Note 1: Material Accounting Policies
(a) Basis of preparation
(i) Compliance with Ind AS
The financial statements of the Company have been
prepared in accordance with Indian Accounting
Standards (Ind AS) notified under the Companies
(Indian Accounting Standards) Rules, 2015 (as
amended from time to time) and presentation
requirements of Division II of Schedule III to the
Companies Act, 2013, (Ind AS compliant Schedule
III).
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 (' 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 segregates assets and liabilities into
current and non-current categories for presentation
in the Balance Sheet after considering its normal
operating cycle and other criteria set out in Ind AS 1,
“Presentation of Financial Statements”.
For this purpose, current assets and liabilities
include the current portion of non-current assets
and liabilities respectively. Deferred tax assets and
liabilities are always classified as non-current. The
operating cycle is the time between the acquisition
of assets for processing and their realization in cash
and cash equivalents. The Company has identified
period up to twelve months as its operating cycle.
(b) Property, plant & equipments
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 & equipments 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). 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:
Ý those to be measured subsequently at fair value
(either through other comprehensive income, or
through profit or loss), and
Ý 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.
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:
Ý Debt instruments at fair value through Profit and Loss
(FVTPL)
Ý Debt instruments at fair value through other
comprehensive income (FVTOCI)
Ý Debt instruments at amortised cost
Ý 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.
A financial asset is derecognised only when:
Ý the rights to receive cash flows from the asset have
expired, or
Ý 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:
Ý In the principal market for the asset or liability, or
Ý 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:
Ý Level 1 — Quoted (unadjusted) market prices in
active markets for identical assets or liabilities
Ý Level 2 — Valuation techniques for which the
lowest level input that is significant to the fair value
measurement is directly or indirectly observable
Ý Level 3 — Valuation techniques for which the
lowest level input that is significant to the fair value
measurement is unobservable
(g) Taxes
The income tax expense or credit for the period is the tax
payable on the current period's taxable income based
on the applicable income tax rate adjusted by changes
in deferred tax assets and liabilities attributable to
temporary differences and to unused tax losses.
The Company's liability for current tax is calculated using
the Indian tax rates and laws that have been enacted at
the end of the reporting period. The Company periodically
evaluates positions taken in the tax returns with respect
to situations in which applicable tax regulations are
subject to interpretations. It establishes provisions where
appropriate on the basis of amount expected to be paid
to tax authorities.
Deferred income tax is provided in full, using the Balance
Sheet approach on temporary differences arising
between the tax bases of assets and liabilities and their
carrying amount in the financial statement. Deferred
income tax is determined using tax rates (and laws) that
have been enacted or substantially enacted by the end
of the reporting period and are expected to apply when
the related deferred income tax assets is realised or the
deferred income tax liability is settled.
Deferred tax assets are recognised for all deductible
temporary differences and unused tax losses, only if, it is
probable that future taxable amounts will be available to
utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets
and liabilities and when the deferred tax balances relate
to the same taxation authority. Deferred tax assets
and liabilities are classified as non-current assets and
liabilities.
Current tax assets and tax liabilities are offset where the
Company has a legally enforceable right to offset and
intends either to settle on a net basis, or to realize the
asset and settle the liability simultaneously.
Current and deferred tax is recognised in the Statement
of Profit and Loss, except to the extent that it relates
to items recognised in other comprehensive income or
directly in equity. In this case, the tax is also recognised
in other comprehensive income or directly in equity,
respectively.
Minimum Alternate Tax credit is recognised as deferred
tax asset only when and to the extent there is convincing
evidence that the Company will pay normal income tax
during the specified period. Such asset is reviewed at
each Balance Sheet date and the carrying amount of the
MAT credit asset is written down to the extent there is
no longer a convincing evidence to the effect that the
Company will pay normal income tax during the specified
period.
(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, Employee State Insurance Corporation
(ESIC).
(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 and
ESIC 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:
Ý the profit attributable to owners of the Company
Ý 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:
Ý the after income tax effect of interest and other
financing costs associated with dilutive potential
equity shares, and
Ý 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 ('), 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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