Significant Accounting Policies
Basis of Preparation of Standalone Financial
Statements
These standalone financial statements are
prepared in accordance with Generally
Accepted Accounting Principles (GAAP) under
the historical cost convention on accrual basis.
GAAP comprises mandatory accounting
standards as prescribed under section 133 of
the Companies Act, 2013, Companies
(Accounting Standards) rules, 2015 and
Companies(Accounting Standards)
amendments Rules 2016 and other applicable
provisions of the Act.
Use of Estimates
The preparation of standalone financial
statements is in conformity with GAAP requires
judgments, estimates and assumptions to be
made that affect the reported amount of assets
and liabilities, disclosure of contingent liabilities
on the date of the financial statements and the
reported amount of revenues and expenses
during the reporting period. Difference between
the actual results and estimates are recognized
in the period in which the results are known/
materialized.
Accounting Convention
The company follows the mercantile system of
accounting, recognizing income and expenditure
on accrual basis. The accounts are prepared on
historical cost basis and as a going concern.
Accounting policies not referred to specifically
otherwise, are consistent with the generally
accepted accounting principles.
The following significant accounting policies
are adopted in the preparation and presentation
of these standalone financial statements:
• Revenue recognition
Revenue is recognized to the extent that it is
probable that the economic benefits will flow to
the Company and the revenue can be reliably
measured.
Sale of goods: Revenue is recognized when the
significant risks and rewards of ownership of the
goods have been passed to the buyer. Sales are
disclosed net of GST, trade discounts and returns,
as applicable. Income from services: Revenue from
services is recognized when services have been
rendered and there should be no uncertainty
regarding consideration and its ultimate collection.
Interest Income: Interest income is recognized on
a time proportion basis taking into account the
amount outstanding and the rate applicable.
• Property, Plant & Equipment
a) Fixed are stated as per Cost Model i.e., at cost¬
less accumulated depreciation and impairment,
if any;
b) Costs directly attributable to acquisition are
capitalized until the Fixed Assets are ready for
use, as intended by the management;
c) Subsequent expenditures relating to fixed assets
are capitalized only when it is probable that
future economic benefits associated with these
will flow to the Company and the cost of the
item can be measured reliably. Repairs &
maintenance costs are recognized in the
Statement of profit & Loss when incurred;
d) The cost and related accumulated depreciated
are eliminated from the financial statements
upon sale or retirement of the asset and the
resultant gains or losses are recognized in the
Statement of Profit or Loss. Assets to be disposed
of are reported at the lower of the carrying value
or the fair value less cost to sell.
e) Depreciation on Tangible Assets in case of
company is provided in such a manner so that
the cost of asset (Net of realizable value) will be
amortized over their estimated remaining useful
life on SLM basis as per the useful life prescribed
under Schedule II to the Companies Act 2013.
f) Depreciation methods, useful lives, and residual
values are reviewed periodically, including a teach
financial year end;
• Impairment
The Management periodically assesses, using
external and internal sources, whether there is an
indication that an asset may be impaired. An
impairment loss is recognized wherever the
carrying value of an asset exceed sits recoverable
amount. The recoverable amount is higher of the
asset's netselling price and value in use, which
means the present value of future cash flows
expected to arise from the continuing use of the
asset and its eventual disposal.
An impairment loss for an asset is reversed if, and
only if, the reversal can be related objectively to an
event occurring after the impairment loss was
recognized. The carrying amount of an asset is
increased to its revised recoverable amount,
provided that this amount does not exceed the
carrying amount that would have been determined
(net of any accumulated amortization or
depreciation) had no impairment loss been
recognized for the asset in prior years.
• Inventories
Inventories are valued after providing for obsole¬
scence, as follows:
a) Raw Materials, Stores & Spare parts and Packing
Material-Lowerof 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 is determined on Weighted
Average Cost basis.
b) Work-in-Progress is valued at raw material cost
plus proportionate conversion cost.
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, however due to the
nature of the company the own manufactured
goods are valued at a Retail Method basis on a
consistent basis.
• Retirement Benefits & Other Employee
Benefits
All short term employee benefits are accounted
on undiscounted basis during the accounting
period based on services rendered by employees.
The Company's contribution to Provident Fund
and Employees State Insurance Scheme is
determined based on a fixed percentage of the
eligible employees' salary and charged to the
Statement of Profit and Loss on accrual basis.
The Group has made provision for payment of
Gratuity to its employees. This Provision is made
as per the method prescribed under the Payment
of Gratuity Act. The cost of providing gratuity
under this plan is determined on the basis of
actuarial valuation at year end. Under the Gratuity
Fund Plan, the holding company contributes to
a LIC administered Group Gratuity Fund on behalf
of employees.
• Foreign Exchange Transactions
Foreign-currency denominated monetary assets
and liabilities if any are translated at exchange
rates in effect at the Balance Sheet date. The
gains or losses resulting from the transactions
relating to purchase of current assets like Raw
Material etc. are included in the Statement of
Profit and Loss. Revenue, expense and cash-flow
items denominated in foreign currencies are
translated using the exchange rate in effect on
the date of the transaction.
• Cash Flow Statement
Cash flows are reported using the indirect method,
whereby profit before tax is adjusted for the effects
of transactions of a non- cash nature, any deferrals
or accruals of past or future operating cash
receipts or payments and item of income or
expenses associated with investing or financing
cash flows. The cash flows from operating,
investing and financing activities are segregated.
• Borrowing Costs
Borrowing costs that are directly attributable to
the acquisition or construction of a qualifying
asset are capitalized as part of the cost of that
asset till such time the asset is ready for its
intended use. A qualifying asset is an asset that
necessarily takes a substantial period of time to get
ready for its intended use. Costs incurred in raising
funds are amortized equally over the period for
which the funds are acquired. All other borrowing
costs are charged to profit and loss account.
• Income Tax
The accounting treatment for the Income Tax in
respect of the Company's income is based on the
Accounting Standard on 'Accounting for Taxes on
Income' (AS-22). The provision made for Income
Tax in Accounts comprises both, the current tax
and deferred tax. Provision for Current Tax is made
on the assessable Income Tax rate applicable to
the relevant assessment year after considering
various deductions available under the Income Tax
Act, 1961. Deferred tax is recognized for all timing
differences; being the differences between the
taxable incomes and accounting income that
originate in one period and are capable of
reversal in one or more subsequent periods.
Such deferred tax is quantified using the tax
rates and laws enacted or substantively
enacted as on the Balance Sheet date. The
carrying amount of deferred tax asset/liability
is reviewed at each Balance Sheet date and
consequential adjustments are carried out.
• Earnings Per Share
Basic earnings per share is computed by
dividing the net profit after tax by the weighted
average number of equity shares outstanding
during the period. Diluted earnings per share is
computed by dividing the profit after tax by the
weighted average number of equity shares
considered for deriving basic earnings per share
and also the weighted average number of equity
shares that could have been issued upon
conversion of all dilutive potential equity shares.
The diluted potential equity shares are adjusted
for the proceeds receivable had the shares been
actually issued at fair value which is the average
market value of the outstanding shares. Dilutive
potential equity shares are deemed converted as
of the beginning of the period, unless issued at
a later date. Dilutive potential equity shares are
determined independently for each period
presented.
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