1.2. Statement of material accounting policies
Accounting policy information is material, if when considered together with
other information included in entity's financial statements, it can reasonably
be expected to influence decisions that the primary users of general purpose
financial statements make on the basis of those financial statements.
Accounting policy information may be material because of the nature of the
related transactions, other events, or conditions, even if the amounts are
immaterial. However, not all accounting policy information relating to material
transactions, other events or conditions is itself material.
1.2.1. Property, Plant and Equipment
Recognition and Measurement:
Freehold land is carried at historical cost. Items of property, plant and
equipment are measured at cost, which includes capitalised borrowing costs,
less accumulated depreciation and accumulated impairment losses, if any.
Cost of an item of property, plant and equipment comprises its purchase
price, including import duties and non-refundable purchase taxes, after
deducting trade discounts and rebates, any directly attributable cost of
bringing the item to its working condition for its intended use. 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.
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.
Any gain or loss on disposal of an item of property, plant and equipment is
recognised in statement of profit and loss.
Subsequent measurement
Subsequent expenditure is capitalised only if it is probable that the future
economic benefits associated with the expenditure 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 derecognized 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.
Depreciation:
Depreciation is provided on a straight-line basis so as to expense the cost
less residual value over their estimated useful lives as prescribed in Schedule
II of the Companies Act, 2013 except in case of assets in moulded products
division where useful life is determined based on technical evaluation. The
estimated useful lives and residual values are reviewed at the end of each
reporting period, with the effect of any change in estimate accounted for on
a prospective basis.
Derecognition
The carrying amount of an item of property, plant and equipment is
derecognized on disposal or when no future economic benefits are expected
from its use or disposal. The consequential gain or loss is measured as the
difference between the net disposal proceeds and the carrying amount of
the item and is recognized in the statement of profit and loss.
Capital Work-In-Progress/ Intangible Asset under development
Cost of assets not ready for intended use are carried at cost, comprising of
direct costs, related incidental expenses and attributable interest if any.
Advances given towards acquisition of assets and outstanding at each
balance sheet date are disclosed as "Other Non-Current Assets".
1.2.2. Intangible Assets
Recognition
Intangible assets are recognized, only if it is probable that the future economic
benefits that are attributable to the assets will flow to the enterprise and
the cost of the assets can be measured reliably. The intangible assets are
recorded at cost and are carried at cost less accumulated amortization and
accumulated impairment losses, if any.
Expenditure on research activities is recognised in statement of profit and
loss as incurred.
Development expenditure is capitalised as part of the cost of the resulting
intangible asset only if the expenditure can be measured reliably, the product
or process is technically and commercially feasible, future economic benefits
are probable, and the Company intends to and has sufficient resources to
complete development and to use or sell the asset. Otherwise, it is recognised
in the statement of profit and loss as incurred.
Amortization
Intangible assets are Amortised over their estimated useful lives (5 years)
using the straight-line method. Amortisation method, useful lives and
residual values are reviewed at the end of each reporting date and adjusted
if appropriate.
Goodwill
Goodwill is initially recognized based on accounting policy for business
combinations and tested for impairment annually or when events or
circumstances indicate that the implied fair value of goodwill is less than its
carrying amount.
CGUs to which goodwill has been allocated are tested for impairment annually,
or more frequently when there is indication for impairment. The financial
projections basis which the future cash flows have been estimated consider
economic uncertainties, reassessment of the discount rates, revisiting the
growth rates factored while arriving at terminal value and subjecting these
variables to sensitivity analysis. If the recoverable amount of a CGU is less
than its carrying amount, the impairment loss is allocated first to reduce the
carrying amount of any goodwill allocated to the unit and then to the other
assets of the unit pro-rata on the basis of the carrying amount of each asset
in the unit.
1.2.3. Business Combination
Business Combinations are accounted for using the acquisition method as
prescribed in Ind AS 103 Business Combinations of accounting, except for
common control transactions which are accounted using the pooling of
interest method that is accounted at carrying values.
The cost of an acquisition is measured at the fair value of the assets
transferred, equity instruments issued, and liabilities assumed at their
acquisition date i.e. the date on which control is acquired. Contingent
consideration to be transferred is recognized at fair value and included as
part of cost of acquisition. Transaction-related costs are expensed in the
period in which the costs are incurred.
Goodwill arising on business combination is initially measured at cost, being
the excess of the aggregate of the consideration transferred and the amount
recognized for non-controlling interests, and any previous interest held, over
the fair value of net identifiable assets acquired and liabilities assumed.
