2.6. Significant Accounting Policies
a) Current and Non-Current Classification
The Company presents assets and liabilities in the balance sheet based on current / non-current
classification.
An asset it is classified as current when it is:
• Expected to be realised or intended to be sold or consumed in normal operating cycle,
• Held primarily for the purpose of trading,
• Expected to be realised within 12 months after the reporting period, or
• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for
at least 12 months after the reporting period.
All other assets are classified as non-current.
A liability is classified as current when:
• It is Expected to be settled in normal operating cycle,
• It is held primarily for the purpose of trading,
• It is due to be settled within 12 months after the reporting period, or
• There is no unconditional right to defer the settlement of the liability for at least twelve
months after the reporting period.
All other liabilities are classified as non-current.
The terms of the liability that could, at the option of the counterparty, result in its settlement by
the issue of equity instruments do not affect its classification.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their
realisation in cash and cash equivalents. The Company has determined its operating cycle, as
explained in schedule III of the Companies Act, 2013, as twelve months, having regard to the
nature of business being carried out by the Company. The same has been considered for
classifying assets and liabilities as current and non-current while preparing the financial
statements.
b) Property, Plant and Equipment and Capital work-in-progress
Recognition and Measurement
Property, plant and equipment, is stated at acquisition cost net of accumulated depreciation and
accumulated impairment losses, if any.
Cost of acquisition or construction of property, plant and equipment comprises its purchase price
including import duties and non-refundable purchase taxes net of trade discounts, rebates and
any directly attributable cost of bringing the item to its working condition for its intended use,
including relevant borrowing costs and any expected costs of decommissioning.
Property, plant and equipment acquired in a business combination, other than common control
combination, are recognised at fair value at the acquisition date. Property, plant and equipment
acquired under common control combination are recognised at carrying value at the acquisition
date.
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. All other repairs and
maintenance cost are charged to the standalone statement of profit and loss during the period in
which they are incurred.
If significant parts of an item of property, plant and equipment have different useful lives, then
they are accounted for as separate items (major components) of property, plant and equipment.
Material items such as spare parts, stand-by equipment and service equipment are classified as
property, plant and equipment when they meet the definition of property, plant and equipment
as specified in Ind AS 16 - Property, Plant and Equipment.
Property, plant and equipment which are not ready for intended use as on the date of Balance
Sheet are disclosed as 'Capital work-in-progress'. Advances paid towards the acquisition of
property, plant and equipment outstanding at each balance sheet date is classified as capital
advances under 'Other Non-Current Assets'.
Capital work-in-progress included in non-current assets comprises of direct costs, related
incidental expenses and attributable interest. Capital work-in-progress are not depreciated as
these assets are not yet available for use.
De-recognition
An item of property, plant and equipment, is de-recognised upon disposal or when no future
economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition
of the asset (calculated as the difference between the net disposal proceeds and the carrying
amount of the asset) is included in the standalone statement of profit and loss.
c) Intangible Assets
Recognition and Measurement
Intangible assets such as marketing intangibles, trademarks, technical know-how, brands,
customer relationship, computer software, product related intangibles, distribution network and
non - compete rights acquired separately are measured on initial recognition at cost. Further,
payments to third parties for in-licensed products, generally take the form of up-front and
milestones payments and are capitalised following a cost accumulation approach to variable
payments (milestones) when receipt of economic benefits out of the separately purchased
transaction is considered to be probable. Following initial recognition, intangible assets are
carried at cost less accumulated amortisation and accumulated impairment loss, if any.
Subsequent expenditures are capitalised only when they increase the future economic benefits
embodied in the specific asset to which they relate.
Acquired research and development intangible assets that are under development are recognised
as In-Process Research and Development assets ("IPR&D") or Intangible assets under
development. IPR&D assets are not amortised but evaluated for potential impairment on an
annual basis or when there are indications that the carrying value may not be recoverable.
Subsequent expenditure on an In-Process Research or Development project acquired separately
or in a business combination and recognised as an intangible asset is:
• recognised as an expense when incurred, if it is research expenditure;
• capitalised if the cost can be reliably measured, the product or process is technically and
commercially feasible and the Company has sufficient resources to complete the
development and to use and sell the asset;
Expenditure for obtaining regulatory approvals and registration of products for overseas markets
is charged to the standalone statement of profit and loss.
De-recognition
Intangible assets are de-recognised either on their disposal or where no future economic benefits
are expected from their use. Losses arising on such de-recognition are recorded in the profit or
loss and are measured as the difference between the net disposal proceeds, if any and the
carrying amount of respective intangible assets as on the date of de-recognition.
d) Investment Properties
Property that is held for long-term rental yields or for capital appreciation or both and that is not
occupied by the Company, is classified as investment properties. Investment property is
measured initially at its cost, including related transaction costs and borrowing costs where
applicable. Subsequent expenditure is capitalised to the asset's carrying amount only when it is
probable that future economic benefits associated with the expenditure will flow to the Company
and the cost of the item can be measured reliably.
