1.3 Material Accounting policies
(A) Property, Plant and Equipment :
Property, plant and equipment are carried at its cost,
net of recoverable taxes, trade discounts and rebate less
accumulated depreciation and impairment losses, if any. Cost
includes purchase price, borrowing cost, non refundable taxes
or levies and directly attributable cost of bringing the asset
to its working condition for its intended use. Expenditure
related to plans, designs and drawings of buildings or plant
and machinery is capitalized under relevant heads of property,
plant and equipment if the recognition criteria are met.
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 entity and the cost can be measured
reliably. In case of Property, Plant and Equipment, the
Company has availed the fair value as deemed cost on the date
of transition i.e. April 01, 2016.
Property, Plant and Equipment not ready for the intended use
on the date of Balance Sheet are disclosed as “Capital Work-in¬
Progress” and expenses incurred relating to it, net of income
earned during the development stage, are disclosed as pre¬
operative expenses under “Capital Work-in-Progress”.
Property, Plant and Equipment are eliminated from Standalone
Financial Statements, either on disposal or when retired from
active use. Gains / losses arising in the case of retirement/
disposal of Property, Plant and Equipment are recognised in
the statement of profit and loss in the year of occurrence.
Capital work in progress and Capital advances:
Cost of assets not ready for intended use, as on the Balance
Sheet date, is shown as capital work in progress. Advances
given towards acquisition of property, plant and equipment
outstanding at each Balance Sheet date are disclosed as Other
Non-Current Assets.
Depreciation:
Depreciation on property, plant and equipment is provided
on straight line method for the year for which the assets have
been used as under:
(a) Depreciation on assets is provided over the useful life of
assets as prescribed under schedule II of Companies Act,
2013 except Mobile phones where 3 years have been taken
(b) Leasehold land is amortised over the period of lease.
The asset's residual values, useful lives and method of
depreciation are reviewed at each financial year end and are
adjusted prospectively, if appropriate.
(B) Intangible Assets and Amortisation:
Intangible Assets are stated at cost, net of accumulated
amortization and impairment losses, if any. Intangible assets
are amortised on a straight line basis over their estimated useful
lives. The amortisation period and the amortisation method
are reviewed at least at each financial year end. If the expected
useful life of the asset is significantly different from previous
estimates, the amortisation period is changed accordingly.
Gain or losses arising from the retirement or disposal of an
intangible asset are determined as the difference between the
net disposal proceeds and the carrying amount of the asset
and recognized as income or expense in the Statement of
Profit and Loss. In case of Intangible Assets, the Company has
availed the fair value as deemed cost on the date of transition
i.e. April 01, 2016.The period of amortisation is as under :
(C) Investment Property:
Investment property is held for long term rental income
and/or for capital appreciation. Investment properties are
measured initially at cost, including transaction costs and net
of recoverable taxes, trade discounts and rebates. Subsequent
to initial recognition, investment properties are stated at cost
less accumulated depreciation and impairment losses, if any.
Depreciation on investment properties is provided using
straight line method over the estimated useful lives as
specified in Schedule II to the Companies Act, 2013. Residual
values, useful lives and method of depreciation of investment
properties are reviewed at each financial year end and are
adjusted prospectively, if appropriate. The effects of any
revision are included in the statement of profit and loss when
the changes arises.
Though the Company measures investment properties using
cost based measurement, the fair value of investment property
is disclosed in the notes.
Investment properties are derecognised either when they have
been disposed off 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
statement of profit and loss in the period of de-recognition.
(D) Impairment of Non-Financial Assets - Property, Plant
and Equipment & Intangible Assets:
The Company assesses at each reporting date as to whether
there is any indication that any property, plant and equipment
and intangible assets or group of assets, called cash generating
units (CGU) may be impaired. If any such indication exists the
recoverable amount of an asset or CGU is estimated to determine
the extent of impairment, if any. When it is not possible to
estimate the recoverable amount of an individual asset, the
Company estimates the recoverable amount of the CGU to
which the asset belongs. An impairment loss is recognised in
the Statement of Profit and Loss to the extent, asset’s carrying
amount exceeds its recoverable amount. The impairment loss
recognised in prior accounting period is reversed if there has
been a change in the estimate of recoverable amount. The
recoverable amount is higher of an asset’s fair value less cost of
disposal and value in use. Value in use is based on the estimated
future cash flows, discounted to their present value using pre¬
tax discount rate that reflects current market assessments of the
time value of money and risk specific to the assets.
