1.3 Material accounting policies
(a) Basis of measurement
The Financial statements have been prepared under historical cost convention on accrual basis,
except for the items that have been measured at fair value as required by relevant Ind AS.
These financial statements are presented in Indian Rupees (?), which is the Company’s functional
and presentation currency and all the amounts included in the financial statements are reported
in lakhs of Indian Rupees (?), except per share data and unless stated otherwise and rounded off to
two decimal places to the nearest lakh.
(b) Current versus non-current classification
All the assets and liabilities have been classified as current or non-current as per the Company’s
normal operating cycle and other criteria set out in Schedule III to the Act. Based on the nature of
products and the time between the acquisition of assets for processing and their realization in cash
and cash equivalent, the Company has ascertained the operating cycle to be 12 months.
(c) Foreign exchange transactions
Transactions in foreign currencies are translated into the respective functional currencies of the
Company at the exchange rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional
currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are
measured at fair value in a foreign currency are translated into the functional currency at the
exchange rate when the fair value was determined. Foreign currency differences are generally
recognized in profit or loss. Non-monetary items that are measured based on historical cost in a
foreign currency are translated using the exchange rate as at the date of the transaction.
(d) Revenue recognition
The Company derives revenues primarily from sale of manufactured goods. As per IND AS 115 -
Revenue from Contracts with Customers, entity shall recognize revenue when (or as) the entity
satisfies a performance obligation by transferring a promised good or service.
Revenue is recognized upon transfer of control of promised products or services to customers in an
amount that reflects the consideration we expect to receive in exchange for those products or
services. The control of the products and services were transfer at a time, where in performance
obligation and Control of goods or services transferred over a time.
Sale of goods
Sale of goods in case of domestic customer, generally performance obligation satisfied and
transferred the control when goods are dispatched or delivery is handed over to transporter, in case
of export customers, generally performance obligation satisfied and transferred the control, when
goods are shipped onboard based on bill of lading.
Sale of services
Revenue from services is recognised in the accounting period in which the services are rendered.
Export incentives
Export Incentives under various schemes are accounted in the year of export.
Interest income
Interest income is recorded using the effective interest rate (EIR) method.
Rental income
Rental income arising from operating leases is accounted for on a straight-line basis over the lease
terms.
(e) Income Taxes
The income tax expense comprises of current and deferred income tax.
Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from
or paid to the taxation authorities in accordance with the Income Tax Act, 1961 enacted in India.
The tax rates and tax laws used to compute the amount are those that are enacted or substantively
enacted, at the reporting date in India.
Current income tax relating to items recognized outside profit and loss is recognized outside profit
and loss (either in other comprehensive income or in equity). Current tax items are recognized in
correlation to the underlying transaction either in other comprehensive income or directly in equity.
Deferred tax
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 and
are accounted
for using the liability method. 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 in future
taxable profits will be available to set off such deductible temporary differences. Deferred tax assets
and liabilities are measured at the applicable tax rates. Deferred tax assets and deferred tax
liabilities are off set, and presented as net.
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 utilized.
Minimum Alternate Tax (MAT)
Minimum Alternative Tax (MAT) is applicable to the Company. Credit of MAT is recognised as an
asset only when and to the extent there is convincing evidence that the Company will pay normal
income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried
forward. In the year in which the MAT credit becomes eligible to be recognised as an asset, the said
asset is created by way of a credit to the profit and loss account and shown as MAT credit
entitlement.
(f) Property, plant and equipment (‘PPE’)
Property, Plant and Equipment are carried at cost less accumulated depreciation and accumulated
impairment losses, if any. Cost includes expenditure that is directly attributable to the acquisition
of the items.
Cost of an item of PPE comprises of 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 present value of estimated costs
of dismantling and removing the item and restoring the site on which it is located
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. The carrying amount of any
component accounted for as a separate asset is derecognised when replaced. All other repairs and
maintenance are charged to the Statement of Profit and Loss during the reporting period in which
they are incurred.
The Assets’ residual values, useful lives and method of depreciation are reviewed at each financial
year end and adjusted prospectively, if appropriate.
Depreciation on PPE is provided on straight line basis using the useful lives as specified in Part C
of Schedule II of the Companies Act, 2013. Freehold land is not depreciated.
Property, plant and equipment are eliminated from financial statement, either on disposal or when
retired from active use. Losses arising in the case of retirement of property, plant and equipment
and gains or losses arising from disposal of property, plant and equipment are recognized in the
statement of profit and loss in the year of occurrence.
(g) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that
necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised
as part of the cost of the asset. All other borrowing costs are expensed in the period in which they
occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with
the borrowing of funds.
Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the
borrowing costs.
(h) Impairment of non-financial assets
An asset is considered as impaired when at the date of Balance Sheet there are indications of
impairment and the carrying amount of the asset, or where applicable the cash generating unit to
which the asset belongs exceeds its recoverable amount (i.e. the higher of the net asset selling price
and value in use). The carrying amount is reduced to the recoverable amount and the reduction is
recognized as an impairment loss in the Statement of Profit and Loss. The impairment loss
recognized in the prior accounting period is reversed if there has been a change in the estimate of
recoverable amount. Post impairment, depreciation is provided on the revised carrying value of the
impaired asset over its remaining useful life.
(i) Leases
The Company’s lease asset classes primarily consist of leases for Office buildings. 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.
The Company recognises a right-of-use asset and a lease liability at the lease commencement date.
The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease
liability adjusted for any lease payments made at or before the commencement date, plus any initial
direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to
restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the
commencement date to the end of the lease term.
The lease liability is initially measured at the present value of the lease payments that are not paid
at the commencement date, discounted using the Company’s incremental borrowing rate. It is
remeasured when there is a change in future lease payments arising from a change in an index or
rate, if there is a change in the Company’s estimate of the amount expected to be payable under a
residual value guarantee, or if the Company changes its assessment of whether it will exercise a
purchase, extension or termination option. When the lease liability is remeasured in this way, a
corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded
in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The Company has elected not to recognise right-of-use assets and lease liabilities for short-term
leases that have a lease term of 12 months or less and leases of low-value assets. The Company
recognises the lease payments associated with these leases as an expense over the lease term.
(j) Inventories
Inventories are valued at the lower of cost and net realisable value.
Raw materials and stores and spares are valued at lower of cost and net realizable value. However,
materials and other items held for use in the production of inventories are not written down below
cost if the finished products in which they will be incorporated are expected to be sold at or above
cost. Cost of raw materials and stores and spares is determined on First in first Out (FIFO) basis.
Finished goods are valued at lower of cost and net realizable value. Cost includes direct materials
and labor and a proportion of manufacturing overheads based on normal operating capacity. Cost
of finished goods includes excise duty, wherever applicable. Cost is determined on a weighted
average basis.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated
costs of completion and estimated costs necessary to make the sale.
(k) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to
the chief operating decision maker.
(l) Cash and Cash Equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes
cash on hand, other short-term highly liquid investments with original maturities of three months
or less that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value.
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