1A: Material Accounting Policies
(a) Basis of preparation
(i) Compliance with Ind AS
The financial statements have been prepared in
accordance with Indian Accounting Standards
(Ind AS) as notified under the Companies
(Indian Accounting Standards) Rules, 2015
read with section 133 of the Companies Act,
2013 and presentation requirements of Division
II of Schedule III to the Companies Act, 2013 (as
amended from time to time).
The accounting policies adopted are consistent
with those of the previous financial year.
The financial statements have been prepared
on a historical cost basis, except for certain
financial assets and liabilities that are measured
at fair value (Refer accounting policy for financial
instruments)
The financial statements are presented in Indian
Rupees ('INR') and all values are rounded
to nearest lakhs (INR 00,000), except when
otherwise indicated.
The Company has prepared the financial
statements on the basis that it will continue to
operate as a going concern.
(ii) Current versus Non-current classification
The Company presents assets and liabilities
in the balance sheet based on 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,
- held primarily for the purpose of trading,
- expected to be realised within twelve
months after the reporting period, or
- cash or cash equivalent unless restricted
from being exchanged or used to settle a
liability for at least twelve months after the
reporting period.
All other assets are classified as non-current.
A liability is 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 right at the end of the reporting
period to defer the settlement of the liability
for at least twelve months after the reporting
period.
The Company classifies all other liabilities as
non-current.
Deferred tax assets and liabilities are classified
as non-current assets and liabilities.
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.
b) Property, plant & equipment
All items of property, plant and equipment are stated
at historical cost less depreciation and impairment,
if any. Historical cost includes expenditure that is
directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's
carrying amount or recognised as a separate asset,
as appropriate, only when it is probable that future
economic benefits associated with the item will
flow to the Company and the cost of the item can
be measured reliably. The carrying amount of any
component accounted for as a separate asset is
derecognised when replaced. All other repairs and
maintenance are charged to the Statement of Profit
and Loss during the reporting period in which they
are incurred.
Capital work- in- progress includes cost of property,
plant and equipment under installation / under
development as at the balance sheet date.
Depreciation methods, estimated useful lives
and residual value
Depreciation on property, plant and equipment
has been provided on straight line method over
the estimated useful lives of the assets, based on
technical evaluation done by management's expert,
which are lower than those specified by Schedule II
to the Companies Act, 2013, in order to reflect the
actual usage of the assets.
Useful life considered for calculation of depreciation
for various assets class are as follows-
The residual values are not more than 5% of the
original cost of the asset. The residual values, useful
lives and methods of depreciation of property, plant
and equipment are reviewed at each financial year
end and adjusted prospectively, if appropriate.
Gains and losses on disposals are determined by
comparing proceeds with carrying amount. These
are included in the Statement of Profit and Loss.
(c) Investment properties
Property that is held for long-term rental yields or
for capital appreciation or for both, and that is not
occupied by the Company, is classified as investment
property. Investment property is measured initially at
its cost, including related transaction cost and where
applicable borrowing costs. Subsequent expenditure
is capitalised to assets carrying amount only when it
is probable that future economic benefits associated
with the expenditure will flow to the Company and
the cost of the item can be measured reliably. All
other repair and maintenance cost are expensed
when incurred. When part of an investment property
is replaced, the carrying amount of the replaced part
is derecognised.
Though the Company measures investment
properties using cost-based measurement, the fair
value of investment properties are disclosed in the
notes (refer note 3 of the financial statements). 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.
Investment properties are derecognised 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 derecognition.
Depreciation methods, estimated useful lives
and residual value
Investment property consists of Freehold Land,
Building, Plant & Equipment, Office Equipment and
Furniture & Fixture, which is depreciated using the
straight line method over the estimated useful lives
of the assets, based on technical evaluation done by
management's expert, which is at a variance than
those specified by Schedule II to the Companies
Act, 2013, in order to reflect the actual usage of
the assets. The management believes that these
estimated useful lives are realistic and reflect fair
approximation of the period over which the assets
are likely to be used.
The residual values are not more than 5% of the
original cost of the asset. The residual values, useful
lives and methods of depreciation of property, plant
and equipment are reviewed at each financial year
end and adjusted prospectively, if appropriate.
Gains and losses on disposals are determined by
comparing proceeds with carrying amount. These
are included in the Statement of Profit and Loss.
(d) Impairment of Non-financial assets
The Company assesses, at each reporting date,
whether there is an indication that an asset may
be impaired. If any indication exists, the Company
estimates the asset's recoverable amount. An
asset's recoverable amount is the higher of an
asset's or cash-generating units (CGU) fair value
less costs of disposal and its value in use.
Recoverable amount is determined for an individual
asset, unless the asset does not generate cash
inflows that are largely independent of those from
other assets or group of assets. Where the carrying
amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is
written down to its recoverable amount.
