3. Summary of accounting policies
3.1 Property, Plant and Equipment (PPE):
Items of PPE are measured at cost of acquisition or construction less accumulated depreciation and/or accumulated impairment
loss, if any.
Cost of an item of PPE comprises its purchase price, including import duties and non-refundable purchase taxes, after deducting
trade discounts and rebates, if any directly attributable cost of bringing the item to its working condition for its intended use
and estimated costs of dismantling and removing the item and restoring the site on which it is located.
The cost of a self-constructed item of property, plant and equipment comprises the cost of materials and direct labour, any other
costs directly attributable to bringing the item to working condition for its intended use, and estimated costs of dismantling
and removing the item and restoring the site on which it is located.
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.
Capital work in progress includes cost of property, plant and equipment (including related expenditure) under installation/
under development as at the balance sheet date.
An items of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected
to arise from continuous use of assets. Any gain or loss on disposal of an item of property, plant and equipment determined as
the difference between the sale proceeds and the carrying amount of assets are recognised in profit or loss.
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure
will flow to the Company.
Depreciation: Depreciation is provided using the straight line method based on useful life of the assets as indicated in
Schedule II of the Companies Act, 2013 and after retaining the residual value of 5% of the original cost of the asset in the said
Schedule except in respect of the plant and machinery and electrical fittings. Upto March 31st 2022, Company used to follow
written down value method for providing depreciation.
Electrical fittings and plant & machinery has been depreciated over useful life different from life specified in Schedule II of
Companies Act, 2013 based on the technical estimates made by the management, it believes that the useful lives as given
above represent the period over which the assets are expected to be used.
The residual value, useful life and method of depreciation of property, plant and equipment are reviewed at each financial year
and adjusted prospectively, if appropriate.
Assets purchased during the period costing ? 5,000 or less are depreciated at the rate of 100%
3.2 Intangible assets:
Intangible assets comprise of computer software (which does not form an integral part of related hardware). Computer
software which is acquired separately, is recognized initially at cost. Following initial recognition principle, intangible assets are
carried at cost less accumulated amortization and accumulated impairment losses, if any. Intangible assets under development
include cost of assets under installation/under development as at the balance sheet date.
Amortisation method and useful lives: Intangible assets are amortized on a straight line basis over the estimated life of three
years.
3.3 Impairment of Non-Financial Assets
The carrying amounts of the Company's non-financial assets, are reviewed at the end of each reporting period to determine
whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated.
The recoverable amount of an asset or cash-generating unit ('ecu') is the greater of its value in use or its fair value less costs
to disposal. 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 or CGU.
For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group
of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or
groups of assets ('CGU').
An impairment loss is recognized, if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount and
is recognised in statement of profit and loss.
Impairment losses recognised in prior periods are assessed at end of each reporting period for any indications that the loss has
decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine
the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed
the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been
recognised.
3.4 Leases:
Determining whether arrangement contains a lease
At inception of an arrangement, it is determined whether the arrangement is or contains a lease.
At the inception of a contract, the company assesses whether the contract is a lease or not. A contract is, or contains, a lease
if the contract conveys the right to control the use of an identified asset for a time in exchange for a consideration. This policy
had been applied to contracts existing and entered into on or after April 01,2019.
The Company's lease asset classes primarily consist of leases for land and buildings. The company has applied Ind AS 116 using
the modified retrospective approach and therefore the comparative information has not been restated.
Company as a lessee
The company recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is
initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or
before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the
underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
If ownership of the leased asset transfers to the Company at the end of the lease term or the cost reflects the exercise of a
purchase option, depreciation is calculated using the estimated useful life of the asset.
The right-of-use assets are also subject to impairment. Refer to the accounting policies in section (Impairment of non financial
assets).
Lease payments
Lease payments included in the measurement of the lease liability comprise the following
- Fixed payments, including in-substance fixed payments;
- Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement
date;
- Amounts expected to be payable under a residual value guarantee; and
- The exercise price under a purchase option that the company is reasonably certain to exercise, lease payments in an optional
renewal period if the company is reasonably certain to exercise an extension option, and penalties for early termination of a
lease unless the company is reasonably certain not to terminate early.
Lease Liability
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted using the Company's incremental borrowing rate. It is remeasured when there is a change in future lease payments
arising from a change in an index or rate, if there is a change in the Company's estimate of the amount expected to be payable
under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension
or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying
amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been
reduced to zero.
Lease liability and right-of-use assets have been separately presented in the Balance Sheet and lease payments have been
classified as financing cash flows.
Short-term leases and leases of low-value assets
The company has elected not to recognise right-of-use assets and lease liabilities for short term leases that have a lease term
of 12 months or less and leases of low-value assets. The company recognises the lease payments associated with these leases
as an expense on a straight-line basis over the lease term.
.5 Foreign currencies:
Functional and presentational currency
The Company's financial statements are presented in Indian Rupees (Rs.) which is also the Company's functional currency.