(E) Taxes on Income:
Tax expense represents the sum of current tax (including
income tax for earlier years) and deferred tax. Tax is recognised
in the statement of profit and loss, except to the extent that
it relates to items recognised directly in equity or other
comprehensive income, in such cases the tax is also recognised
directly in equity or in other comprehensive income. Any
subsequent change in direct tax on items initially recognised
in equity or other comprehensive income is also recognised in
equity or other comprehensive income.
Current tax provision is computed for Income calculated after
considering allowances and exemptions under the provisions
of the applicable Income Tax Laws. Current tax assets and
current tax liabilities are off set, and presented as net.
Deferred tax is recognised on differences between the carrying
amounts of assets and liabilities in the Balance sheet and the
corresponding tax bases used in the computation of taxable
profit. Deferred tax liabilities are generally recognised for all
taxable temporary differences, and deferred tax assets are
generally recognised for all deductible temporary differences,
carry forward tax losses and allowances to the extent that it
is probable that future taxable profits will be available against
which those deductible temporary differences, carry forward
tax losses and allowances can be utilised. Deferred tax assets
and liabilities are measured at the applicable tax rates. The
carrying amount of deferred tax assets is reviewed at each
Balance Sheet date and reduced to the extent that it is no
longer probable that sufficient taxable profits will be available
against which the temporary differences can be utilised.
(F) Inventories:
Inventories are measured at lower of cost and net realisable value
(NRV) after providing for obsolescence , if any. NRV is the estimate
selling price in the ordinary course of business, less estimated
costs of completion and estimate cost necessary to make the
sale. Cost of Inventories comprises of cost of purchase, cost of
conversion and other costs incurred in bringing them to their
respective present location and condition. Cost of raw materials,
stores & spares, packing materials are determined on weighted
average basis. The Cost of Work in Progress and Finished Goods is
determined on absorption costing methods.
(G) 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 financial assets are initially recognized at fair value.
Transaction costs that are directly attributable to the
acquisition of financial assets, which are not at fair value
through profit or loss, are adjusted to the fair value on
initial recognition. Financial assets are classified, at initial
recognition, as financial assets measured at fair value or as
financial assets measured at amortised cost. Purchase and sale
of financial assets are recognized using trade date accounting.
However, trade receivables that do not contain a significant
financing component are measured at transaction price.
Financial assets - Subsequent measurement
For the purpose of subsequent measurement financial assets
are classified in two broad categories:-
a) Financial assets at fair value
b) Financial assets at amortised cost
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 and loss), or recognised in
other comprehensive income (i.e. fair value through other
comprehensive income).
A financial asset that meets the following two conditions
is measured at amortised cost (net of any write down for
impairment) unless the asset is designated at fair value
through profit or loss under the fair value option.
a) Business model test: The objective of the Company's
business model is to hold the financial asset to collect
the contractual cash flow.
b) Cash flow characteristics test: The contractual terms of
the financial asset give rise on specified dates to cash
flow that are solely payments of principal and interest on
the principal amount outstanding.
A financial asset that meets the following two conditions is
measured at fair value through other comprehensive income
unless the asset is designated at fair value through profit or
loss under the fair value option.
a) Business model test: The financial asset is held within
a business model whose objective is achieved by
both collecting contractual cash flow and selling
financial assets.
b) Cash flow characteristics test: The contractual terms of
the financial asset give rise on specified dates to cash
flow that are solely payments of principal and interest on
the principal amount outstanding.
All other financial asset is measured at fair value through
profit or loss.
Financial assets - Derecognition
A financial assets (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 statement of
financial position) when:
a) The rights to receive cash flows from the asset
have expired, or
b) The Company has transferred its rights to receive cash
flow from the asset.
