Note 2: SIGNIFICANT ACCOUNTING POLICIES
A) Basis of Preparation of Ind AS Financial Statements:
These financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) under the
historical cost convention on an accrual basis except for:
i) Certain financial assets are measured at fair value,
The financial statements of the Company have been prepared to comply with the Indian Accounting Standards
('Ind AS') notified under Companies (Indian Accounting Standards) Rules, 2015 read with Section 133 of the
Companies Act, 2013 and other recognized accounting practices and policies to the extent applicable.
B) Use of Estimates:
The preparation of Ind AS financial statement requires estimates and assumptions to be made that affect the reported
amounts of assets and liabilities on the date of financial statements and reported amount of revenues and expenses
during the reporting period. Difference between the actual results and estimates are recognised in the period in
which the results are known / materialized.
C) Property, Plant and Equipment (PPE):
PPE is recognised 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. PPE is stated at original cost net of tax/duty credits availed, if
any, less accumulated depreciation and cumulative impairment, if any. Cost includes professional fees related to
the acquisition of PPE and for qualifying assets, borrowing costs capitalized in accordance with the company's
accounting policy. Costs in nature of repairs and maintenance are recognized in the Statement of Profit and Loss as
and when incurred.
For transition to Ind AS, the company has elected to adopt as deemed cost, the carrying value of PPE measured as
per I-GAAP less accumulated depreciation and cumulative impairment on the transition date of April 1, 2016.
Gains or losses arising from de-recognition of Property, Plant and Equipment are measured as the difference between
the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss
when the asset is derecognized.
D) Depreciation on Property, plant and equipment
Depreciation on Property, plant and equipment is calculated on a straight-line basis using the rates arrived at based
on the useful lives estimated by the management, which are equal to the life prescribed under the Schedule II to the
Companies Act, 2013.
E) Intangible assets
Computer software
Costs relating to software, which are acquired, are capitalized and amortized on a straight-line basis over their useful
life of three years.
F) 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.
i. Financial assets
Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at
fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.
Purchases or sales of financial assets that require delivery of assets within a time frame established by
regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the
date that the Company commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
• Debt instruments at amortised cost
• Debt instruments at fair value through other comprehensive income (FVTOCI)
• Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVTPL)
• Equity instruments measured at fair value through other comprehensive income (FVTOCI)
Debt instruments at amortised cost
A 'debt instrument' is measured at the amortised cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual
cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of
principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such 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 amortization is included in other
income in the statement of profit and loss. The losses arising from impairment are recognised in the statement
of profit and loss.
Debt instrument at FVTOCI
FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for
categorization as at amortized cost or as FVTOCI, is classified as at FVTPL.
Debt instruments included within the FVTPL category are measured at fair value with all changes recognized
in the Statement of Profit and Loss.
Equity & Mutual Fund Investments
All equity & Mutual Fund investments in scope of Ind AS 109 are measured at fair value. Equity & Mutual
Fund instruments which are held for trading are classified as at FVTPL. For all other equity & Mutual Fund
instruments, the Company decides to classify the same either as at FVTOCI or FVTPL. The Company makes
such election on an instrument by-instrument basis. The classification is made on initial recognition and is
irrevocable.
If the Company decides to classify an equity & Mutual Fund instrument as at FVTOCI, then all fair value changes
on the instrument, excluding dividends are recognised in the OCI. There is no recycling of the amounts from
OCI to the statement of profit and loss, even on sale of investment.
Derecognition
A financial asset is primarily derecognized and removed from the Company's balance sheet when:
• The rights to receive cash flows from the asset have expired, or
• 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 (a) the Company has transferred substantially all the risks and rewards of the
asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of
the asset, but has transferred control of the asset
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass¬
through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When
it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred
control of the asset, the Company continues to recognise the transferred asset to the extent of the Company's
continuing involvement. In that case, the Company also recognises an associated liability. The transferred
asset and the associated liability are measured on a basis that reflects the rights and obligations that the
Company has retained.
Impairment of Financial Assets
The Company assesses at each reporting date whether there is any objective evidence that a financial asset
or a Group of financial assets is impaired. A financial asset or a Group of financial assets is deemed to be
impaired if, there is objective evidence of impairment as a result of one or more events that has occurred after
the initial recognition of the asset (an expected 'loss event') and that loss event has an impact on the estimated
future cash flows of the financial asset or the Group of financial assets that can be reliably estimated. Evidence
of impairment may include indications that the trade receivables or a Group of trade receivables is experiencing
significant financial difficulty, default or delinquency in interest or principal payments, the probability that they
will enter bankruptcy or other financial reorganization and where observable data indicate that there is a
measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions
that correlate with defaults.
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and
recognition of impairment loss on the trade receivables or any contractual right to receive cash or another
financial asset that result from transactions that are within the scope of Ind AS 18.
As a practical expedient, the Company uses a provision matrix to determine impairment loss allowance on
portfolio of its trade receivables. The provision matrix at every reporting date is based on its historically observed
default rates over the expected life of the trade receivables and is adjusted for forward-looking estimates.
ii. Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables,
net of directly attributable transaction costs.
The Company's financial liabilities include trade and other payables, loans and borrowings including bank
overdrafts, financial guarantee contracts and derivative financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial
liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are
classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category
also includes derivative financial instruments entered into by the Company that are not designated as hedging
instruments in hedge relationships as defined by Ind AS 109. Separated embedded derivatives are also
classified as held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in the statement of profit and loss.
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost
using the EIR method. Gains and losses are recognised in the statement of profit and loss when the liabilities
are derecognized as well as through the EIR amortization process.
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 amortization is included as finance costs in the statement of profit
and loss.
Derecognition
A financial liability is derecognized 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.
G) Inventories:
Items of inventories are measured at lower of cost and net realisable value after providing for obsolescence, if any.
i. Stock in Trade are valued at cost or net realisable value whichever is lower.
ii. The valuation of inventories includes taxes, duties of non-refundable nature and direct expenses, and other
direct cost attributable to the cost of inventory, net of GST.
H) Provision for Current tax and Deferred tax:
i) Provision for current tax is made with reference to taxable income computed for the accounting period for
which the financial statements are prepared by applying the tax rates and laws that are enacted or substantively
enacted at the balance sheet date. The tax is recognised in statement of profit and loss, except to the extent
that it related to items recognised in the other comprehensive income (OCI) or in other equity. In this case, the
tax is also recognised in other comprehensive income and other equity.
ii) Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in
the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred
tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which
the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period. The carrying amount of deferred tax liabilities and
assets are reviewed at the end of each reporting period. Deferred tax asset on unabsorbed depreciation and
carried forward losses is recognised only to the extent of deferred tax liability.
iii) Provisions of MAT are not applicable to the Company due to opting for new tax regime.
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