1.2.4.Impairment of Non-Financial Assets
Non-financial assets other than inventories and deferred tax assets are
reviewed at each Balance Sheet date to determine whether there is any
indication of impairment. If any such indication exists, or when annual
impairment testing for an asset is required, the Company estimates the
asset's recoverable amount. The recoverable amount is higher of the assets
or Cash-Generating Units (CGU's) 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. When 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.
1.2.5. Leases
The Company evaluates each contract or arrangement, whether it qualifies
as lease as defined under Ind AS 116.
As a lessee
The Company assesses, whether the contract is, or contains, a lease. A
contract is, or contains, a lease if the contract involves -
Ý the use of an identified asset,
Ý the right to obtain substantially all the economic benefits from use of
the identified asset, and
Ý the right to direct the use of the identified asset.
The Company at the inception of the lease contract recognizes a Right-
of-Use (RoU) asset at cost and a corresponding lease liability, for all lease
arrangements in which it is a lessee, except for leases with term of less than
twelve months (short term) or low-value assets.
(A) Lease Liability
At the commencement date, the Company measures the lease liability
at the present value of the lease payments that are not paid at that
date. The lease payments shall be discounted using incremental
borrowing rate.
(B) Right-of-use assets
Initially recognized at cost, which comprises the initial amount of the
lease liability adjusted for any lease payments made at or prior to the
commencement date of the lease plus any initial direct costs less any
lease incentives.
Subsequent measurement
(A) Lease Liability
Company measure the lease liability by (a) increasing the carrying
amount to reflect interest on the lease liability; (b) reducing the carrying
amount to reflect the lease payments made; and (c) remeasuring the
carrying amount to reflect any reassessment or lease modifications.
(B) Right-of-use assets
Subsequently measured at cost less accumulated depreciation and
impairment losses. Right-of-use assets are depreciated from the
commencement date on a straight line basis over the shorter of the
lease term and useful life of the under lying asset.
Short term lease:
Short term lease is that, at the commencement date, has a lease term of
12 months or less. A lease that contains a purchase option is not a short¬
term lease. If the company elected to apply short term lease, the lessee shall
recognize the lease payments associated with those leases as an expense
on either a straight-line basis over the lease term or another systematic
basis. The lessee shall apply another systematic basis if that basis is more
representative of the pattern of the lessee's benefit.
As a lessor
Leases for which the company is a lessor is classified as a finance or operating
lease. Whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee, the contract is classified as a finance
lease. All other leases are classified as operating leases.
Lease income is recognized in the statement of profit and loss on straight line
basis over the lease term.
I. 2.6. Investment in subsidiaries
The Company has elected to recognize its investments in Subsidiary Company
at Cost in accordance with the option available in Ind AS 27 ‘Separate
Financial Statements'.
II. 2.7.Inventories
Ý Inventories are measured at the lower of cost and net realisable value.
The cost of inventories is determined on weighted average basis and
includes expenditure incurred in acquiring the inventories, production
or conversion costs and other costs incurred in bringing them to their
present location and condition.
Ý In the case of raw materials and stock-in-trade, cost includes cost of
purchase and other costs incurred in bringing the inventories to their
present location and condition. In the case of finished goods and work
in progress,
Ý cost includes cost of direct materials and labour and a proportion of
manufacturing overheads based on the normal operating capacity but
excluding borrowing costs. Cost is determined on weighted Average
Cost basis.
. 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.
The comparison of cost and net realisable value is made on an item-by¬
item basis.
1.2.8. Revenue Recognition
Sale of goods and services
Revenue from the sale of goods is recognised when the goods are delivered
and titles have passed, at which time all the following conditions are satisfied:
Ý the Company has transferred to the buyer the significant risks and
rewards of ownership of the goods;
Ý the Company retains neither continuing managerial involvement to the
degree usually associated with ownership nor effective control over
the goods sold;
Ý the amount of revenue can be measured reliably;
Ý it is probable that the economic benefits associated with the
transaction will flow to the Company; and
Ý the costs incurred or to be incurred in respect of the transaction can
be measured reliably.
Revenue from the sale of goods is recognised at the point in time when control
is transferred to the customer, which generally coincides with the delivery of
goods to customers, based on contracts with the customers. Export sales
are recognized on the issuance of Bill of Lading/ Airway bill by the carrier.
Revenue is measured based on the transaction price, which is the
consideration, adjusted for volume discounts, price concessions, incentives,
and returns, if any, as specified in the contracts with the customers.
