2.2 Business Combination
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business
combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets
transferred by the Company, liabilities incurred by the Company to the former owners of the acquiree and the equity
interest issued by the Company in exchange of control of acquiree. Acquisition-related costs are recognised in
statement of profit or loss as incurred.
When the consideration transferred by the Company in a business combination includes assets or liabilities resulting
from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair
value and included as a part of the consideration transferred in a business combination. Changes in the fair value
of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with
corresponding changes against goodwill or capital reserve, as the case maybe. Measurement period adjustments are
adjustments that arise from additional information obtained during the 'measurement period’ (which cannot exceed
one year from the acquisition date) about facts and circumstances that existed at the acquisition date. Contingent
consideration that is classified as an asset or a liability is subsequently (after the measurement period) remeasured at
subsequent reporting dates with the corresponding gain or loss being recognised in Statement of Profit and Loss.
In case of business combinations involving entities under common control, the above policy does not apply. Business
combinations involving entities under common control are accounted for using the pooling of interests method. The net
assets of the transferor entity or business are accounted at their carrying amounts on the date of the acquisition subject
to necessary adjustments required to harmonise accounting policies. Retained earnings appearing in the financial
statements of the transferor is aggregated with the corresponding balance appearing in the financial statements of the
transferee. Identity of the reserves appearing in the financial statements of the transferor is preserved and appears in
the financial statements of the transferee in the same form. Any excess or shortfall of consideration paid over share
capital and reserves of transferor entity is recognised as capital reserve under equity.
2.3 Goodwill
Goodwill is measured as the excess of the sum of the consideration transferred over the net of acquisition-date
amounts of the identifiable assets acquired and the liabilities assumed.
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the
business less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the Company’s cash-generating units (or
groups of cash-generating units) that is expected to benefit from the synergies of the combination.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently
when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit 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 based on the carrying amount of each assets in
the unit. Any impairment loss for goodwill is recognised directly in Statement of Profit and Loss. An impairment loss
recognised for goodwill is not reversed in subsequent periods.
2.4 Revenue Recognition
The Company recognises revenue from sale of goods, based on the terms of contract and as per the business practice;
the Company determines transaction price considering the amount it expects to be entitled in exchange of transferring
promised goods to the customer. Revenue is recognised when it is realized or is realizable and has been earned after
the deduction of variable components such as discounts, rebates, incentives, promotional couponing and schemes.
The Company estimates the amount of variable components based on historical, current and forecast information
available and either expected value method or most likely method, as appropriate and records a corresponding liability
in other current financial liability; the actual amounts may be different from such estimates. These differences, which
have historically not been significant, are recognized as a change in management estimate in a subsequent period.
2.4.1 a Sale of Goods
Revenue is recognised when control of the products being sold has been transferred to a customer and when there are
no longer any unfulfilled obligations to the customer. This is generally on delivery to the customer but depending on
individual customer terms, this can be at the time of dispatch, delivery or upon formal customer acceptance. This is
considered the appropriate point where the performance obligations in our contracts are satisfied and the Company
no longer has control over the inventory.
Advance received from customer before transfer of control of goods to the customer is recognised as
contract liability.
2.4.1.b Sale of Services
Revenue from sale of services includes fixed price contracts and time and material contracts and is recognized as
sale, as and when the related services are performed and certified by the customer. Incomplete services are recorded
at cost as work-in-progress.
The Company accounts for provision of warranty in accordance with Ind AS 37 "Provisions, Contingent Liabilities and
Contingent Assets" at the best estimate of the expenditure required to settle the Company’s obligation. The provisions
are reviewed at each Balance Sheet date and adjusted to reflect the current best estimate.
2.4.2 Dividend, Interest income and Royalty
Dividend income from investments is recognised when the Company’s right to receive dividend is established.
Interest income from a financial asset is recognised on a time basis, by reference to the principal outstanding using
the effective interest method provided it is probable that the economic benefits associated with the interest will flow
to the Company and the amount of interest can be measured reliably. The effective interest rate is the rate that exactly
discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount
of that financial asset.
Royalty income is recognised on an accrual basis in accordance with the substance of the relevant agreement or
underlying arrangement in case of sales provided that it is probable that the economic benefits associated with the
royalty shall flow to the Company and the amount of royalty can be measured reliably. Claims / Insurance Claim etc.
are accounted for when no significant uncertainties are attached to their eventual receipt.
The Company’s policy for recognition of revenue (rental income) from leases is described in note 2.5.2.
2.5 Leasing
The Company at the inception of a contract, assesses whether the contract is a lease or not lease. A contract is, or
contains, a lease if the contract conveys the right to control the use of an identified asset for a time in exchange
for a consideration.
