2.01 Summary of significant accounting policies
(a) Use of estimates and judgements
In the application of the Company's accounting
policies, the management of the Company are
required to make judgements, estimates and
assumptions about the carrying amounts of assets
and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions
are based on historical experience and other factors
that are considered to be relevant. Actual results may
differ from these estimate.
The estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in
which the estimate is revised if the revision affects
only that period, or in the period of the revision and
future periods if the revision affects both current and
future periods.
(b) Useful lives of property, plant and equipment and
intangible assets.
The Company reviews the useful life of property, plant
and equipment at the end of each reporting period.
This assessment may result in change in the
depreciation expense in future periods.
(c) Deferred tax
"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 are generally recognised for all
taxable temporary differences. Deferred tax assets are
generally recognised for all deductible temporary
differences to the extent that it is probable that
taxable profits will be available against which those
deductible temporary differences can be utilised.
Such deferred tax assets and liabilities are not
recognised if the temporary difference arises from the
initial recognition of assets and liabilities in a
transaction that affects neither the taxable profit nor
the accounting profit. 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 theasset
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
theCompany expects, at the end of the reporting
period, to recover or settle the carrying amount of its
assets and liabilities."
(d) Post-retirement benefit plans
The obligation arising from the defined benefit plan is
determined on the basis of actuarial assumptions
which include discount rate, trends in salary
escalation and vested future benefits and life
expectancy. The discount rate is determined with
reference to market yields at each financial year end
on the government bonds.
(e) Provisions and contingencies
The recognition and measurement of other provisions
are based on the assessment of the probability of an
outflow of resources, and on past experience and
circumstances known at the reporting date. The actual
outflow of resources at a future date may therefore
vary from the figure estimated at end of each
reporting period.
2.02 Revenue recognition
Sale of goods
Revenue is recognised when a promise in a customer
contract (performance obligation) has been satisfied by
transferring control over the promised goods to the
customer. Control over a promised good refers to the
ability to direct the use of, and obtain substantially all of
the remaining benefits from, those goods. Control is
usually transferred upon shipment, delivery to, upon
receipt of goods by the customer, in accordance with the
delivery and acceptance terms agreed with the customers.
The amount of revenue to be recognised (transaction
price) is based on the consideration expected to be
received in exchange for goods, excluding amounts
collected on behalf of third parties such as sales tax or
other taxes directly linked to sales. If a contract contains
more than one performance obligation, the transaction
price is allocated to each performance obligation based on
their relative stand-alone selling prices. Revenue from
product sales are recorded net of allowances for estimated
rebates, cash discounts and estimates of product returns,
all of which are established at the time of sale."
Sale to dealers
The Company appoints dealers in various territories who
purchases the goods from the Company and thereafter
sells them in the territory. In case the dealers is acting as an
agent, the Company defers revenue recognition till the
time goods are sold by the dealers to the end customer. On
the other hand, if the dealers is principal, revenue is
recognised upon the transfer of significant risks and
rewards of ownership of the goods to the dealers."
Interest income
Interest income from a financial asset is recognised when it
is probable that the economic benefits will flow to the
Company and the amount of income can be measured
reliably. Interest income is accrued on a time basis, by
reference to the principal outstanding and at the effective
interest rate applicable, which is the rate that exactly
discounts estimated future cash receipts through the
expected life of the financial asset to that asset's net
carrying amount on initial recognition.
2.03 Leases
Ind AS 116 requires lessees to determine the lease term as
the non-cancellable period of a lease adjusted with any
option to extend or terminate the lease, if the use of such
option is reasonably certain. The Company makes an
assessment on the expected lease term on a lease-by¬
lease basis and thereby assesses whether it is reasonably
certain that any options to extend or terminate the
contract will be exercised. In evaluating the lease term, the
Company considers factors such as any significant
leasehold improvements undertaken over the lease term,
costs relating to the termination of the lease and the
importance of the underlying asset to Company's
operations taking into account the location of the
underlying asset and the availability of suitable
alternatives. The lease term in future periods is reassessed
to ensure that the lease term reflects the current economic
circumstances. After considering current and future
economic conditions, the Company has concluded that no
changes are required to lease period relating to the
existing lease contracts.
Under Ind AS 116, the Company assesses, whether the
contract is, or contains, a lease. A contract is, or contains, a
lease if the contract involves:
(a) the use of an identified asset: (b) the right to obtain
substantially all the economic benefits from use of the
identified asset, and: (c) the right to direct the use of the
identified asset.