Revenue excludes taxes collected from customers on behalf of the
government. Accruals for discounts/incentives and returns are estimated
(using the most likely method) based on accumulated experience and
underlying schemes and agreements with customers.
Dividend income
Dividend income is accounted for when the right to receive the same is
established, which is generally when shareholders approve the dividend.
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.
Insurance Claims
Insurance claims are accounted for on the basis of claims admitted /
expected to be admitted and to the extent that the amount recoverable can
be measured reliably and it is reasonable to expect ultimate collection.
Other Income
Other income is accounted for on accrual basis except where the receipt of
income is uncertain in which case it is accounted for on receipt basis.
1.2.9. Employee benefits
i. Short term employee benefits
Short-term employee benefit obligations are measured on an undiscounted
basis and are expensed as the related service is provided. A liability is
recognised for the amount expected to be paid e.g., under short-term cash
bonus, 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
amount of obligation can be estimated reliably.
ii. Long term employee benefits
Defined-benefit plans
For defined benefit retirement plans, the cost of providing benefits is
determined using the Projected Unit Credit Method, with actuarial valuation
being carried out at each balance sheet date. Remeasurement, comprising
actuarial gains and losses, the effect of the changes to the asset ceiling (if
applicable) and the return on plan assets (excluding net interest), is reflected
immediately in the balance sheet with a charge or credit recognized in other
comprehensive income in the period in which they occur. Remeasurement
recognized in other comprehensive income is reflected immediately in
retained earnings and is not reclassified to statement of profit and loss.
Past service cost is recognized as an expense when the plan amendment or
curtailment occurs or when any related restructuring costs or termination
benefits are recognized, whichever is earlier. The service cost, net interest
on the net defined benefit liability/ (asset) is treated as a net expense within
employment cost. The retirement benefit obligation recognized in the
balance sheet represents the present value of the defined-benefit obligation
as reduced by the fair value plan assets.
Defined Contribution Plans and Other long-term employee benefits
Compensated absences which accrue to employees, and which can be
carried to future periods but are expected to be encashed or availed in
twelve months immediately following the year end are reported as expenses
during the year in which the employees perform the services that the benefit
covers and the liabilities are reported at the undiscounted amount of the
benefits after deducting amounts already paid. Where there are restrictions
on availment of encashment of such accrued benefit or where the availment
or encashment is otherwise not expected to wholly occur in the next twelve
months, the liability on account of the benefit is actuarially determined using
the projected unit credit method.
1.2.10.Share based payments
Employees of the Company receive remuneration in the form of share-
based payments in consideration of the services rendered. Under the equity
settled share based payment, the fair valuation on the grant date of the
awards given to employees is recognized as ‘Employee benefit expenses'
with a corresponding increase in equity over the vesting period. The fair
value of the options at the grant date is calculated by an independent valuer
basis black-scholes model. At the end of each reporting period, apart from
the non-market vesting condition, the expense is reviewed and adjusted to
reflect changes to the level of options expected to vest. When the options are
exercised, the Company issues fresh equity shares.
1.2.11. Foreign Currency Transactions
Monetary Items
Transactions in foreign currencies are initially recorded at their respective
exchange rates at the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are
translated at exchange rates prevailing on the reporting date.
Exchange differences arising on settlement or translation of monetary items
are recognized in Statement of Profit and Loss either as profit or loss on
foreign currency transaction and translation or as borrowing costs to the
extent regarded as an adjustment to borrowing costs.
Non - Monetary items
Non-monetary items that are measured in terms of historical cost in a
foreign currency are translated using the exchange rates at the dates of the
initial transactions.
1.2.12. Government Grants
Government grants are recognized where there is reasonable assurance
that the grant will be received and all attached conditions will be complied
with. Government grants received in relation to assets are presented as a
reduction to the carrying amount of the related assets.
The loan or assistance is initially recognised and measured at fair value and
the government grant is measured as the difference between initial carrying
value of the loan and proceeds received. The loan is subsequently measured
at amortised cost.
When the grant relates to an expense item, it is recognized in Statement of
Profit and Loss on a systematic basis over the periods that the related costs,
for which it is intended to compensate, are expensed.
Government grants relating to PPE are presented as deferred income and
are credited to the Statement of Profit and Loss on a systematic and rational
basis over the useful life of the asset.
The export incentives received by the Company such as duty draw back,,
Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme and
Export Promotions on Capital Goods (EPCG) scheme are also treated as
government grants.
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