Investment properties are depreciated using the straight-line method over their estimated useful
lives. Investment properties generally have a useful life of 5-60 years. The useful life has been
determined based on technical evaluation performed by the management's expert.
e) Inventories
Inventories consist of raw materials and packing materials, work-in-progress, stock-in-trade,
finished goods, stores and spares, which are valued at lower of cost or net realisable value. The
Company used First-In-First-Out (FIFO) for valuing its inventory.
Cost of inventory comprises all costs of purchase, cost of conversion and other costs incurred in
bringing the inventories to their present location and condition.
Net realisable value is the estimated selling price in the ordinary course of business, less
estimated cost of completion and the estimated cost necessary to make the sale.
The Company reviews the condition of its inventories and makes provision against obsolete and
slow - moving inventory items which are identified as no longer suitable for sale or use. Obsolete
and slow - moving items are valued at cost or estimated net realisable value, whichever is lower.
Any write down of inventories is recognised as an expense during the year.
f) Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand and cash at bank including fixed deposit with
original maturity period of three months or less and short-term highly liquid investments with an
original maturity of three months or less, which are subject to an insignificant risk of changes in
value.
g) 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.
Financial Assets
Classification
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost,
fair value through other comprehensive income (OCI), or fair value through profit or loss. The
classification of financial assets at initial recognition depends on the financial asset's contractual
cash flow characteristics and the Company's business model for managing them.
Initial recognition and measurement
All financial assets excluding trade receivables are recognised initially at fair value plus, in the case
of financial assets not recorded at fair value through profit or loss, transaction costs that are
attributable to the acquisition of the financial asset.
Trade receivables are recognised initially at the amount of consideration that is unconditional
unless they contain significant financing components, in which case they are recognised at fair
value. The Company's trade receivables do not contain any significant financing component and
hence are measured at the transaction price measured under Ind AS 115 "Revenue from
Contracts with Customers".
Subsequent Measurement
Financial assets carried at amortised cost
A financial asset is subsequently measured at amortised cost if it is held within a business model
whose objective is to hold the asset for collecting contractual cash flows and the contractual
terms of the asset give rise on specified dates to cash flows that are solely payments of principal
and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost
using the effective interest rate (EIR) method. Amortised 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 amortisation is included in other income in the Statement of Profit or Loss. The losses arising
from impairment are recognised in the Statement of Profit or Loss.
Financial assets carried at fair value through other comprehensive income (FVTOCI)
A financial asset is subsequently measured at fair value through other comprehensive income if
it is held within a business model whose objective is achieved by both collecting contractual cash
flows and selling the financial assets and the contractual terms of the asset give rise on specified
dates to cash flows that are solely payments of principal and interest (SPPI) on the principal
amount outstanding.
Debt instruments included within the FVTOCI category are measured initially as well as at each
reporting date at fair value. Fair value movements are recognized in the other comprehensive
income (OCI). However, the company recognizes interest income, impairment losses and reversals
in the Profit and Loss. On de-recognifion of the asset, cumulative gain or loss previously
recognised in OCI is reclassified from the equity to Profit and Loss. Interest earned whilst holding
FVTOCI asset is reported as interest income using the EIR method.
Equity instruments, except for the ones held for trading, could also be classified as at FVTOCI, if
the Company makes an irrevocable election to do so at the time of initial recognition. Such
election is made on instrument-to-instrument basis. In case of equity instruments classified as at
FVTOCI, all the fair value changes on the instrument, excluding dividends, are recognised in the
OCI. There is no recycling of the amounts from OCI to statement of profit and loss, even on sale
of investment. However, the Company may transfer the cumulative gain or loss within equity. The
Company has designated certain equity instruments as at FVTOCI.
Financial assets carried at fair value through profit or loss (FVTPL)
A financial asset which is not categorized as at amortised cost or as FVTOCI, is classified and
subsequently measured as at FVTPL.
As per the requirements of Ind AS 109 - "Financial Instruments", all investments in equity
instruments and contracts on those instruments are to be measured at FVTPL unless designated
at FVTOCI. However, there might be situations where cost may be an appropriate estimate of fair
value. That may be the case if insufficient information is available to measure fair value, or if there
is a wide range of possible fair value measurements and cost represents the best estimate of fair
value within that range.
In addition, the Company may elect to designate a debt instrument, which otherwise meets
amortized cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so
reduces or eliminates a measurement or recognition inconsistency (referred to as 'accounting
mismatch').
