3. Material Accounting Policies
The material accounting policies applied by the Company in the preparation of its financial statements are
listed below. Such accounting policies have been applied consistently to all the periods presented in these
financial statements, unless otherwise indicated.
3.1. Property, Plant and Equipment:
Property, plant and equipment are stated at cost, comprising of purchase price and any initial directly
attributable cost of bringing the asset to its working condition for its intended use, less accumulated
depreciation (other than freehold land) and impairment loss, if any.
Subsequent costs are included in the asset’s carrying amount or recognized 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. All other repairs and maintenance costs are
charged to the Statement of Profit and Loss during the period in which they are incurred.
Gains or losses arising on retirement or disposal of property, plant and equipment are recognized in the
Statement of Profit and Loss.
Property, plant and equipment which are not ready for intended use as on the date of Balance Sheet are
disclosed as “Capital work-in-progress”.
Depreciation is provided on a pro-rata basis based on the written-down-value method based on estimated
useful life prescribed under Schedule II to the Companies Act, 2013. Depreciation is not recorded on
capital work-in- progress until construction and installation is complete and the asset is ready for its
intended use.
The residual values, useful lives and method of depreciation of property, plant and equipment is reviewed
at each financial year end and adjusted prospectively, if appropriate.
3.2 Intangible Assets
Intangible assets purchased are initially measured at cost. Subsequently, intangible assets are carried at cost
less any accumulated amortization and accumulated impairment losses, if any.
The useful lives of intangible assets are assessed as either finite or indefinite. Finite-life intangible assets
are amortised on a straight-line basis over the period of their estimated useful lives. The Company has only
one class of finite-life intangible asset, viz., Computer Software whose estimated useful life is 3 years. The
amortisation period and the amortisation method for finite-life intangible assets is reviewed at each
financial year end and adjusted prospectively, if appropriate.
For indefinite life intangible assets, the assessment of indefinite life is reviewed annually to determine
whether it continues, if not, it is impaired or changed prospectively basis revised estimates.
3.3 Impairment of Non-financial assets - Tangible and intangible assets
Property, plant and equipment and intangible assets with finite life are evaluated for recoverability
whenever there is any indication that their carrying amounts may not be recoverable. If any such indication
exists, the recoverable amount (i.e. higher of the fair value less cost to sell and the value-inuse) is
determined on an individual asset basis unless the asset does not generate cash flows that are largely
independent of those from other assets. In such cases, the recoverable amount is determined for the Cash
Generating Unit (CGU) to which the asset belongs.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the
carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is
recognised in the statement of profit and loss.
3.4 Inventories
Inventories are valued at the lower of cost and net realisable value. Cost is computed on a weighted
average basis. Cost of finished goods or Stock in Trade include all costs of purchases and other costs
incurred in bringing the inventories to their present location and condition. The net realisable value is the
estimated selling price in the ordinary course of business less the estimated costs of completion and
estimated costs necessary to make the sale.
3.5 Revenue Recognition
Revenue from sale of products is recognized when control of products being sold is transferred to customer
and when there are no longer any unfulfilled obligations. The performance obligations in contracts are
considered as fulfilled in accordance with the terms agreed with the respective customers.
Revenue is measured at fair value of the consideration received or receivable and are accounted for net of
The Company considers the terms of the contract and its customary business practices to determine the
transaction price. The transaction price is the amount of consideration to which the Company expects to be
entitled in exchange for transferring promised goods to a customer, excluding amounts collected on behalf
of third parties (for example, taxes collected on behalf of the government). The consideration promised in a
contract with a customer may include fixed consideration, variable consideration (if reversal is less likely
in future), or both.
The transaction price is allocated by the Company to each performance obligation in an amount that depicts
the amount of consideration to which it expects to be entitled in exchange for transferring the promised
goods to the customer.
For each performance obligation identified,the Company determines at contract inception whether it
satisfies the performance obligation over time or satisfies the performance obligationat a point in time.
When either party to a contract has performed its obligation, an entity shall present the contract in the
balance sheet as a contract asset or a contract liability, depending on the relationship between the entity’s
performance and the customer’s payment.
Rental income is recognized on a straight-line basis over the terms of the lease, except for contingent rental
income which is recognized when it arises and where scheduled increase in rent compensates the lessor for
expected inflationary costs.
Interest income is recognized using effective interest method.
Other incomes have been recognized on accrual basis in the financial statements, except when there is
uncertainty of collection.