2.5.1 Company as Lessee
The Company’s lease asset classes primarily consist of leases for land and buildings. The Company assesses whether
a contract 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.
At the date of commencement of the lease, the Company recognizes a right-of-use asset ("ROU”) and a corresponding
lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less
(short - term leases) or leases of low value assets. For these leases, the Company recognizes the lease payments as
an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term.
ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
The right-of-use assets are 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. They are 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 underlying asset. Right-of-use assets are evaluated for recoverability whenever events or
changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment
testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on
an individual asset basis unless the asset does not generate cashflows 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.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The
lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using
the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a
corresponding adjustment to the related Right-of-use asset if the Company changes its assessment of whether it
will exercise an extension or a termination option.
Lease liability and ROU asset are separately presented in the Balance Sheet and lease payments are classified as
financing activity under cash flows.
2.5.2 Company as Lessor
At the inception of a lease, the lease arrangement is classified as either a finance lease or an operating lease, based
on contractual terms and substance of the lease arrangement. 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.
Rental income from operating leases is recognised on a straight- line basis over the term of the relevant lease and
disclosed as part of 'Other Income'.
2.6 Foreign Currencies
The functional currency of the Company is the Indian Rupee.
At the end of each reporting period, monetary items (including financial assets and liabilities) denominated in foreign
currencies are translated at the rates prevailing at that date. Non-monetary items that are measured in terms of
historical cost in a foreign currency are not translated. Gains or losses arising from these translations are recognised
in the Statement of Profit and Loss.
In respect of the assets and liabilities of foreign operations are translated into INR at the exchange rate prevailing at
the reporting date and their statements of profit and loss are translated at exchange rates prevailing at the dates of
the transactions.
2.7 Share-based payment transactions of the Company
Equity-settled share-based payments to employees providing similar services are measured at the fair value of the
equity instruments at the grant date.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Company’s estimate of equity instruments that will eventually vest, with a
corresponding increase in equity.
2.8 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
2.8.1 Current Tax
The tax currently payable is based on taxable profit for the year and any adjustment of the tax payable or receivable in
respect of previous years. Taxable profit differs from 'profit before tax’ as reported in the Statement of Profit and Loss
because of items of income or expense that are taxable or deductible in other years and items that are never taxable
or deductible. The Company’s current tax is calculated using applicable tax rates that have been enacted or
substantively enacted by the end of the reporting period and the provisions of the Income Tax Act, 1961 and other
tax laws, as applicable.
The Company offsets current tax assets and current tax liabilities, where it has a legally enforceable right to set off the
recognised amounts and where it intends either to settle on a net basis, or to realise the asset and settle the liability
simultaneously.
2.8.2 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 liabilities are generally recognised for
all taxable temporary differences. Deferred tax assets are recognised for unused tax losses, unused tax credits and
deductible temporary differences to the extent that it is probable that future taxable profits will be available against
which they can be used.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the
extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset
to be recovered.
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 measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the
manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of
its assets and liabilities.
In case of deferred tax assets and deferred tax liabilities, the same are offset if the Company has a legally enforceable
right to set off corresponding current tax assets against current tax liabilities and the deferred tax assets and deferred
tax liabilities relate to income taxes levied by the same tax authority on the Company.
2.8.3 Current and Deferred Tax for the year
Current and deferred tax are recognised in Statement of Profit and Loss, except when they relate to items that are
recognised in Other Comprehensive Income or directly in equity, in which case, the current and deferred tax are also
recognised in Other Comprehensive Income or directly in equity respectively.
Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable
tax regulations are subject to interpretation and establishes provisions where appropriate. The provision is estimated
based on one of two methods, the expected value method (the sum of the probability weighted amounts in a range
of possible outcomes) or the single most likely amount method, depending on which is expected to better predict the
resolution of the uncertainty.
2.9 Property, Plant and Equipment
2.9.1 Property, Plant and Equipment acquired separately
An item of property, plant and equipment that qualifies as an asset is measured on initial recognition at cost. Following
initial recognition, items of property, plant and equipment are carried at its cost less accumulated depreciation and
accumulated impairment losses.
The cost of an item of property, plant and equipment comprises of its purchase price including import duties and
other non refundable purchase taxes or levies, directly attributable cost of bringing the asset to its working condition
for its intended use and the initial estimate of decommissioning, restoration and similar liabilities, if any. Any trade
discounts and rebates are deducted in arriving at the purchase price. Cost includes cost of replacing a part of a plant
and equipment if the recognition criteria are met. Expenses directly attributable to new manufacturing facility during
its construction period are capitalised if the recognition criteria are met. Expenditure related to plans, designs and
drawings of buildings or plant and machinery is capitalised 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 Company and the cost of
the item can be measured reliably.