Functional currency is the currency of the primary economic environment in which a Company operates and is normally the
currency in which the Company primarily generates and expends cash.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Company at the functional currency spot rate prevailing on the
date when the transaction first qualifies for recognition.
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 the transaction.
Exchange differences arising on settlement or restatement of monetary items are recognised in statement of profit or loss in
the period in which they arise.
.6 Inventories:
Basis of valuation
Inventories are measured at lower of cost and net realizable value. However, materials and other items held for use in the
production of inventories are not written down below cost if the finished products in which they will be incorporated are
expected to be sold at or above cost. The comparison of cost and net realizable value is made on an item-by- item basis.
Method of valuation
Cost of raw materials: Cost includes purchase price (excluding taxes which are subsequently recoverable by the enterprise
from the concerned revenue authorities), freight inwards and other expenditure incurred in bringing such inventories to their
present location and condition. In determining the cost, first-in-first-out method (FIFO) is used.
Cost of finished goods and work in progress are determined on FIFO basis and comprises direct material, cost of conversion
and other costs incurred in bringing these inventories to their present location and condition.
Stock in Transit is valued at lower of cost or net realizable value. Scrap is valued at estimated net realizable value.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion
and selling expenses. The net realisable value of work-in-progress is determined with reference to the selling prices of related
finished products.
3.7 Employee Benefits:
Short Term Employee Benefits
All employee benefits expected to be settled wholly within twelve months of rendering the service are classified as short-term
employee benefits. When an employee has rendered service to the Company during an accounting period, the Company
recognises the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service as an
expense unless another Ind AS requires or permits the inclusion of the benefits in the cost of an asset. Benefits such as salaries,
wages and short-term compensated absences, bonus and ex-gratia etc. are recognised in statement of profit and loss in the
period in which the employee renders the related service.
A liability is recognised for the amount expected to be paid after deducting any amount already paid under short-term cash
bonus or profit-sharing plans 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 obligation can be estimated reliably. If the amount already paid exceeds the
undiscounted amount of the benefits, the Company recognises that excess as an asset /prepaid expense to the extent that the
prepayment will lead to, for example, a reduction in future payments or a cash refund.
Post-Employment Benefits
Defined contribution plan
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions to a statutory
authority and will have no legal or constructive obligation to pay further amounts.
Retirement benefits in the form of Provident Fund and employee state insurance are a defined contribution scheme and
contributions paid/payable towards these funds are recognised as an expense in the statement of profit and loss during the
period in which the employee renders the related service. There are no other obligations other than the contribution payable
to the respective trusts.
Defined benefit plan
The Company has Defined benefits plans namely Gratuity for employees. The gratuity fund are recognised by the income
tax authorities and are administered through Company's trusts where a policy with 'Life Insurance Corporation of India' has
been taken to cover the gratuity liability of the employees. The difference between the actuarial valuation of the gratuity of
employees at the period end and the balance of funds with Life Insurance Corporation of India is provided for as liability in the
books.
The liability or asset recognised in the balance sheet in respect of gratuity plans is the present value of the defined benefit
obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated
annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by
reference to market yields at the end of the reporting period on government bonds that have terms approximating to the
terms of the related obligation.
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 profit or loss.
Remeasurement of gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised
in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the
statement of changes in equity and in the balance sheet.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised
immediately in profit or loss as past service cost.
Other Long Term Employee Benefits
a) Gratuity
The Employee's Gratuity Fund Scheme, which is defined benefit plan, is maintained with Life insurance Corporation. The
liabilities with respect to Gratuity Plan are determined by actuarial valuation on projected unit credit method on the balance
sheet date, based upon which the Company contributes to the Company Gratuity Scheme. The difference, if any, between the
actuarial valuation of the gratuity of employees at the year end and the balance of funds is provided for as assets/ (liability) in
the books. Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company
recognizes the following changes in the net defined benefit obligation under Employee benefit expense in statement of profit
or loss:
1. Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine
settlements.
2. Net interest expense or income.
Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net
interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the
net defined benefit liability), are recognized immediately in the Balance Sheet with a corresponding debit or credit to retained
earnings through OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent
periods.
b) Provident fund
Retirement benefits in the form of Provident fund / Pension Schemes are defined contribution schemes and the contributions
are charged to the statement of profit and loss of the year when the contributions to the respective funds become due. The
Company has no obligation other than contribution payable to these funds.
c) Compensated Absences
Accumulated leaves which are expected to be utilized within next 12 months are treated as short term employee benefit.
The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the
unused entitlement and is discharged by the year end.
The Company treats accumulated leaves to be carried forward beyond 12 months as long term employee benefits for
measurement purpose, such long term compensated absence are provided for based on actuarial valuation which is done as
per projected unit credit method at year end.
d) Voluntary retirement
Expenses incurred on voluntary retirement of employees are charged off to the Statement of Profit & Loss in the year of
occurrence.
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