De-recognition
A financial asset (or, where applicable, a part of a financial asset) is primarily de-recognised (i.e.,
removed from the Company's balance sheet) when:
• The rights to receive cash flows from the asset have expired, or
• The Company has transferred its rights to receive cash flows from the asset or has assumed
an obligation to pay the received cash flows in full without material delay to a third party
under a 'pass-through' arrangement; and either (a) the company has transferred substantially
all the risks and rewards of the asset, or (b) the company has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the company has transferred its rights to receive cash flows from an asset or has entered
into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and
rewards of ownership. When it has neither transferred nor retained substantially all of the risks
and rewards of the asset, nor transferred control of the asset, the company continues to recognise
the transferred asset to the extent of the Company's continuing involvement. In that case, the
company also recognises an associated liability. The transferred asset and the associated liability
are measured on a basis that reflects the rights and obligations that the Company has retained.
On de-recognition of a financial asset in its entirety, the difference between the asset's carrying
amount and the sum of the consideration received and receivable and the cumulative gain or loss
that had been recognised in OCI and accumulated in equity is recognised in profit or loss if such
gain or loss would have otherwise been recognised in profit or loss on disposal of that financial
asset.
Financial Liabilities
Classification
Financial liabilities are classified, at initial recognition, as subsequently measured at amortised
cost, except for financial liabilities specifically classified and subsequently measured as at fair
value through profit and loss.
Initial recognition and measurement
The Company initially measures a financial liability at its fair value plus, in the case of a financial
liability not at fair value through profit or loss, transaction costs.
Subsequent measurement
Financial liabilities carried at amortised cost
The Company measures its financial liabilities at amortised cost using the effective interest rate
method. The effective interest rate is the rate that exactly discounts, estimated future cash
payments (including all fees, transaction costs and other premiums or discounts) through the
expected life of the financial liability, or (where appropriate) a shorter period, to the amortised
cost on initial recognition.
The interest expense (calculated based on effective interest method) and any gain or loss on
derecognition is recognised in the Statement of Profit and Loss.
Financial assets carried at fair value through profit or loss (FVTPL)
Financial liabilities are classified as at FVTPL when the financial liability is held for trading or is a
derivative (except for effective hedge) or are designated upon initial recognition as FVTPL. Gains
or losses, including any interest expense on liabilities held for trading are recognised in the
Statement of Profit and Loss.
De-recognition
A financial liability is derecognised 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 de-recognition of the original liability
and the recognition of a new liability. The difference in the respective carrying amounts is
recognised in the statement of profit and loss.
Offseffing of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance
sheet if there is a currently enforceable legal right to offset the recognised amounts and there is
an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
h) Leases
Where Company is Lessee:
The Company's lease asset classes primarily consist of leases for land, factory building and office
building. The Company assesses whether a contract is or contains a lease, at the inception of a
contract. A contract is, or contains, a lease if the contract conveys the right to control the use of
an identified asset for a period of time in exchange for consideration. To assess whether a contract
conveys the right to control the use of an identified asset, the Company assesses whether:
• the contract involves the use of an identified asset;
• the Company has substantially all of the economic benefits from use of the asset through the
period of the lease; and
• the Company has the right to direct the use of the asset.
The right-of-use asset is a lessee's right to use an asset over the life of a lease. At the date of
commencement of the lease, the Company recognises a right-of-use asset ('ROU') and a
corresponding lease liability for all lease arrangements in which it is a lessee, except for leases of
low value assets. For these leases of low value assets, the Company recognises the lease
payments as an operating expense on a straight-line basis over the term of the lease. The right-
of-use assets are initially recognised at cost, which comprises the initial amount of the lease
liability adjusted for any lease payments made at or prior to the commencement date of the lease
plus any initial direct costs less any lease incentives. They are subsequently measured at cost less
accumulated depreciation and impairment losses, if any. Right-of-use assets are depreciated from
the commencement date on a straight-line basis over the shorter of the lease term and useful life
of the underlying asset.
Lease liability is initially measured at the present value of future lease payments. Lease payments
are discounted using the interest rate implicit in the lease or, if not readily determinable, using
the incremental borrowing rates. Lease liability is subsequently remeasured by increasing the
carrying amount to reflect interest on the lease liability and reducing the carrying amount to
reflect the lease payments made. A lease liability is remeasured upon the occurrence of certain
events such as a change in the lease term or a change in an index or rate used to determine lease
payments. The remeasurement normally also adjusts the leased assets.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease
payments have been classified as financing cash flows.
Where Company is lessor:
The Company has given certain premises under operating lease or leave and license agreement.
The Company retains substantially all risks and benefits of ownership of the leased asset and
hence classified as operating lease. Lease income on such operating lease is recognised in profit
or loss under 'Rent' as Other income.
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