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. In determining fair value
less costs of disposal, recent market transactions are
taken into account, if available. If no such transactions
can be identified, an appropriate valuation model is
used. After impairment, depreciation is provided on
the revised carrying amount of the asset over its
remaining useful life.
(e) Financial Instruments
A financial instrument is any contract that gives
rise to a financial asset of one entity and a financial
liability or equity instrument of another entity.
(I) Financial Assets
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 Company's
business model for managing the financial assets
and the contractual terms of the cash flows.
Initial Recognition & Measurement
With the exception of trade receivables that do
not contain a significant financing component or
for which the Company has applied the practical
expedient, the Company initially measures a
financial asset at its fair value plus, in the case of
financial assets not recorded at fair value through
profit or loss, transaction costs that are attributable
to the acquisition of the financial asset. Trade
receivables that do not contain a significant financing
component or for which the Group has applied the
practical expedient are measured at the transaction
price determined under Ind AS 115.
Subsequent Measurement
For purposes of subsequent measurement financial
assets are classified in following categories:
» Debt instruments at fair value through profit and
loss (FVTPL)
» Debt instruments at fair value through other
comprehensive income (FVTOCI)
» Debt instruments at amortised cost
» Equity instruments
Where assets are measured at fair value, gains and
losses are either recognised entirely in the statement
of profit and loss (i.e. fair value through profit or loss),
or recognised in other comprehensive income (i.e.
fair value through other comprehensive income).
For investment in debt instruments, this will depend
on the business model in which the investment is
held. For investment in equity instruments, this will
depend on whether the Company has made an
irrevocable election at the time of initial recognition
to account for equity instruments at FVTOCI.
Debt instruments at amortised cost
A Debt instrument is measured at amortised cost if
both the following conditions are met:
a) Business Model Test: The objective is to hold
the debt instrument to collect the contractual
cash flows (rather than to sell the instrument
prior to its contractual maturity to realize its fair
value changes).
b) Cash flow characteristics test: The contractual
terms of the debt instrument give rise on specific
dates to cash flows that are solely payments
of principal and interest on principal amount
outstanding.
After initial measurement, such financial assets are
subsequently measured at amortised cost using the
effective interest rate (EIR) method. Amortised cost
is calculated by taking into account any discount or
premium on acquisition and fees or costs that are
an integral part of EIR. EIR is the rate that exactly
discounts the estimated future cash receipts over
the expected life of the financial instrument or a
shorter period, where appropriate, to the gross
carrying amount of the financial asset.
Debt instruments at fair value through OCI
A Debt instrument is measured at fair value through
other comprehensive income if following criteria are
met:
a) Business Model Test: The objective of financial
instrument is achieved by both collecting
contractual cash flows and for selling financial
assets.
b) Cash flow characteristics test: The contractual
terms of the debt instrument give rise on specific
dates to cash flows that are solely payments
of principal and interest on principal amount
outstanding.
Debt instrument included within the FVTOCI
category are measured initially as well as at each
reporting date at fair value. Fair value movements
are recognised in the other comprehensive income
(OCI), except for the recognition of interest income,
impairment gains or losses and foreign exchange
gains or losses which are recognised in Statement
of Profit and Loss. On derecognition of asset,
cumulative gain or loss previously recognised in OCI
is reclassified from the equity to Statement of Profit
and Loss. Interest earned whilst holding FVTOCI
financial asset is reported as interest income using
the EIR method.
Debt instruments at FVTPL
FVTPL is a residual category for financial instruments.
Any financial instrument which does not meet the
criteria for amortised cost or FVTOCI is classified as
at FVTPL. A gain or loss on a Debt instrument that is
subsequently measured at FVTPL and is not a part
of a hedging relationship is recognised in statement
of profit or loss and presented net in the Statement
of Profit and Loss within other gains or losses in the
period in which it arises. Interest income from these
Debt instruments is included in other income.
Equity Instruments
For all equity instruments, the Company may
make an irrevocable election to present in other
comprehensive income all subsequent changes in
the fair value.
The Company makes such election on an instrument-
by-instrument basis. The classification is made on
initial recognition and is irrevocable.
If the Company decides to classify an equity
instrument as at FVTOCI, then all fair value
changes on the instrument, excluding dividends, are
recognised in the OCI. There is no recycling of the
amounts from OCI to profit and loss, even on sale
of investment. However, the Company may transfer
the cumulative gain or loss within equity. Equity
instruments included within the FVTPL category are
measured at fair value with all changes recognised
in the Statement of Profit and loss.