3.6 Cost recognition
Costs and expenses are recognized when incurred and have been classified according to their nature. The
costs of the Company are broadly categorized into Purchase, employee benefits expenses, finance cost,
depreciation and amortization and other expenses.
Cost of Purchases consists of purchase cost of stock, freight, clearing and forwarding etc..
Employee benefit expenses include salaries, wages, bonus, incentives and allowances, directors'
remuneration, contributions to provident and other funds and staff welfare expenses.
Selling & Distribution expenses comprising of sales promotion and advertising expenses, commission on
sales and tour, travel and conveyance and lodging and boarding of sales and marketing team, and
establishment Expenses mainly include legal and professional fees to external consultants, facility
expenses, travel expenses, insurance costs, auditors' remuneration, communication expenses, bad debts and
advances written off, allowances for doubtful trade receivables and advances (net) and miscellaneous
expenses. Miscellaneous expenses is an aggregation of costs which are individually not material such as,
packing, water and fuel charges etc.
3.7 Income Taxes
Income tax expense comprises current tax expense and the net change in the deferred tax asset or liability
during the year. Current and deferred taxes are recognized in the statement of profit and loss, except when
they relate to items that are recognized in other comprehensive income or directly in equity, in which case,
the current and deferred tax are also recognized in other comprehensive income or directly in equity,
respectively. Interest expenses and penalties, if any, related to income tax are included in finance cost and
other expenses, respectively. Interest Income, if any, related to Income tax is included in Other Income.
Current income taxes
Current income tax is the expected tax payable/receivable on the taxable income/loss for the year using
applicable tax rates for the relevant period, and any adjustment to taxes in respect of previous years.
Advance taxes and provisions for current income taxes are presented in the balance sheet after off-setting
advance tax paid and income tax provision arising in the same tax jurisdiction and where there is an
intention to settle the asset and the liability on a net basis.
Deferred income taxes
Deferred tax is recognized in respect of temporary differences between the carrying amount of assets and
liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes.
A deferred tax liability is recognized based on the expected manner of realization or settlement of the
carrying amount of assets and liabilities, using tax rates enacted, or substantively enacted, by the end of the
reporting period. Deferred tax assets are recognized only to the extent that it is probable that future taxable
profits will be available against which the asset can be utilised. Deferred tax assets are reviewed at each
reporting date and reduced to the extent that it is no longer probable that the related tax benefit will be
realized.
Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set off
current tax assets against current tax liabilities; and the deferred tax assets and the deferred tax liabilities
relate to income taxes levied by the same taxation authority.
3.8 Leases
As a lessee:
The Company assesses whether a contract is or contains a lease, at inception of a contract. A contract is, or
contains, a lease if the contract conveys the right to control the use of an identified asset for a period of
time in exchange for consideration. To assess whether a contract conveys the right to control the use of an
identified asset, the Company assesses whether:
i. the contract involves the use of an identified asset
ii. the Company has substantially all of the economic benefits from use of the
asset through the period of the lease and
iii. the Company has the right to direct the use of the asset.
The Company has applied the short-term lease recognition exemption to its short-term leases (i.e., those
leases that have a lease term of 12 months or less from the commencement date and do not contain a
purchase option) and low-value assets recognition exemption.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks
and rewards incidental to ownership to the lessee.
As a lessor:
Leases in which a substantial portion of the risks and rewards of ownership are retained by the lessor are
classified as operating leases. Receipts under such leases are recognised to the Statement of Profit and Loss
on a straight-line basis over the term of the lease.
3.9 Borrowing costs
Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are
capitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial
period of time to get ready for its intended use.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for capitalization.
All other borrowing costs are charged to the Statement of Profit and Loss for the period for which they are
incurred.
3.10 Foreign Currencies
Foreign currency transactions are translated into the functional currency using exchange rates at the date of
the transaction. Foreign exchange gains and losses from the settlement of these transactions are recognised
in the Statement of Profit and Loss. Foreign currency denominated monetary assets and liabilities are
translated into functional currency at exchange rates in effect at the balance sheet date, the gain or loss
arising from such translations are recognised in the statement of profit & loss.
3.11 Government Grant
The company recognizes Government Grants only when there is a reasonable assurance that the conditions
attached to them will be complied with, and the grants will be received. Government Grants received in
relation to assets are presented in the Balance Sheet by setting up the Grant as deferred income. Grants
related to Income are shown separately in the statement of profit and loss.
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