2. SIGNIFICANT ACCOUNTING POLICIES
2.1 Compliance with Indian Accounting Standard
(IndAS):
The financial statements of the Company have
been prepared and comply in all material aspects
with Companies (Indian Accounting Standards)
Rules, 2015 (Ind AS) notified under Section 133 of the
Companies Act, 2013 (the Act) read with relevant
rules and other accounting principles. The policies
set out below have been consistently applied
during the period presented except where a newly
issued accounting standard or revision in existing
accounting standard requires change in
accounting policy hitherto in use.
2.2 BasisofPreparation
The financial statements are presented in 'Indian
Rupees', which also is the Company's functional
currency and all amounts, are rounded to the
nearest Lakhs, with two decimals, unless otherwise
stated.
The financial statements have been prepared in
accordance with the requirements of the
information and disclosures mandated by
Schedule III to the Act, applicable Ind AS, other
applicable pronouncements and regulations as
amendedfromtimetotime.
2.3 BasisofMeasurement
The financial statements have been prepared on a
historical cost convention on accrual basis, except
forthefollowing:
• certain financial assets and liabilities
(including derivative instruments) that are
measured atfairvalue;and
• defined benefit plans - planned assets
measured atfairvalue
2.4 Useof judgements, estimates & assumptions
The preparation of the financial statements in
conformity with Ind AS requires the Management to
make estimates, judgement and assumptions.
These estimates, judgments and assumptions
affect the application of accounting policies and
the reported amount of assets, liabilities, income
and expenses, the disclosure of contingent asset
and liabilities at the date of financial statements
and reported amounts of revenue and expenses
during the period. Accounting estimates could
change from period to period. Actual results could
differ from those estimates. Appropriate changes
in estimates are made as the Management
becomes aware of such changes in the
circumstances surrounding the estimates.
Changes in estimate are reflected in the financial
statements in the period in which changes are
made and, if material, their effects are disclosed in
thenotes to the financial statements.
2.5 Revenue Recognition
Revenue is recognized on satisfaction of
performance obligation upon transfer of control of
promised products or services to customers in an
amount that reflects the consideration the
Companyexpectsto receivein exchangefor those
products or services. Revenue is measured at the
fair value of the consideration received or
receivable, taking into account contractually
defined terms of payment and stated net of
discounts, returns, applicable taxes.
The Company satisfies a performance obligation
and recognises revenue over time, if one of the
following criteria is met:
1. The customer simultaneously receives and
consumes the benefits provided by the
Company's performance or
2. The Company's performance creates or
enhances an asset that the customer controls
as the asset is created or enhanced; or
3. The Company's performance does not create
an asset with an alternative use to the
Company and an entity has an enforceable
right to payment for performance completed
to date.
For performance obligations where one of the
above conditions are not met, revenue is
recognised at the point in time at which the
performance obligation is satisfied.
InterestIncome
For all financial instruments measured at
amortised cost, interest income is recorded using
the effective interest rate (EIR), which is the rate that
exactly discounts the estimated future cash
payments or receipts over the expected life of the
financial instrument or a shorter period, where
appropriate, to the net carrying amount of the
financial asset.
DividendIncome
Dividend income is recognised when the
Company's right to receive such dividend is
established.
GiftVoucher
The Company issues Gift Vouchers with 1 year
validity. The Gift Vouchers, which are unutilized at
the end of their validity period is recognized as
income.
2.6 Purchaseof Goods under Sale or Return basis
The Company also purchases inventories on a
Sales or Return basis (SOR) where cost of such
purchases / trade payables becomes due when
such inventories are being sold off. Under SOR basis,
the Company does not have any ownership rights
of the said inventory but it acts as a custodian for
the inventory till the same are being sold or
returned. The Company has a right to return the
inventory to the vendor at any point prior to its sales.
On the Balance sheet date, the Company reverses
the value of such inventories which areacquired on
SOR basis and are in its possession along with the
simultaneous reversal of such amount from
purchases/trade payables.
2.7 Property,PlantandEquipment
Property, Plant and Equipment are stated at cost,
less accumulated depreciation and accumulated
impairment losses if any. The initial cost of an asset
comprises its purchase price or construction cost,
any costs directly attributable to bringing the asset
into the location and condition necessary for it to be
capable of operating in the manner intended by
management.