Derecognition
A financial asset is derecognised only when:
> the rights to receive cash flows from the asset
have expired, or
> the Company has transferred its rights to receive
cash flows from the asset or has assumed an
obligation to pay the received cash flows in full
without material delay to a third party under a
“pass through” arrangement and either:
(a) The Company has transferred the rights to
receive cash flows from the financial assets
or
(b) The Company has retained the contractual
right to receive the cash flows of the
financial asset, but assumes a contractual
obligation to pay the cash flows to one or
more recipients.
Where the Company has transferred an asset,
the Company evaluates whether it has transferred
substantially all the risks and rewards of the
ownership of the financial assets. In such cases, the
financial asset is derecognised.
Where the entity has not transferred substantially
all the risks and rewards of the ownership of
the financial assets, the financial asset is not
derecognised. Where the Company has neither
transferred nor retains substantially all risks and
rewards of ownership of the financial asset, the
financial asset is derecognised if the Company has
not retained control of the financial asset. Where the
Company retains control of the financial asset, the
asset is continued to be recognised to the extent of
continuing involvement in the financial asset.
Impairment of financial assets
The Company assesses on a forward looking
basis the expected credit losses associated with its
assets carried at amortised cost and FVOCI debt
instruments. The impairment methodology applied
depends on whether there has been a significant
increase in credit risk. Note 34 details how the
Company determines whether there has been a
significant increase in credit risk.
For trade receivables only, the Company applies
the simplified approach permitted by Ind AS 109
Financial Instruments, which requires expected
lifetime losses to be recognise on initial recognition
of the receivables.
(II) Financial Liabilities
The measurement of financial liabilities depends on
their classification, as described below:
Trade and other payables
These amounts represent liabilities for goods and
services provided to the Company prior to the end
of financial year which are unpaid. The amounts are
unsecured and are usually paid within 120 days of
recognition. Trade and other payables are presented
as current liabilities unless payment is not due within
12 months after the reporting period. They are
recognised initially at fair value and subsequently
measured at amortised cost using EIR method.
Borrowings
Borrowings are initially recognised at fair value, net
of transaction cost incurred. After initial recognition,
interest-bearing loans and borrowings are
subsequently measured at amortised cost using the
EIR method.
Gains and losses are recognised in profit or loss
when the liabilities are derecognised as well as
through the EIR amortization process. Amortised
cost is calculated by taking into account any discount
or premium on acquisition and fees or costs that are
an integral part of the EIR. The EIR amortization is
included as finance costs in the statement of profit
and loss.
Lease Deposits
Lease deposits received are financial liability
and need to be measured at fair value on initial
recognition. The difference between the fair value
and the nominal value of deposits is considered
as rent in advance and recognised over the lease
term on a straight line basis. Unwinding of discount
is treated as interest expense (finance cost) for
deposits received and is accrued as per the EIR
method.
Derecognition
A financial liability is derecognised when the
obligation under the liability is discharged or
cancelled or expires. When an existing financial
liability is replaced by another from the same
lender on substantially different terms, or the terms
of an existing liability are substantially modified,
such an exchange or modification is treated as
the derecognition of the original liability and the
recognition of a new liability. The difference in the
respective carrying amounts is recognised in the
Statement of Profit and Loss.
(III) Derivative financial instruments
Derivative financial instruments such as forward
contracts are taken by the Company to hedge its
foreign currency risks, are initially recognised at fair
value on the date a derivative contract is entered
into and are subsequently re-measured at their fair
value with changes in fair value recognised in the
Statement of Profit and Loss in the period when they
arise.
(IV) Offsetting of financial instruments
Financials 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 a net basis, to realize the assets and settle
the liabilities simultaneously.
(f) Fair Value Measurement
The Company measures certain financial
instruments at fair value.
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. The fair value measurement is
based on the presumption that the transaction to sell
the asset or transfer the liability takes place either:
> In the principal market for the asset or liability, or
> In the absence of a principal market, in the most
advantageous market for the asset or liability.
The fair value of an asset or a liability is measured
using the assumptions that market participants would
use when pricing the asset or liability, assuming
that market participants act in their economic best
interest.
All assets and liabilities for which fair value is
measured or disclosed in the financial statements
are categorised 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 — Quoted (unadjusted) market prices in
active markets for identical assets or liabilities
> Level 2 — Valuation techniques for which the
lowest level input that is significant to the fair
value measurement is directly or indirectly
observable
> Level 3 — Valuation techniques for which the
lowest level input that is significant to the fair
value measurement is unobservable
(g) Taxes
Tax expense comprises of current and deferred tax.
Current income tax assets and liabilities are
measured at the amount expected to be recovered
from or paid to the taxation authorities. The tax rates
and tax laws used to compute the amount are those
that are enacted or substantively enacted, at the
reporting date in the countries where the Company
operates and generates taxable income.
The Company's current tax is calculated using
tax rates that have been enacted or substantively
enacted by the end of the reporting period.
