3.3 Significant Accounting Policies
(a) Revenue Recognition
i. Revenue is recognized when the significant risks and rewards of ownership have been
transferred to the customers. Revenue is measured net of returns, trade discounts and volume
rebates. The timing of the transfer of risks and rewards varies depending on the individual
terms of the sales agreement.
ii. Revenues from contracts priced on a time and material basis are recognized when services
are rendered and related costs are incurred.
iii. Revenues from turnkey contracts, which are generally time bound fixed price contracts, are
recognized over the life of the contract using the proportionate completion method, with
contract costs determining the degree of completion. Foreseeable losses on such contracts are
recognized when probable.
iv. Revenues from maintenance contracts are recognized pro-rata over the period of the contract.
v. Revenue from sale of goods will be recognized when the delivery of goods has happened, and
ownership is transferred to buyer.
vi. Interest income is recognized on the accrual basis using transactional interest rates.
(b) Property, Plant and Equipment (PPE)
i. All fixed assets are stated at cost of acquisition or construction less accumulated depreciation.
ii. Recognition and measurement: Normally Property, plant and equipment are measured at
cost less accumulated depreciation and impairment losses, if any. Cost includes expenditures
directly attributable to the acquisition of the asset. The Company has elected to apply the
optional exemption to use this previous GAAP value as deemed cost on 1 April 2017, the date
of transition.
iii. Depreciation has been provided on straight line method based on life assigned to each asset
in accordance with Schedule II of the Companies Act 2013.
iv. Depreciation on additions to fixed assets has been calculated on pro-rata basis from the date
of addition.
v. No depreciation has been provided on the fully depreciated assets.
(c) Borrowing cost
Borrowing costs attributable to the acquisition/construction of qualifying assets are capitalized and
form part of the cost of the qualifying assets. A qualifying asset is an asset that necessarily takes a
substantial period of time to get ready for its intended use. All other borrowing costs are charged
to revenue as an expense.
(d) Income Tax
Current Tax is determined as the amount of tax payable in respect of taxable income for the period.
Deferred Tax is recognized, on timing differences, being the difference between taxable Income
and accounting Income that originates in one period and are capable of reversal in oneor more
subsequent periods. Deferred Tax assets are recognized subject to the consideration of
prudence. The tax rates and laws that have been enacted or substantively enacted as of the balance
sheet date are applied.
(e) Inventories
Inventories are measured at lower of cost and net realizable value after providing for obsolescence,
if any. Cost of inventories comprises of cost of purchase, cost of conversion and other cost including
manufacturing overheads incurred in bringing them to their respective present location and
condition. Cost of raw materials, work-in- progress, packing materials, trading and other products
are determined on first-in-first-out basis.
(f) Deferred Revenue Expenditure
Expenditure incurred on advertisement and other expenses for promotion of new products and
recruitment of key personnel is amortized over a period of five years, having due regard to the
nature of expenses and the benefit that may be derived there from. Expenditure on routine product
advertisement and personnel recruitment is expensed off to profit & loss account in the year in
which it is incurred.
(g) Cash and cash equivalents
Cash and cash equivalents for the purposes of cash flow statement comprise cash at bank and in
hand and short-term deposits with banks with an original maturity of three months or less.
(h) Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the
effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating
cash receipts or payments and item of income or expenses associated with investing or financing
cash flows. The cash flows from operating, investing and financing activities of the Company are
segregated.
(i) Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured
at amortized cost. Gains and losses are recognized in profit and loss when the liabilities are
derecognized. This category generally applies to interest-bearing loans and borrowings.
(j) Foreign currency transactions
Transactions arising in foreign currency during the year are recorded at average rates closely
approximating those ruling at the transaction dates. Current Assets and Current Liabilities,
denominated in foreign currency, are translated at the exchange rate prevalent at the date of
the Balance Sheet. Exchange differences arising on foreign currency transactions/translations
are recognized as income or expense in the Profit & Loss Account, except those relating to the
acquisition of fixed assets, which are adjusted against the cost of the assets.
(k) Leases
Leases where the lessor effectively retains substantially all the risks and benefits of ownership of
the leased item, are classified as operating leases. Operating lease payments are recognized as
an expense in the Statement of Profit and Loss on a Straight - line basis over the lease term.
(l) Employee benefits
All Employee Benefits payable for rendering the service such as Salaries, Wages etc. and the
expected cost of ex-gratia are recognized in the period in which the employee renders the related
service. A Liability is recognized for the amount expected to be paid when there is 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.
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