Capital work-in-progress comprises cost of
property, plant and equipment (including related
expenses), that are not yet ready for their intended
use at the reporting date.
An item of Property, Plant and Equipment and any
significant part initially recognised is derecognised
upon disposal or when no future economic benefits
are expected from its use or disposal. Any gain or
loss arising on derecognition of the asset
(calculated as the difference between the net
realisable value and the carrying amount of the
asset) is included in the Statement of Profit and Loss
when the asset is derecognised.
The Cost of Property, Plant and Equipment acquired
in a business combination is recorded at fair value
less cost to sell as on the date of business
combination.
An asset's carrying amount is written down
immediately to its recoverable amount if the
asset's carrying amount is greater than its
recoverable amount.
Property, Plant and Equipment are eliminated from
the financial statements, either on disposal or when
retired from active use.
The residual values, useful lives and method of
depreciation of Property, Plant and Equipment are
reviewed at each financial year end and changes, if
any, are accounted prospectively.
Subsequent costs are included in the asset's
carrying amountor 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 are charged to profit or loss during
the reporting period in which theyare incurred.
Property, Plant and Equipment are depreciated
under the written down value method as per the
useful life and in the manner prescribed in Part "C"
Schedule II to the Act, except for Leasehold
Improvements which are amortised over the life of
right of use asset.
2.8 IntangibleAssets
Intangible assets are stated at acquisition cost and
other costs incurred, which is attributable to
preparing the assets for its intended use, less
accumulated amortization and accumulated
impairment losses, if any. The cost of intangible
assets acquired in a business combination is
recorded atfairvalue on the date of acquisition.
Intangible assets are amortised on straight line
basis over their estimated useful economic life. The
estimated useful life oftheassets is five years.
An item of intangible assets is derecognised upon
disposal or when no future economic benefits are
expected from its use or disposal. Any gain or loss
arising on derecognition of the asset is included in
the Statement of Profit or Loss when the asset is
derecognised.
The useful lives and methods of amortisation of
intangible assets are reviewed at each financial
year end and adjusted prospectively, if
appropriate.
2.9 Impairment of Non-Financial Assets
Non-financial assets are tested for impairment
whenever events or changes in circumstances
indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for
the amount by which the asset's carrying amount
exceeds its recoverable amount. The recoverable
amount is the higher of an asset's fair value less
costs of disposal and value in use. For the purposes
of assessing impairment, assets are grouped at the
lowest levels for which there are separately
identifiable cash inflows which are largely
independent of the cash inflows from other assets
or groups of assets (cash-generating units). Non¬
financial assets that suffered impairment are
reviewed for possible reversal of the impairment at
the end of each reporting period.
2.10 Currentand Non-current classification
All the assets and liabilities have been classified as
current or non-current as per the Company's
normal operating cycle.
Assets
An asset is classified as current when it satisfies any of
thefollowing criteria:
i) It is expected to be realised in, or is intended for sale
or consumption in, the Company's normal
operating cycleor
ii) It is held primarilyfor the purposeof being traded or
iii) It is expected to be realised within 12 months after
the reporting date or,
iv) It is cash or cash equivalent unless it is restricted
from being exchanged or used to settle a liability for
at least 12 months after the reporting date.
Current assets include the current portion of non¬
current financial assets. All other assets are classified as
non-current.
Liabilities
A liability is classified as current when it satisfies any of
thefollowing criteria
i) It is expected to be settled in the Company's normal
operating cycleor
ii) It is held primarilyforthe purposeof being traded or
iii) It is due to be settled within 12 months after the
reporting dateor,
iv) The Company does not have an unconditional right
to defer settlement of the liability for at least 12
months after the reporting date. Terms of a liability
that could, at the option of the counterparty, result
in its settlement by the issue of equity instruments
do not affect its classification.
Current liabilities include current portion of non-current
financial liabilities. All other liabilities are classified as
non-current.
Deferred tax asset and liabilities are classified as non¬
current assets and liabilities.
Operating cycle
Operating cycle is the time between the acquisition of
assets for processing and their realisation in cash or
cash equivalents. The Company's operating cycle is
within a period of 12 months.
2.H Fairvaluemeasurement
Accounting policies and disclosures require
measurement of fair value for both financial and
non-financial assets.
