6 Material accounting policies
The following are the material accounting policies adopted in
the preparation of these financial statements. These policies
have been consistently applied to all the years presented, unless
otherwise stated.
The Company uses the following critical accounting judgements,
estimates and assumptions in preparation of its standalone
financial statements:
6.1 Recognition of Revenue and Expenditure
Revenue from contracts with customers is recognized on transfer
of control of promised goods or services to a customer at an
amount that reflects the consideration to which the Company is
expected to be entitled to in exchange for those goods or services.
Revenue towards satisfaction of a performance obligation is
measured at the amount of transaction price (net of variable
consideration) allocated to that performance obligation.The
transaction price of goods sold and services rendered iss net
of variable consideration on account of various discounts and
schemes offered by the Company as part of the contract.This
variable consideration is estimated based on the expected value
of outflow. Revenue (net of variable consideration) is recognized
only to the extent that it is highly probable that the amount will not
be subject to significant reversal when uncertainty relating to its
recognition is resolved.
Sale of Goods
Revenue from sale of products is recognized 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.
Interest
I nterest income is recognized on a time proportion basis taking
into account the amount outstanding and the effective interest rate
method. Interest income is included under the head "Other Income"
in statement of profit and loss.
Export Incentive
Revenue from export incentives are accounted for on export
of goods if the entitlements can be estimated with reasonable
assurance and condition precedent to claim are fulfilled.
Expenses
All expenses are charged in statement of profit and loss as and
when they are incurred.
6.2 Property, Plant & Equipment
Property, plant and equipment are stated at cost comprising of
purchase price and any initial directly attributable cost of bringing
the asset to its working condition for its intended use, less
accumulated depreciation and impairment loss, if any.
Depreciation is provided for property, plant and equipment on a
straight line method so as to expenses the cost less residual value
over their useful lives assets as prescribed in Schedule II of the
Companies Act, 2013. The estimated useful lives and residual value
are reviewed at the end of each reporting period, with the effect of
any change in estimate accounted for on a prospective basis.
Depreciation is not recorded on capital work-in progress until
construction and installation is completed and the asset is
for intended use.
6.3 Inventory
I nventories consists of Raw Material, Work In Progress, Finished
Goods, Stores & Spares and packing materials.
Inventories are valued at the lower of cost or net realisable value.
Cost is determined on weighted average basis.
Raw materials, Stores & Spares & Packing material: Cost
includes cost of purchase and other costs incurred in bringing
the inventories to their present location and condition on the
weighted average basis.
Finished goods and work in progress: Cost includes cost of direct
materials and labour and a proportion of manufacturing overheads
based on the normal operating capacity on a weighted average
basis. Cost of finished goods includes 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 costs of completion and the
estimated costs necessary to make the sale.
6.4 Employee benefits
a) Short Term Employee Benefits
All employee benefits payable wholly within twelve months of
rendering the service are classified as short-term employee
benefits. Benefits such as salaries, wages etc. and the
expected cost of ex-gratia are recognised in the period in
which the employee renders the related service. A liability is
recognised for the amount expected to be paid when there is
a present legal or constructive obligation to pay this amount
as a result of past service provided by the employee and the
obligation can be estimated reliably.
b) Defined Contribution Plan
Contributions to defined contribution plans are recognised as
expense when employees have rendered services entitling
them to such benefits.
c) Defined Benefit Plan
For defined benefit plans, the cost of providing benefits is
determined using the Projected Unit Credit method, with
actuarial valuations being carried out at each balance sheet
date. Remeasurement, comprising actuarial gains and losses,
the effect of the changes to the asset ceiling and the return
on plan assets (excluding 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.
Past service cost, both vested and unvested, is recognised
as an expense at the earlier of (a) when the plan amendment
or curtailment occurs; and (b) when the entity recognises
related restructuring costs or termination benefits.
The retirement benefit obligations recognised in the balance
sheet represents the present value of the defined benefit
obligations reduced by the fair value of scheme assets.
Any asset resulting from this calculation is limited to the
present value of available refunds and reductions in future
contributions to the scheme.
6.5 Employee Share based payments:
Equity- settled share-based payments to employees are measured
at the fair value of the employee stock options at the grant date
using Black-Scholes model. The fair value determined at the grant
date of the equity-settled share-based payments is amortized over
the vesting period, based on the Company's estimate of equity
instruments that will eventually vest, with a corresponding increase
in equity. At the end of each reporting period, the Company
revises its estimate of the number of equity instruments expected
to vest. The impact of the revision of the original estimates, if
any, is recognized in the Statement of Profit and Loss such that
the cumulative expense reflects the revised estimate, with a
corresponding adjustment to the Share Based Payment Reserve.
6.6 Taxation
Tax expense is the aggregate amount included in the determination of
profit or loss for the period in respect of current tax and deferred tax.
Current tax
Current tax is the amount of income taxes payable in respect of
taxable profit for a period. 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 under the
Income Tax Act, 1961.
Current tax is measured using tax rates that have been enacted
by the end of reporting period for the amounts expected to be
recovered from or paid to the taxation authorities.
Deferred Tax
Deferred tax is recognized 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 under Income tax Act, 1961.
Deferred tax liabilities are generally recognized for all taxable
temporary differences. However, in case of temporary differences
that arise from initial recognition of assets or liabilities in a
transaction (other than business combination) that affect neither
the taxable profit nor the accounting profit, deferred tax liabilities
are not recognized. Also, for temporary differences if any that may
arise from initial recognition of goodwill, deferred tax liabilities are
not recognized.
Deferred tax assets are generally recognized for all deductible
temporary differences to the extent it is probable that taxable
profits will be available against which those deductible temporary
difference can be utilized. In case of temporary differences that arise
from initial recognition of assets or liabilities in a transaction (other
than business combination) that affect neither the taxable profit nor
the accounting profit, deferred tax assets are not recognized.
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 the
benefits of part or all of such deferred tax assets to be utilized.
Deferred tax assets and liabilities are measured at the tax rates
that have been enacted or substantively enacted by the balance
sheet date and are expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled.
Presentation of current and deferred tax:
Current and deferred tax are recognized as income or an expense in
the Statement of Profit and Loss, except when they relate to items
that are recognized in Other Comprehensive Income, in which case,
the current and deferred tax income/expense are recognized in
Other Comprehensive Income.
The Company offsets current tax assets and current tax liabilities,
where it has a legally enforceable right to set off the recognized
amounts and where it intends either to settle on a net basis, or
to realize the asset and settle the liability simultaneously. In case
of deferred tax assets and deferred tax liabilities, the same are
offset if the Company has a legally enforceable right to set off
corresponding current tax assets against current tax liabilities and
the deferred tax assets and deferred tax liabilities relate to income
taxes levied by the same tax authority on the Company.
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