The Company has entered into lease arrangements for its
office premises and warehouses. The Company at the
inception of the lease contract recognizes a Right-of-Use
(RoU) asset at cost and corresponding lease liability,
except for leases with term of less than twelve months
(shortterm) and low-value assets.
The cost ofthe right-of-use assets comprises the amount
of the initial measurement ofthe lease liability, any lease
payments made at or before the inception date ofthe lease
plus any initial direct costs, less any lease incentives
received. Subsequently, the right-of-use assets is
measured at cost less any accumulated depreciation and
accumulated impairment losses, if any. The right-of-use
assets is depreciated using the straight-line method from
the commencement date over the shorter of lease term or
useful life of right-of-use assets.
The lease liability is initially measured at amortized cost at
the present value ofthe 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. Lease liabilities are
remeasured with a corresponding adjustment to the
related right of use asset if the Company changes its
assessment if whether it will exercise an extension or a
termination option.
For short-term and low value leases, the Company
recognizes the lease payments as an operating expense on
a straight-line basis over the lease term.
2.04 Foreign currencies transactions and translation
The functional currency of the Company is the Indian
Rupee (?).
"Transactions in foreign currencies are recorded at the
exchange rate prevailing on the date of transaction.
Monetary assets and liabilities denominated in foreign
currencies are translated at the functional currency closing
rates of exchange at the reporting date. Exchange
differences arising on settlement or translation of
monetary items are recognised in Statement of Profit and
Loss except to the extent of exchange differences which
are regarded as an adjustment to interest costs on foreign
currency borrowings that are directly attributable to the
acquisition or construction of qualifying assets, are
capitalized as cost of assets."
2.05 Cash and Cash Equivalents
Cash and cash equivalents comprise of cash on hand, cash
at banks, short-term deposits and short-term highly liquid
investments that are readily convertible to known
amounts of cash and which are subject to an insignificant
risk of changes in value.
2.06 Borrowings and borrowing costs
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently
stated at amortised cost. Any difference between the
proceeds (net of transaction costs) and the redemption
value is recognised in the income statement over the
period of the borrowings using the effective interest rate
method. Borrowings are classified as current liabilities
unless the Company has an unconditional right to defer
settlement of the liability for at least 12 months after the
reporting date.
Borrowing costs include:(i) interest expense calculated
using the effective interest rate method,(ii) finance charges
in respect of finance leases, and(iii) exchange differences
arising from foreign currency borrowings to the extent that
they are regarded as an adjustment to interest costs."
Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time to
get ready for their intended use or sale, are added to the
cost of those assets, until such time as the assets are
substantially ready fortheir intended useorsale.
Preference shares which are mandatorily redeemable on a
specific date, are classified as liabilities. The dividends on
these preference shares are recognised in the statement of
profit and loss as finance costs.
Interest income earned on the temporary investment of
specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs
eligible for capitalisation.
AH other borrowing costs are recognised in statement of
profit and loss in the period in which they are incurred.
2.07 Employee benefits
(a) Retirement benefit costs and termination benefits
Payments to defined contribution retirement benefit
plans are recognised as an expense when employees
have rendered service entitling them to the
contributions.
For defined benefit retirement plans, the cost of
providing benefits is determined using the projected
unit credit method, with actuarial valuations being
carried out at the end of each annual reporting period.
Remeasurement, comprising actuarial gains and
losses, the effect ofthe changes to the asset ceiling (if
applicable) and the return on plan assets (excluding
net interest), is reflected immediately in the balance
sheet with a charge or credit recognised in other
comprehensive income in the period in which they
occur. Remeasurement recognised in other
comprehensive income is reflected immediately in
retained earnings and is not reclassified to statement
of profit and loss. Past service cost is recognised in
statement of profit and loss in the period of a plan
amendment. Net interest is calculated by applying the
discount rate at the beginning ofthe period to the net
defined benefit liability or asset. Defined benefit costs
are categorised as follows:
service cost (including current service cost, past
service cost, as well as gains and losses on
curtailments and settlements);net interest expense or
income; an remeasurement
The Company presents the first two components of
defined benefit costs in statement of profit and loss in
the line item 'Employee benefits expense'.
Curtailment gains and losses are accounted for as past
service costs.