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:
a. In the principal market fortheasset or liability, or
b. In the absence of a principal market, in the most
advantageous market for the assetorliability
The principal or the most advantageous market
must be accessible by the Company. The fair value
of an asset or a liability is measured using the
assumptions that market participants would use
when pricing the asset or liability, assuming that
market participants act in their economic best
interest.
A fair value measurement of a non-financial asset
takes into account a market participant's ability to
generate economic benefits by using the asset in
its highest and best use or by selling it to another
market participant that would use the asset in its
highest and best use.
The Company uses valuation techniques that are
appropriate in the circumstances and for which
sufficient data is available to measure fair value,
maximising the use of relevant observable inputs
and minimising the use of unobservableinputs.
All assets and liabilities for which fair value is
measured or disclosed in the financial statements
are categorised within the fair value hierarchy,
described as follows, based on the lowest level
input that is significant to the fair value
measurementas a whole:
Level 1 — Quoted (unadjusted) market prices in
active markets for identical assets or liabilities.
Level 2 — Valuation techniques for which the lowest
level input that is significant to the fair value
measurementis directly or indirectly observable.
Level 3 — Valuation techniques for which the lowest
level input that is significant to the fair value
measurementis unobservable.
For assets and liabilities that are recognised in the
financial statements on a recurring basis, the
Company determines whether transfers have
occurred between levels in the hierarchy by re¬
assessing categorisation (based on the lowest
level input that is significant to the fair value
measurement as a whole) at the end of each
reporting period.
The Company's Management determines the
policies and procedures for recurring and non¬
recurring fair value measurement, such as
derivative instruments and unquoted financial
assetsmeasured atfairvalue.
At each reporting date, the Management analyses
the movements inthevalues of assets and liabilities
which are required to be remeasured or re¬
assessed as per the Company's accounting
policies. For this analysis, the Management verifies
the major inputs applied in the latest valuation by
agreeing the information in the valuation
computation to contracts and other relevant
documents.
The management also compares the change in the
fair value of each asset and liability with relevant
external sources to determine whether the change
is reasonable.
For the purpose of fair value disclosures, the
Company has determined classes of assets and
liabilities on the basis of the nature, characteristics
and risks of the asset or liability and the level of the
fairvaluehierarchyasexplained above.
Disclosures for valuation methods, significant
estimates and assumptions of Financial
instruments (including those carried at amortized
cost) (Refer note 26) and Quantitative disclosures
of fair value measurement hierarchy (Refer note
26).
2.12 Derivatives
Derivatives including forward contracts are initially
recognised at fair value on the date a derivative
contract is entered into and are subsequently re¬
measured to their fair value at the end of each
reporting period. The Company does not designate
their derivatives as hedges and such contracts are
accounted foratfairvaluethrough profit or loss and
are included in the Statement of Profitand Loss.
In respect of derivative transactions, gains / losses
are recognised in the Statement of Profit and Loss
on settlement.
On a reporting date, open derivative contracts are
revalued at fair values and resulting gains / losses
are recognised inthe Statement of Profit and Loss.
2.13 Tradereceivables
Trade receivables are initially measured at
transaction price excluding any financing
arrangements in sale transactions of the Company.
Expected Credit Loss is assessed and recognized as
per Financial Instrument policyin 2.15
2.14 Inventories
Inventories are valued at lower of cost and net
realizable value. Costs of Inventories are computed
on Weighted Average basis. Cost includes
purchase cost and other costs incurred to bringing
the inventory to its location and condition. Net
realizable value is the estimated selling price in the
ordinary course of business, less estimated costs of
completion and estimated costs necessary to
makethesale.
2.15 FinancialInstruments
The Company recognises financial assets and
liabilities when it becomes a party to the
contractual provisions of the instrument. All
financial assets and liabilities are recognised at fair
values on initial recognition, except for trade
receivables, which are initially measured at
transaction price.
