3 Summary of Significant Accounting Policies
This note provides a list of the significant accounting policies adopted in the preparation of these
standalone financial statements. These policies have been consistently applied to all the years
presented, unless otherwise stated.
A Use of Estimates
The preparation of financial statements in conformity with Ind AS requires management to make
certain estimates and assumptions that affect the reported amounts of revenues, expenses, assets
and liabilities (including contingent liabilities) and the accompanying disclosures. The
management believes that the estimates used in preparation of the financial statements are
prudent and reasonable. Future results could differ due to these estimates and differences
between the actual results and the estimates are recognised in the periods in which the results are
known / materialized.
B Significant Estimates and assumptions are required in particular for
(i) Recognition of deferred tax assets
A deferred tax asset is recognised for all the deductible temporary differences to the extent that it
is probable that taxable profit will be available against which the deductible temporary difference
can be utilised. The management assumes that taxable profits will be available while recognising
deferred tax assets.
(ii) Impairment of Non Financial Assets:
The Company assesses at each reporting date as to whether there is any indication that any
property, plant and equipment and intangible assets may be impaired. If any such indication
exists the recoverable amount of an asset is estimated to determine the extent of impairment, if
any. An impairment loss is recognised in the Statement of Profit and Loss to the extent, asset's
carrying amount exceeds its recoverable amount.
C Inventories
Inventories are valued at the lower of cost and the net realisable value estimated by the
management after providing for obsolescence and other losses, where considered necessary.
D Property, Plant and Equipment
Property, Plant and Equipments are stated at cost of acquisition less accumulated depreciation
and impairment in value, if any. Cost comprises the purchase price and any other attributable
cost of bringing the asset to its working condition for its intended use. Subsequent costs have
been included in the asset's carrying amount as recognised as a separate asset, as a appropriate
only when it is probable future benefits associated with the item will flow to the entity and the
cost can be measured reliably.
Depreciation is provided using straight line method, pro-rata for the period of use, based on the
respective useful lives as mentioned under Schedule II of the Act. Leasehold land and
improvements are depreciated over the estimated useful life, or the remaining period of lease
from the date of capitalisation, whichever is shorter.
Gains or losses arising from derecognition of a property, plant and equipment are measured as
the difference between the net disposal proceeds and the carrying amount of the asset and are
recognised in the Statement of Profit and Loss when the asset is derecognised.
E Foreign Currency Transactions:
The Company's financial statements are presented in Indian Rupees [Rs.], which is the functional
and presentation currency.
The transactions in foreign currencies are translated into functional currency at the rates of
exchange prevailing on the dates of transactions.
Foreign Exchange gains and losses resulting from settlement of such transactions and from the
translation of monetary assets and liabilities denominated in foreign currencies at the year end
exchange rates are recognised in the Statement of Profit and Loss. However, foreign currency
differences arising from the translation of certain equity instruments where the Company had
made an irrevocable election to present in OCI subsequent changes in the fair value are
recognised in OCI.
Foreign exchange differences regarded as adjustments to borrowing costs are presented in the
(iii) Statement of Profit and Loss within finance costs. All other foreign exchange gains and losses are
presented in the Statement of Profit and Loss on a net basis.
F Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a
financial liability or equity instrument of another entity.
A. Financial Assets
i. Initial recognition and measurement
All financial assets and liabilities are initially recognized at fair value. Transaction costs that are
directly attributable to the acquisition or issue of financial assets and financial liabilities, which
are not at fair value through profit or loss, are adjusted to the fair value on initial recognition.
Purchase and sale of financial assets are recognised using trade date accounting.
ii. Subsequent measurement
a) Financial assets carried at amortised cost (AC)
A financial asset is measured at amortised 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 payments of principal
and interest on the principal amount outstanding.
b) Financial assets at fair value through other comprehensive income (FVTOCI)
A financial asset is measured at FVTOCI if it is held within a business model whose objective is
achieved by both collecting contractual cash flows and selling financial assets and the contractual
terms of the financial asset give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
c) Financial assets at fair value through profit or loss (FVTPL)
A financial asset which is not classified in any of the above categories are measured at FVTPL.
iii Impairment of financial assets
The impairment provisions for financial assets are based on assumptions about risk of default
and expected cash loss rates. The Company uses judgement in making these assumptions and
selecting the inputs to the impairment calculation, based on Company's past history, existing
market conditions as well as forward looking estimates at the end of each reporting period.
B. Financial Liabilities
i) . Initial recognition and measurement
All financial liabilities are recognized at fair value and in case of loans, net of directly attributable
cost. Fees of recurring nature are directly recognised in the Statement of Profit and Loss as
finance cost.
ii) . Subsequent measurement
Financial liabilities are carried at amortized cost using the effective interest method.
C. Derecognition of financial instruments
The Company derecognizes a financial asset when the contractual rights to the cash flows from
the financial asset expire or it transfers the financial asset and the transfer qualifies for
derecognition under Ind AS 109. A financial liability (or a part of a financial liability) is
derecognized from the Company's Balance Sheet when the obligation specified in the contract is
discharged or cancelled or expires.
G Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to
the chief operating decision maker. The company is reported at an overall level and hence there
are no reportable segment as per Ind AS 108.