Impairment of Financial Assets
In accordance with Ind AS 109, the Company uses ‘Expected
Credit Loss’ (ECL) model, for evaluating impairment of financial
assets other than those measured at fair value through profit
and loss (FVTPL).
Expected credit losses are measured through a loss allowance
at an amount equal to:
a) The 12-months 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 lifetime expected credit losses (expected credit
losses that result from all possible default events over
the life of the financial instrument)
For trade receivables Company applies ‘simplified approach’
which requires expected lifetime losses to be recognised
from initial recognition of the receivables. The Company
uses historical default rates to determine impairment loss
on the portfolio of trade receivables. At every reporting date
these historical default rates are reviewed and changes in the
forward looking estimates are analysed.
For other assets, the Company uses 12 month ECL to provide
for impairment loss where there is no significant increase
in credit risk. If there is significant increase in credit risk full
lifetime ECL is used.
Financial Liabilities - Initial recognition and measurement:
The financial Liabilities are recognised initially at fair value
and, in the case of loans and borrowings and payables, net of
directly attributable transaction costs.
Financial Liabilities - Subsequent measurement:
Financial Liabilities are subsequently carried at amortised
cost using the effective interest method. For trade and other
payables maturing within one year from the Balance Sheet
date, the carrying amounts approximate fair value due to the
short maturity of these instruments.
Financial Liabilities - Financial guarantee contracts:
Financial guarantee contracts issued by the Company
are those contracts that require a payment to be made to
reimburse the holder for a loss it incurs because the specified
debtor fails to make a payment when due in accordance with
the terms of a debt instrument. Financial guarantee contracts
are recognised initially as a liability at fair value, adjusted for
transaction costs that are directly attributable to the issuance
of the guarantee. Subsequently, the liability is measured at the
higher of the amount of loss allowance determined and the
amount recognised less cumulative amortisation.
Financial liability - 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.
(H) Fair Value:
The Company measures financial instruments at fair value
at each Balance sheet date. 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:
- in the principal market for the asset or liability, or
- in the absence of a principal market, in the most
advantageous market for the asset or liability
All assets and liabilities for which fair value is measured
or disclosed in the Standalone Financial Statements are
categorized within the fair value hierarchy that categorizes
into three levels, described as follows, the inputs to valuation
techniques used to measure value. The fair value hierarchy
gives the highest priority to quoted prices in active markets
for identical assets or liabilities (Level 1 inputs) and the lowest
priority to unobservable inputs (Level 3 inputs).
Level 1 — quoted (unadjusted) market prices in active markets
for identical assets or liabilities
Level 2 — inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly or indirectly
Level 3 — inputs that are unobservable for the asset or liability
For assets and liabilities that are recognized in the Standalone
Financial Statements at fair value on a recurring basis, the
Company determines whether transfers have occurred
between levels in the hierarchy by re-assessing categorization
at the end of each reporting period and discloses the same.
(I) Investment in Subsidiaries and Associates:
The Company has elected to recognize its investments
in subsidiaries and associate at cost in accordance with
the option available in Ind AS 27, ‘Separate Standalone
Financial Statements’.
(J) Revenue Recognition and Other Income:
Sales of goods and services:
The Company derives revenues primarily from sale of products
comprising of Defence & Space Applications
Revenue from contracts with customers is recognised
when control of the goods or services are transferred to the
customer at an amount that reflects the consideration entitled
in exchange for those goods or services. Generally, control is
transferred upon shipment of goods to the customer or when
the goods is made available to the customer, provided transfer
of title to the customer occurs and the Company has not
retained any significant risks of ownership or future obligations
with respect to the goods shipped.
Revenue is measured at the amount of consideration which the
company expects to be entitled to in exchange for transferring
distinct goods or services to a customer as specified in the
contract, excluding amounts collected on behalf of third
parties (for example taxes and duties collected on behalf of the
government). Consideration is generally due upon satisfaction
of performance obligations and a receivable is recognized
when it becomes unconditional.