(a) FinancialAssets:
a) Classification
The Company shall classify financial assets
as subsequently measured at amortized
cost, fair value through other compre¬
hensive income (FVOCI) or fair value
through profit or loss (FVTPL) on the basis of
its business model for managing the
financial assets and the contractual cash
flow characteristics of thefinancial asset.
b) Initial Recognition and Measurement
The Company recognizes financial asset
and financial liabilities when it becomes a
party to the contractual provisions of the
instrument. All financial asset and liabilities
are recognised at fair value on initial
recognition, except for trade receivable
which are initially measured at transaction
price. Transaction cost that are directly
attributable to the acquisition or issue of
financial asset and financial liabilities that
are not fair value through Profit or loss, are
added to the fair value on initial recognition.
c) SubsequentMeasurement
i) FinancialassetatAmortizedcost
A Financial asset is subsequently
measured at amortized cost if it is held
within a business model whose objective
is to hold the asset in order to collect contractual
cash flows, and the contractual terms of the
financial asset give rise on specified dates to cash
flows that are solely payment of principal and
interest on the principal outstanding. Interest
income from these financial assets is included in
other income using the effective interest rate
method.
ii) Financial Asset at Fair Value through
other comprehensive income (FVOCI)
Financial Asset is subsequently measu¬
red through other comprehensive
income if it is held within a business
model whose objective is achieved by
both collecting contractual cash flow
and selling financial asset and
contractual terms of the financial asset
give rise on specified dates to the cash
flows that are solely payments of
principal and interest on the principal
amount outstanding. Movements in the
carrying amount are taken through
Other Comprehensive Income (OCI),
except for the recognition of impairment
gains and losses, interest revenue and
foreign exchange gains and losses
which are recognized in the Statement
of Profit and Loss. Further in cases where
the Company has made irrevocable
election based on its business model, for
its investment which are classified as
equity instruments, the subsequent
changes in fair value are recognized in
othercomprehensiveincome.
When the financial asset is
derecognised, the cumulative gain or
loss previously recognised in OCI is
reclassified from equity to profit or loss
and recognised in other gains / (losses).
Interest income from these financial
assets is included in other income using
the effective interest rate method.
iii) Financial Asset at Fair value through
Profit&Loss (FVTPL)
A Financial Asset which is not classified
in any of the above categories is
subsequently fair valued through profit
orloss.
d) ImpairmentofFinancialAssets
The Company assesses on a forward
looking basis the expected credit losses
associated with its assets carried at
amortised cost and FVOCI debt instruments.
The impairment methodology applied
depends on whether there has been a
significant increase in credit risk. For trade
receivables only, the Company measures
the expected credit loss associated with its
trade receivables based on historical trend,
industry practices and the business
environment in which the entity operates or
any other appropriate basis. The
impairment methodology applied depends
on whether there has been a significant
increase in credit risk.
e) Derecognition of Financial Assets
A financial asset isderecognisedonlywhen:
• Right to receive cash flow from assets
have expired or,
• The Company has transferred the rights
to receive cash flows from the financial
asset or,
• It retains the contractual rights to
receive the cash flows of the financial
asset, but assumes a contractual
obligation to pay the received cash
flows in full without material delay to a
third party under a "pass through"
arrangement.
Where the entity has transferred an asset, the
Company evaluates whether it has transferred
substantially all risks and rewards of ownership of
thefinancial asset. In such cases,thefinancial asset
is derecognised.
Where the entity has neither transferred a financial
asset nor retains substantially all risks and rewards
of ownership of the financial asset, the financial
assetis derecognised if theCompanyhas not
retained control of the financial asset. Where the
Company retains control of the financial asset, the
asset is continued to be recognised to the extent of
continuing involvement in the financial asset.
(b) Financial Liabilities
a) Initial Recognition and Measurement
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 and derivative
financial instruments.
b) Subsequent measurement
Financial liabilities at amortized cost: After
initial measurement, such financial
liabilities are subsequently measured at
amortized cost using the effective interest
rate (EIR) method. Amortized 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
finance costs in the Statement of Profit and
Loss.
I) Borrowings:
Borrowings are initially recognised at fair
value, net of transaction costs incurred.
Borrowings are subsequently measured
at amortised cost. Any difference
between the proceeds (net of
transaction costs) and the redemption
amount is recognised in the Statement
of Profit and Loss over the period of the
borrowings using the EIR method.
ii) Trade and Other Payables:
These amounts represent liabilities for
goods and services provided to the
Company prior to the end of financial
year which are unpaid. Trade and other
payables are presented as current
liabilities unless payment is not due
within 12 months after the reporting
period. They are recognised initially at
their fair value and subsequently
measured at amortised cost using the
effective interest method
c) 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 recognized in the Statement
of Profit and Loss.
(c) Contributed Equity
Equity Shares are classified as equity.
Incremental costs directly attributable to the
issue of new ordinary shares are shown in
equity as a deduction, net of tax, from the
proceeds.
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