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 difference arises
from the initial recognition of assets and liabilities in
a transaction that affects neither the taxable profit
nor the accounting profit.
The carrying amount of deferred 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 all or part of
the deferred tax asset to be utilised. 'Deferred tax
assets are recognised for unused tax losses to the
extent that it is probable that taxable profit will be
available against which the losses can be utilised.
Significant management judgement is required to
determine the amount of deferred tax assets that
can be recognised, based upon the likely timing and
the level of future taxable profits together with future
tax planning strategies.
Deferred tax assets and liabilities are offset when
they relate 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.
Deferred tax liabilities (DTL) 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.
Deferred tax relating to items recognised outside
Statement of Profit and Loss is recognised outside
profit or loss (either in Other Comprehensive Income
or in Equity). Deferred tax items are recognised in
correlation to the underlying transaction either in
OCI or directly in Equity.
(h) Employee Benefits
(i) Short-term obligations
Liabilities for wages and salaries, including
non-monetary benefits that are expected to
be settled wholly within 12 months after the
end of the period in which the employees
render the related service are recognised in
respect of employees' services up to the end
of the reporting period and are measured at the
amounts expected to be paid when the liabilities
are settled.
(ii) Other long-term employee benefit
obligations
The liabilities for compensated absences that
are not expected to be settled wholly within 12
months are measured as the present value of
expected future payments to be made in respect
of services provided by employees up to the
end of the reporting period using the projected
unit credit method. Remeasurements as a
result of experience adjustments and changes
in actuarial assumptions are recognised in the
Statement of Profit and Loss.
The obligations are presented as current
liabilities in the balance sheet if the entity
does not have an unconditional right to defer
settlement for at least 12 months after the end
of the reporting period, regardless of when the
actual settlement is expected to occur.
(iii) Post-employment obligations
The Company operates the following post¬
employment schemes:
(a) Defined benefit plans such as gratuity and
(b) Defined contribution plans such as provident
fund.
(iv) Termination Benefits
Termination benefits are expensed at the
earlier of when the Company can no longer
withdraw the offer of those benefits and when
the Company recognizes cost of a restructuring.
If benefits are not expected to be settled wholly
within 12 months of the reporting date, then they
are discounted.
Gratuity Obligations
The liability or asset recognised in the balance
sheet in respect of defined benefit gratuity
plans is the present value of the defined benefit
obligation at the end of the reporting period. 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 the Statement of Profit and
Loss.
Remeasurement 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.
Defined Contribution plans
Defined Contribution Plans such as Provident
Fund are charged to the Statement of Profit
and Loss as an expense, when an employee
renders the related services. If the contribution
payable to scheme for service received before
the balance sheet date exceeds the contribution
already paid, the deficit payable to the scheme
is recognised as liability after deducting the
contribution already paid. If the contribution
already paid exceeds the contribution due for
services received before the balance sheet
date, then excess is recognised as an asset.
(i) Cash and cash equivalents
For the purpose of presentation in the statement
of cash flows, cash and cash equivalents includes
cash on hand, demand deposits with banks, other
short-term highly liquid investments with original
maturities of three months or less that are readily
convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value.
(j) Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing:
> the profit attributable to owners of the Company
> by the weighted average number of equity
shares outstanding during the financial year,
adjusted for bonus elements in equity shares
issued during the year and excluding treasury
shares.
Diluted earnings per share
Diluted earnings per share adjust the figures used in
the determination of basic earnings per share to take
into account:
> the after income tax effect of interest and other
financing costs associated with dilutive potential
equity shares, and
> the weighted average number of additional
equity shares that would have been outstanding
assuming the conversion of all dilutive potential
equity shares.
(k) Borrowing Cost
General and specific borrowing costs that are
directly attributable to the acquisition/construction of
a qualifying asset are capitalised during the period
of time that is required to complete and prepare the
asset for its intended use or sale. Qualifying assets
are assets that necessarily take a substantial period
of time to get ready for their intended use or sale.
Any specific borrowing remains outstanding after
the related asset is ready for its intended use or
sale, that borrowing becomes part of the funds that
an entity borrows generally when calculating the
capitalisation rate on general borrowings.
Investment income earned on the temporary
investment of specific borrowing pending their
expenditure on qualifying assets is deducted from
the borrowing cost eligible for capitalisation.
Other borrowing costs are expensed in the period in
which they are incurred.
(l) Foreign currency translation
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 (i.e. functional currency). The financial
statements are presented in Indian rupee (INR),
which is Company's functional and presentation
currency.
Transactions and balances
Foreign currency transactions are translated into the
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 profit or loss.
Foreign exchange differences regarded as an
adjustment to borrowing cost are presented in the
Statement of Profit and Loss, within finance costs.
All other foreign exchange gains and losses are
presented in the Statement of profit and loss on a
net basis within other income or other expenses.
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.
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