The retirement benefit obligation recognised in the
balance sheet represents the actual deficit or surplus
in the Company's defined benefit pians. Any surpius
resuiting from this caicuiation is iimited to the present
vaiue of any economic benefits avaiiabie in the form of
refunds from the pians or reductions in future
contributions to the pians.
A liability for a termination benefit is recognised at the
earlier of when the entity can no longer withdraw the
offer of the termination benefit and when the entity
recognises any related restructuring costs.
(b) Defined contribution plan
Contribution to defined contribution plans are
recognised as expense when employees have
rendered services entitling them to such benefits.
(c) Compensated absences
Compensated absences which are not expected to
occur within twelve months afterthe end of the period
in which the employee renders the related services are
recognised at an actuarially determined liability at the
present value of the defined benefit obligation at the
Balance sheet date. In respect of compensated
absences expected to occur within twelve months
after the end of the period in which the employee
renders the related services, liability for short-term
employee benefits is measured at the undiscounted
amount of the benefits expected to be paid in
exchange for the related service.
2.08 Taxation
Income tax expense represents the sum of the tax
currently payable and deferred tax.
(a) Current tax
The tax currently payable is based on taxable profit
for the year. 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 tax rates that have been
enacted or substantively enacted by the end of the
reporting period.
(b) Deferred tax
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 are generally recognised for all
taxable temporary differences. Deferred tax assets are
generally recognised for all deductible temporary
differences to the extent that it is probable that
taxable profits will be available against which those
deductible temporary differences can be utilised.
Such deferred tax assets and liabilities are not
recognised if the temporary difference arises from the
initial recognition (other than in a business
combination) of assets and liabilities in a transaction
that affects neither the taxable profit nor the
accounting profit. In addition, deferred tax liabilities
are not recognised if the temporary difference arises
from the initial recognition of goodwill.
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.
(c) Current and deferred tax for the year
Current and deferred tax are recognised in profit or
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.
2.09 Property, plant and equipment
Property, plant and equipment held for use in the
production or supply of goods or services, or for
administrative purposes, are stated in the balance sheet at
cost less accumulated depreciation and accumulated
impairment losses.
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 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.
Depreciation is recognised so as to write off the cost of
assets (other than freehold land and properties under
construction) less their residual values over their useful
lives, using the straight-line method. 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 tangibie fixed assets has been provided
on the straight-tine method as per the usefut life
prescribed in Scheduie II to the Companies Act, 2013.
Assets held under finance leases are depreciated over their
expected useful lives on the same basis as owned assets.
However, when there is no reasonable certainty that
ownership will be obtained by the end of the lease term,
assets are depreciated over the shorter of the lease term
and their usefullives.
2.10 Impairment of assets
Impairment of financial assets:
The Company assesses at each date of balance sheet,
whether a financial asset or a group of financial assets is
impaired. Ind AS 109 requires expected credit losses to be
measured through a loss allowance. The Company
recognises lifetime expected losses for all contract assets
and / or all trade receivables that do not constitute a
financing transaction. For all other financial assets,
expected credit losses are measured at an amount equal
to the twelve-month expected credit losses or at an
amount equal to the life time expected credit losses if the
credit risk on the financial asset has increased significantly,
since initial recognition.
Impairment of non-financial assets:
At the end of each reporting period, the Company reviews
the carrying amounts of its tangible 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.
Recoverable amount is the higher of fair value less costs of
disposal and value in use. In assessing value in use, the
estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects
current market assessments of the time value of money
and the risks specific to the asset for which the estimates of
future cash flows have not been adjusted.
If the recoverable amount of an 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 immediately in statement of profit
and loss.
When an impairment loss subsequently reverses, the
carrying amount of the asset (or a cash-generating unit) is
increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does
not exceed the carrying amount that would have been
determined had no impairment loss been recognised for
the asset (or cash-generating unit) in prior years. A
reversal of an impairment loss is recognised immediately
in statement of profit and loss.
2.11 Inventories
"Inventories are valued at the lower of cost and the net
realisable value after providing for obsolescence and
other losses, where considered necessary. Cost includes
all charges in bringing the goods to the point of sale,
including octroi and other levies, transit insurance and
receiving charges. Work-in-progress and finished goods
include appropriate proportion of overheads and, where
applicable, excise duty. Cost is determined as
follows:Traded goods and packing materials: First in first
out basis.Stock-in trade: First in first out basis."
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