Material accounting policies
a) Property, plant and equipment (PPE)
Recognition and measurement
Items of PPE are measured at cost less accumulated depreciation and accumulated impairment losses, 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, 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.
Capital work-in-progress is stated at cost. All the direct expenditure related to implementation including
incidental expenditure incurred during the period of implementation of a project, till it is commissioned, is
accounted as Capital work-in-progress and after commissioning the same is transferred / allocated to the
respective item of PPE. Pre-operative costs, being indirect in nature, are expensed to the Statement of Profit and
Loss as and when incurred.
If significant parts of an item of PPE have different useful lives, then they are accounted for as separate items
(major components) of PPE.
Any gain or loss on disposal of an item of PPE is recognised in the Statement of Profit and Loss.
Subsequent expenditure
Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the
expenditure will flow to the Company.
b) Depreciation
Depreciation on property, plant & equipment has been provided on Straight Line Method /Written Down Value
method as per the useful life prescribed in schedule II of the Companies Act, 2013 for respective PPE except for
below assets where useful life is determined by the Management of the Company basis internal technical
assessment. In respect of PPE purchased or ready to use during the year, depreciation is provided on pro-rata
basis from the date on which such asset is purchased or ready to use. Freehold land is not depreciated.
Leasehold land is amortised over the period of lease.
The residual value, useful life and method of depreciation of PPE are reviewed at each reporting date and
adjusted prospectively, as appropriate.
c) Intangible assets
Recognition and measurement
Intangible assets are recognised when it is probable that the future economic benefits that are attributable to the
assets will flow to the Company and the cost of the asset can be measured reliably. Intangible assets are initially
measured at cost. Such intangible assets are subsequently measured at cost less accumulated amortisation
and any accumulated impairment losses.
Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the
specific asset to which it relates. All other expenditure is recognised in the Statement of Profit and Loss as
incurred.
Amortisation
Intangible assets are amortised over the estimated period of benefit i.e. 3 to 5 years.
d) Impairment of non-financial assets
The Company's non-financial assets, other than inventories and deferred tax assets, are reviewed at each
reporting date to determine whether there is any indication of impairment. If any such indication exists, then the
asset's recoverable amount is estimated.
For impairment testing, assets that do not generate independent cash inflows are grouped together into cash¬
generating units (CGUs). Each CGU represents the smallest group of assets that generates cash inflows that
are largely independent of the cash inflows of other assets or CGUs.
The recoverable amount of a CGU (or an individual asset) is the higher of its value in use and its fair value less
costs to sell. Value in use is based on the estimated future cash flows, 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 CGU (or the asset).
The Company's corporate assets (e.g., central office building for providing support to various CGUs) do not
generate independent cash inflows. To determine impairment of a corporate asset, recoverable amount is
determined for the CGUs to which the corporate asset belongs.
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its estimated recoverable
amount. Impairment losses are recognised in the Statement of Profit and Loss except for properties previously
revalued with the revaluation surplus taken to Other Comprehensive Income (OCI). For such properties, the
impairment is recognised in OCI up to the amount of any previous revaluation surplus.
An impairment loss in respect of assets for which impairment loss has been recognised in prior periods, the
Company reviews at each reporting date whether there is any indication 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. Such a reversal is made 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 recognized.
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.
Financial assets
Initial recognition and measurement
All the financial assets are recognized initially at fair value, plus in the case of financial assets not recorded at fair
value through profit or loss (FVTPL), transaction costs that are attributable to the acquisition of the financial
assets. However, trade receivable that do not contain a significant financing component are measured at
transaction price.
Subsequent measurement
For purpose of subsequent measurement, financial assets are classified into:
a) Financial assets measured at amortised cost;
b) Financial assets measured at fair value through other comprehensive income (FVTOCI);
c) Financial assets measured at fair value through statement of profit and loss (FVTPL).
The Company classifies its financial assets in the above mentioned categories based on:
a) The Company's business model for managing the financial assets;
b) The contractual cash flows characteristics of the financial asset.
Financial assets measured at amortised cost
A financial asset is measured at amortised cost if both of the following conditions are met:
a) The financial asset is held within a business model whose objective is to hold financial assets in order to
collect contractual cash flows; and
b) The contractual terms of the financial assets give rise on specified dates to cash flows that are solely
payments of principal and interest (SPPI) on the principal amount outstanding.
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 the EIR. The EIR amortisation is included in finance income in the statement of profit and
loss. The losses arising from impairment are recognised in the statement of profit and loss. This category
generally applies to trade and other receivables.
Financial assets measured at fair value through other comprehensive income (FVTOCI)
A financial asset is measured at fair value through other comprehensive income if both of the following conditions
are met:
a) The financial asset is held within a business model whose objective is achieved by both collecting the
contractual cash flows and selling financial assets; and
b) The asset's contractual cash flows represent SPPI.
Financial assets measured at fair value through the statement of profit and loss (FVTPL)
FVTPL is a residual category. Any financial asset, which does not meet the criteria for categorization as at
amortized cost or as FVTOCI, is classified as at FVTPL. In addition, the Company may elect to designate a
financial asset, which otherwise meets amortized cost or FVTOCI criteria, as at FVTPL. However, such election
is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as
'accounting mismatch').
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is
primarily derecognised (i.e. removed from the Company's balance sheet) when:
a) The contractual rights to the cash flows from the financial asset have expired, or
b) 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:
i) The Company has transferred substantially all the risks and rewards of the asset, or
ii) The Company has neither transferred nor retained substantially all the risks and rewards of the
asset, but has transferred control of the asset.