Freehold land is stated at cost and not depreciated.
An item of Property, Plant and Equipment is derecognised upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item
of Property, Plant and Equipment is determined as the difference between the sales proceeds and the carrying amount
of the asset and is recognised in Statement of Profit and Loss.
The Company had elected to consider the carrying value of all its property, plant and equipment appearing in the
Financial Statements prepared in accordance with Accounting Standards notified under the Section 133 of the
Companies Act, 2013, read together with Rule 7 of the Companies (Accounts) Rules, 2014 and used the same as
deemed cost in the opening Ind AS Balance Sheet prepared on 1st April 2015.
2.9.2 Capital Work-in-Progress
Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any
recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in
accordance with the Company’s accounting policy. Such properties are classified and capitalised to the appropriate
categories of Property, Plant and Equipment when completed and ready for intended use. Depreciation of these assets,
on the same basis as other property assets, commences when the assets are ready for their intended use.
2.9.3 Depreciation
Depreciation is recognised so as to write off the cost of assets (other than Freehold Land and Capital
Work-in-Progress) less their residual values over their useful lives, as prescribed in Schedule II to the Companies
Act, 2013, using the straight-line method.
For certain items of Property, Plant and Equipment, the Company depreciates over estimated useful life which are
different from the useful lives prescribed under Schedule II to the Companies Act, 2013 which is based upon technical
assessment made by technical expert and management estimate. The management believes that these estimated
useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used. The
estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with
the effect of any changes in estimate accounted for on a prospective basis.
Depreciation on addition/disposal is provided on a pro-rata basis.
The estimated useful lives are as mentioned below:
2.10 Intangible Assets
2.10.1 Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation
and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful
lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the
effect of any changes in estimate being accounted for on a prospective basis.
Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated
impairment losses.
The Company had elected to consider the carrying value of all its intangible assets appearing in the Financial
Statements prepared in accordance with Accounting Standards notified under the Section 133 of the Companies Act,
2013, read together with Rule 7 of the Companies (Accounts) Rules, 2014 and used the same as deemed cost in the
opening Ind AS Balance Sheet prepared on 1st April 2015.
2.10.2 Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised
at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less
accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are
acquired separately.
The Company had elected to consider the carrying value of all its intangible assets appearing in the Financial
Statements prepared in accordance with Accounting Standards notified under the Section 133 of the Companies
Act, 2013, read together with Rule 7 of the Companies (Accounts) Rules, 2014 and used the same as deemed cost in
the opening Ind AS Balance Sheet prepared on 1st April 2015.
2.10.3 Internally generated Intangible Assets - Research and Development Expenditure
Expenditure on research activities is recognised in Statement of Profit and Loss in the period in which it is incurred.
An internally generated intangible asset arising from development is recognised if and only if it meets the recognition
criteria of intangible assets. The amount initially recognised is the sum total of expenditure incurred from the
date when the intangible asset first meets the recognition criteria. Where no intangible asset can be recognised,
development expenditure is recognised in Statement of Profit and Loss in the period in which it is incurred.
Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated
amortisation and accumulated impairment losses, on the same basis as intangible assets acquired separately.
2.10.4 Useful lives of Intangible Assets
Estimated useful lives of the Intangible Assets are as follows:
2.11 Impairment of Property, Plant and Equipment and Intangible Assets other than Goodwill
At the end of each reporting period, the Company reviews the carrying amounts of its Property, Plant and Equipment
and intangible assets to determine whether there is any indication that those assets have suffered an impairment
loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset,
the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a
reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash¬
generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable
and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment
at least annually, and whenever there is an indication that the asset may be impaired. Intangible assets with indefinite
useful lives are tested for impairment annually at the cash-generating unit level. The assessment of indefinite useful
life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful
life from indefinite to finite is made on a prospective basis.
Recoverable amount is the higher of fair value less costs of disposal and value in use.
If the recoverable amount of the asset (or cash-generating unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is
recognised in Statement of Profit and Loss.
2.12 Inventories
Inventories are valued at lower of cost and net realisable value.
Cost of inventories is determined on weighted average. Cost for this purpose includes cost of direct materials,
direct labour and appropriate share of overheads. However, materials and other items held for use in production of
inventories are not written down below cost if the finished goods in which they will be incorporated are expected to be
sold at or above cost. The comparison of cost and net realisable value is made on an item-by item basis. Net realisable
value represents the estimated selling price in the ordinary course of business less all estimated costs of completion
and estimated costs necessary to make the sale.
Obsolete, defective, unserviceable and slow / non-moving stocks are duly provided for and valued at net
realisable value.
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