H Leases
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if
the contract conveys the right to control the use of an identified asset for a period of time in
exchange for consideration.
Company as a lessee
The Company applies a single recognition and measurement approach for all leases, except for
short-term leases and leases of low-value assets. The Company recognises lease liabilities to
make lease payments and right-of-use assets representing the right to use the underlying assets.
i) Right of use assets
The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date
the underlying asset is available for use). Right-of-use assets are measured at cost, less any
accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease
liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised,
initial direct costs incurred, and lease payments made at or before the commencement date less
any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the
lease term. The right of use assets are also subject to impairment.
ii) Lease liabilities
At the commencement date of the lease, the Company recognises lease liabilities measured at the
present value of lease payments to be made over the lease term. The lease payments are fixed
payments. In calculating the present value of lease payments, the Company uses its incremental
borrowing rate at the lease commencement date because the interest rate implicit in the lease is
not readily determinable. After the commencement date, the amount of lease liabilities is
increased to reflect the accretion of interest and reduced for the lease payments made. In
addition, the carrying amount of lease liabilities is remeasured if there is a modification, a
change in the lease term, a change in the lease payments (e.g., changes to future payments
resulting from a change in an index or rate used to determine such lease payments) or a change
in the assessment of an option to purchase the underlying asset.
iii) Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases (i.e.,
those leases that have a lease term of 12 months or less from the commencement date and do not
contain a purchase option). It also applies the lease of low-value assets recognition exemption
that are considered to be low value.
Lease payments on short-term leases and leases of low value assets are recognised as expense on
a straight-line basis over the lease term.
I Borrowing Costs
Borrowing costs consist of interest and other borrowing costs that are incurred in connection
(i) with the borrowing of funds. Other borrowing costs include ancillary charges at the time of
acquisition of a financial liability, which is recognised as per EIR method.
Borrowing costs also include exchange differences to the extent regarded as an adjustment to
the borrowing costs.
Borrowing costs that are directly attributable to the acquisition/ construction of a qualifying
asset are capitalised as part of the cost of such assets, up to the date the assets are ready for their
intended use. All other borrowing costs are recognised in profit or loss in the period in which
they are incurred.
J Revenue Recognition
Revenue from sale of products is recognised when the control on the goods have been
transferred to the customer. The performance obligation in case of sale of product is satisfied at a
point in time i.e., when the material is shipped to the customer or on delivery to the customer, as
may be specified in the contract.
Brokerage income is recognized on transactions on which "Settlements" are completed during
the year. In case of Income from Marketing of Financial Products the same are accounted on cash
basis.
Other Income is accounted on accrual basis except Dividend Income, Interest on Government
Bonds and Interest on Income Tax Refunds which are accounted on cash basis.
K Earnings Per Share
Basic earnings per share is calculated by dividing the net profit or loss attributable to equity
holders of the company (after deducting preference dividends and attributable taxes) by the
weighted average number of equity shares outstanding during the period.
Partly paid equity shares are treated as a fraction of an equity share to the extent that they are
entitled to participate in dividends relative to a fully paid equity share during the reporting
period. The weighted average number of equity shares outstanding during the period is
adjusted for events such as bonus issue, bonus element in a rights issue, share split, and reverse
share split (consolidation of shares) that have changed the number of equity shares outstanding,
without a corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period
attributable to equity shareholders of the parent company and the weighted average number of
shares outstanding during the period are adjusted for the effects of all dilutive potential equity
shares.
L Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short¬
term deposits with an original maturity of three months or less, that are readily convertible to a
known amount of cash and subject to an insignificant risk of changes in value.
M Trade and other payables
These amounts represent liabilities for goods and services provided to the company prior to the
end of the financial year which are unpaid. The amounts are unsecured and are usually paid
within 30 days of recognition. 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 (EIR) method.
N Taxes on Income
Tax expense comprises of current income tax and deferred tax.
(i) Current Taxation
Current income tax assets and liabilities are measured at the amount expected to be recovered
from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount
are those that are enacted or substantively enacted, at the reporting date where the Company
operates and generates taxable income.
Current tax items, relating to items recognised outside the statement of profit and loss, are
recognised in correlation to the underlying transaction either in OCI or directly in equity.
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. Provision for current tax is recognised based on the estimated tax liability computed
after taking credit for allowances and exemption in accordance with the Income Tax Act, 1961.
Current tax assets and liabilities are offset where the Company has a legally enforceable right to
offset and intends either to settle on a net basis, or to realize the asset and settle the liability
simultaneously.
(ii) Deferred Taxation
Deferred tax is provided using the balance sheet approach on temporary differences between the
tax bases of assets and liabilities and their carrying amounts in the financial statements at the
reporting date. Deferred tax relating to items recognised outside profit or loss is recognised
outside profit or loss (either in Other Comprehensive Income or in equity).
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of
unused tax credits and any unused tax losses to the extent it is probable that these assets can be
realised in future.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the
year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that
have been enacted or substantively enacted at the reporting date. Deferred tax assets and
liabilities are offset where a legally enforceable right exists to offset current tax assets and
liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
Deferred tax includes MAT tax credit. the Company reviews such tax credit asset at each
reporting date to assess its recoverability.
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