Impairment of financial assets
The Company assesses impairment based on expected credit loss (ECL) model to the following:
a) Financial assets measured at amortised cost;
b) Financial assets measured at fair value through other comprehensive income
Expected credit losses are measured through a loss allowance at an amount equal to:
a) The 12 month's expected credit losses (expected credit losses that result from those default events on the
financial instrument that are possible within 12 months after the reporting date); or
b) Full time expected credit losses (expected credit losses that result from all possible default events over the
life of the financial instrument).
The Company follows 'simplified approach' for recognition of impairment loss allowance on trade receivables.
Under the simplified approach, the Company uses a provision matrix to determine impairment loss allowance on
the portfolio of trade receivables. The provision matrix is based on its historically observed default rates over the
expected life of the trade receivable which is adjusted for management's estimates. At every reporting date, the
historical observed default rates are updated and changes in the forward-looking estimates are analysed.
Financial Liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through statement of
profit and loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an
effective hedge, as appropriate. All financial liabilities are recognised initially at fair value.
The Company's financial liabilities include trade and other payables.
Subsequent measurement
a) Financial liabilities measured at amortised cost;
b) Financial liabilities subsequently measured at fair value through statement of profit and loss (FVTPL)
Trade and other payables
These amounts represent liability for goods and services provided to the Company prior to the end of financial
year which are unpaid. 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 the effective interest 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.
Offsetting financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet when, and
only when, there is a legally enforceable right to offset the recognised amount and there is intention either to
settle on net basis or to realise the assets and to settle the liabilities simultaneously.
f) Inventories
Inventories are valued at cost or net realizable value, whichever is lower. The comparison of cost vs NRV is made
on item to item basis. The basis of determining cost for various categories of inventories is as follows:
g) Employee Benefits
i) Short-term employee benefits
Employee benefits payable wholly within twelve months of rendering the service are classified as short-term
employee benefits and are recognised in the period in which the employee renders the related service.
ii) Post-employment benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which the Company makes specified
contributions towards Government administered provident fund scheme. The contributions are charged to the
Statement of Profit and Loss of the year, when the contributions to the respective funds are due. There are no
obligations other than the contributions payable to the respective fund.
Defined benefit plans
All employees are covered under Employees' Gratuity Scheme, which is a defined benefit plan. The Company
contributes to a fund maintained with Life Insurance Corporation of India (LIC) on the basis of the year-end
liability determined based on actuarial valuation using the Projected Unit Cost Method. Remeasurements of the
net defined benefit liability, which comprise actuarial gains/losses, the return on plan assets (excluding interest)
and the effect of the asset ceiling (if any, excluding interest) are recognized in Other Comprehensive Income. Net
interest expense and other expenses related to defined benefit plans are recognised in the Statement of Profit
and Loss.
In respect of all employees, the Company makes contributions determined based on specified percentage of
salaries, towards Provident Fund to a Company managed Provident Fund Trust. These contributions are
charged to Statement of Profit and Loss as they accrue. The Company has an obligation to fund any shortfall in
the Trust Fund, as determined based on the year end actuarial valuation using the projected unit credit method.
Short- term employee benefits
Provision for short-term employee benefits comprise of compensated absences. These are measured on the
basis of year-end actuarial valuation in line with the Company's policy for compensated absences.
Remeasurement gains or losses are recognized in the Statement of Profit and Loss in the period in which they
arise.
h) Revenue recognition
Sale of products
Nature and timing of satisfaction of performance obligations, including significant payment terms: The timing of
transfer of control is driven by the individual terms of contracts. Invoices are usually payable within agreed credit
terms.
Revenue is recognised when a customer obtains control of the goods which is driven by the individual terms of
contracts. For contracts that permit the customer to return an item, revenue is recognised to the extent that it is
highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur.
Other income
Interest income or expense is recognised using the effective interest method.In calculating interest income, the
effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit-impaired).
Export incentives
Export incentives are accounted on accrual basis based in shipment of eligible exports and there is no significant
uncertainty regarding realization.
Claims
Insurance and other claims are accounted to the extent lodged with the appropriate authorities and only when it is
reasonably certain that the ultimate collection will be made.
i) Foreign currency transactions
Transactions and balances:
Transactions denominated in foreign currencies are translated into functional currency at the exchange rates
prevailing at the time of transaction.
Monetary items denominated in foreign currencies at the year-end are translated into the functional currency at
the exchange rate prevailing on the balance sheet date.
Non-monetary items are carried at historical cost using the exchange rates on the date of transaction, other than
those measured at fair value. 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.
Any income or expense on account of foreign exchange difference either on settlement or on translation is
recognized in the Statement of Profit and Loss.
j) Taxes
Income tax comprises current and deferred tax. It is recognised in the Statement of Profit and Loss except to the
extent that it relates to a business combination or to an item recognised directly in equity or in other
comprehensive income.
Current Tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any
adjustment to the tax payable or receivable in respect of previous years. The amount of current tax reflects the
best estimate of the tax amount expected to be paid or received after considering the uncertainty, if any, related to
income taxes. It is measured using Income tax rates (and tax laws) enacted or substantively enacted by the
reporting date.
Current tax assets and current tax liabilities are offset only if there is a legally enforceable right to set off the
recognised amounts, and it is intended to realise the asset and settle the liability on a net basis or simultaneously.
Deferred Tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes. Deferred
tax is also recognised in respect of carried forward tax losses and tax credits.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available
against which they can be used. The existence of unused tax losses is strong evidence that future taxable profit
may not be available. Deferred tax assets - unrecognised or recognised, are reviewed at each reporting date to
evaluate if the related tax benefit will be realised.
Deferred tax is measured at the tax rates that are expected to apply to the year when the asset is realised or the
liability is settled, based on the Income tax laws that have been enacted or substantively enacted by the reporting
date.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the
Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and
assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different
tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and
liabilities will be realised simultaneously.
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