The Company does not expect to have any contracts where the
period between the transfer of the promised goods or services
to the customer and payment by the customer exceeds one
year. As a consequence, it does not adjust any of the transaction
prices for the time value of money.
Revenue is measured based on the transaction price, which is
the consideration, adjusted for volume discounts, performance
bonuses, price concessions and incentives, if any, as specified
in the contract with the customer. Revenue also excludes taxes
collected from customers.
Revenue from rendering of services is recognised over time
by measuring the progress towards complete satisfaction of
performance obligations at the reporting period.
Contract Balances - Trade Receivables
A receivable represents the Company’s right to an amount of
consideration that is unconditional.
Contract liabilities
A contract liability is the obligation to transfer goods or
services to a customer for which the Company has received
consideration (or an amount of consideration is due) from the
customer. If a customer pays consideration before the Company
transfers goods or services to the customer, a contract liability
is recognised when the payment is made or the payment is
due (whichever is earlier). Contract liabilities are recognised as
revenue when the Company performs under the contract.
Other Income:
Incentives on exports and other Government incentives related
to operations are recognised in the statement of profit and loss
after due consideration of certainty of utilization/receipt of
such incentives.
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 timely 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.
Dividend Income:
Dividend Income is recognised when the right to receive the
payment is established.
Rental income:
Rental income arising from operating leases is accounted for
on a straight-line basis over the lease terms and is included as
other income in the statement of profit or loss.
(K) Foreign currency transactions and translation:
Transactions in foreign currencies are recorded at the exchange
rate prevailing on the date of transaction. Monetary assets and
liabilities denominated in foreign currencies are translated
at the functional currency closing rates of exchange at the
reporting date.
Exchange differences arising on settlement or translation of
monetary items are recognised in Statement of Profit and Loss
except to the extent of exchange differences which are regarded
as an adjustment to interest costs on foreign currency borrowings
that are directly attributable to the acquisition or construction of
qualifying assets, are capitalized as cost of assets.
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 transaction. Non-monetary items
carried at fair value that are denominated in foreign currencies
are translated at the exchange rates prevailing at the date
when the fair value was determined. The gain or loss arising
on translation of non-monetary items measured at fair value
is treated in line with the recognition of the gain or loss on the
change in fair value of the item (i.e., translation differences on
items whose fair value gain or loss is recognised in OCI or profit
or loss are also recognised in OCI or profit or loss, respectively).
Foreign exchange differences regarded as an adjustment to
borrowing costs are presented in the statement of profit and
loss, within finance costs. All other finance gains / losses are
presented in the statement of profit and loss on a net basis.
In case of an asset, expense or income where a monetary
advance is paid/received, the date of transaction is the date
on which the advance was initially recognized. If there were
multiple payments or receipts in advance, multiple dates of
transactions are determined for each payment or receipt of
advance consideration.
(L) Employee Benefits:
Short term employee benefits are recognized as an expense
in the statement of profit and loss of the year in which the
related services are rendered. Contribution to Provident Fund,
a defined contribution plan, is made in accordance with the
statute, and is recognised as an expense in the year in which
employees have rendered services.
The cost of providing gratuity, a defined benefit plans, is
determined based on Projected Unit Credit Method, on the
basis of actuarial valuations carried out by third party actuaries
at each Balance Sheet date. Actuarial gains and losses arising
from experience adjustments and changes in actuarial
assumptions are charged or credited to other comprehensive
income in the period in which they arise. Other costs are
accounted in statement of profit and loss.
Remeasurements of defined benefit plan in respect of post
employment and other long term benefits are charged to the
other comprehensive income in the year in which they occur.
Remeasurements are not reclassified to statement of profit
and loss in subsequent periods.
(M) Share based payments
The cost of equity-settled transactions with employees is
measured at fair value at the date at which they are granted.
The fair value of share options are determined with the
assistance of an external valuer and the fair value at the grant
date is expensed on a proportionate basis over the vesting
period based on the Company’s estimate of shares that will
eventually vest. The estimate of the number of options likely
to vest is reviewed at each balance sheet date up to the vesting
date at which point the estimate is adjusted to reflect the
current expectations.
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