
reliably. Interest income is accrued on a
time basis, by reference to the principal
outstanding and at the effective interest
rate applicable, which is the rate that
exactly discounts estimated future cash
receipts through the expected life of
the financial asset to that asset's net
carrying amount on initial recognition.
b) Rental income : Rental income from
operating leases is generally recognised
over the term of the relevent lease.
2.2.2 Employee Benefits:
Retirement benefit costs and termination
benefits
Payment to defined contribution retirement
benefit plans are recognised as an expenses
when employees have rendered service
entitling them to the contributions.
Provident Fund
Contribution to provident fund is charged to
revenue
Gratuity
Every Employee who has completed 5 years
or more of service eligible for gratuity on
departure @ 15 days salary ( last drawn salary)
for each completed year of service as per the
provsions of Payment of Gratuity Act, 1972.
2.2.3 Taxation
Income tax expense represents sum of the
tax currently payable and deferred tax
Current Tax
Current tax is the amount of tax payable on
the taxable income for the year as determined
in accordance with the applicable tax rates
and the provisions of the Income-tax Act,
1961 and other applicable tax laws that have
been enacted or substantively enacted by
the end of the reporting period.
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. Such deferred
tax assets and liabilities are not recognised
if the temporary differences arise from the
initial recognition (other than in a business
combination) of assets and liabilities in a
transaction that affects neither the taxable
profit nor the accounting profit. In addition,
deferred tax liabilities are not recognised
if the temporary difference arises from the
initial recognition of goodwill.
The carrying amount of deferred tax assets is
reviewed at the end of each reporting period
and reduced to the extent that it is no longer
probable that sufficient taxable profits will
be available to allow all or part of the asset
to be recovered. Deferred tax assets and
liabilities 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.
Current and deferred tax for the year
Current and deferred tax are recognised in
profit or 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.
2.2.4 Property, plant and equiptment:
Property, plant and equipment are carried
at cost less accumulated depreciation
and impairment losses, if any. The cost of
Property, plant and equipment comprises
of purchase price, applicable duties and
taxes, any directly attributable expenditure
on making the asset ready for its intended
use, other incidental expenses and interest
on borrowings attributable to acquisition
of qualifying fixed assets, upto the date the
asset is ready for its intended use."The initial
estimate of the costs of dismantling and
removing the item and restoring the site on
which it is located is required to be included
in the cost of the respective item of property
plant and equipment” "Cost of major
inspections is recognised in the carrying
amount of property, plant and equipment
as a replacement, if recognition criteria
are satisfied and any remaining carrying
amount of the cost of previous inspection is
derecognised”
Property, Plant and equipment retired from
active use and held for sale are stated at
the lower of their net book value and net
realizable value and are disclosed separately.
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
equipement is determined as the difference
between the sales proceeds and the carrying
amount of the asset and is recognised in
profit or loss.
For transition into Ind AS,the company
has elected to continue with the carrying
value of all its property, plant & equipment
recognised as of April 1, 2016 ( transition
date) measured as per the previous GAAP
and use that carrying value as its deemed
cost as of the transition date.
2.2.5 Depreciation and Amortisation:
Depreciable amount for assets is the cost of
an asset, or other amount substituted for cost
less its estimated residual value.
Depreciation on Property, Plant and
equipment has been provided on the straight
line method as per the useful life prescribed
in Schedule II to the Companies Act, 2013
in whose case the life of the assets has been
assessed based on technical assesment,
taking into account the nature of asset, the
estimated usage of the asset, the operating
conditions of the asset, past history of
replacement, anticipated technological
changes, maintenance, etc.
|