NOTE 2 SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of preparation

The accounts have been prepared in accordance with the provisions of Companies Act 2013 and
Indian Accounting Standards (Ind AS) and Disclosures thereon comply with requirements of Ind AS,
stipulations contained in Schedule- III (revised) as applicable under Section 133 of the Companies
Act, 2013 read with, Companies (Indian Accounting Standards) Rules 2015 as amended from time to
time, MSMED Act, 2006, other pronouncement of ICAI, provisions of the Companies Act and Rules
and guidelines issued by SEBI as applicable.

“The Ministry of Corporate Affairs (MCA) has notified the Companies (Accounting Standards)
Amendment Rules, 2016 vide its notification dated 30 March 2016. The said notification read with
Rule 3(2) of the Companies Accounting Standards) Rules, 2006 is applicable to accounting period
commencing on or after the date of notification i.e.1 April 2016”

All the assets and liabilities have been classified as current or non-current as per the Company’s
normal operating cycle and other criteria set out in Schedule III to the Companies Act, 2013. Based
on the nature of products and the time between the acquisition of assets for processing and their
realization in cash and cash equivalent, the Company has ascertained its operating cycle to be 12
months for the purpose of current - non-current classification of assets and liabilities.

2.2 System of accounting

1) The Company follows the mercantile system of accounting and recognises income and
expenditure on an accrual basis except in case of significant uncertainties.

2) Financial Statements are prepared under the Historical cost convention. These costs are not
adjusted to reflect the impact of changing value in the purchasing power of money.

3) Estimates and Assumptions used in the preparation of the financial statements and disclosures
are based upon management’s evaluation of the relevant facts and circumstances as of the
date of the financial statements, which may differ from the actual results at a subsequent
date.

2.3 Use of Estimates

The Ind AS enjoins management to make certain estimates and assumptions that affect the amounts
reported in the financial statements and notes thereto. Differences between actual results and
estimates are recognized in the period in which the results are known/materialize.

2.4 Property, Plants and Equipments, Depreciation/Amortization
A. Property, Plants and Equipments

i) The Property, Plants and Equipments are held for use in production, supply of goods or
services or for administrative purposes. They are stated at their original cost net of tax/duty,
credits availed, if any, including incidental expenditure related to acquisition and installation
less accumulated depreciation. Cost represents all expenses directly attributable to bringing
the asset to its working condition capable of operating in the manner intended and includes
borrowing cost capitalized in accordance with the Company’s Accounting Policy.

B. Depreciation

Depreciation is provided on straight line method other than on freehold land and properties
under construction less their residual values over their useful lives specified in Schedule II to
the Companies Act 2013. The estimated useful life and residual values are also reviewed at
each financial year end and the effect of any change in the estimates of useful life/residual
value is accounted on prospective basis. There is no deviation in useful life as specified in
Schedule II to the Companies Act 2013.

Depreciation on fixed assets has been calculated on pro-rata basis with reference to the
month in which the assets are put to use.

2.5 Investment property

Properties, including those under construction, held to earn rentals and/or capital appreciation are
classified as investment property and measured and reported at cost, including transaction costs.

2.6 Financial instruments

Financial assets and liabilities are recognised when the Group becomes a party to the contractual
provisions of the instrument. Financial assets and liabilities are initially measured at fair value.
Transaction costs that are directly attributable to the acquisition or issue of financial assets and
financial liabilities (other than financial assets and financial liabilities at fair value through profit or
loss) are added to or deducted from the fair value measured on initial recognition of financial asset or
financial liability.

Cash and cash equivalents

The Group considers all highly liquid financial instruments, which are readily convertible into known
amounts of cash that are subject to an insignificant risk of change in value and having original
maturities of three months or less from the date of purchase, to be cash equivalents. Cash and cash
equivalents consist of balances with banks which are unrestricted for withdrawal and usage.

Financial assets at amortized cost

Financial assets are subsequently measured at amortized cost if these financial assets are held
within a business whose objective is to hold these assets 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.

Financial assets at fair value through other comprehensive income

Financial assets are measured at fair value through other comprehensive income if these financial
assets are held within a business whose objective is achieved by both collecting contractual cash
flows on specified dates that are solely payments of principal and interest on the principal amount
outstanding and selling financial assets.

Financial assets at fair value through profit or loss

Financial assets are measured at fair value through profit or loss unless they are measured at
amortised cost or at fair value through other comprehensive income on initial recognition. The
transaction costs directly attributable to the acquisition of financial assets and liabilities at fair value
through profit or loss are immediately recognised in statement of profit and loss.

Financial liabilities

Financial liabilities are recognised when the Company becomes a party to the contractual provisions
of the instrument Financial liabilities are initially measured at the amortised cost unless at initial
recognition, they are classified as fair value through profit and loss.

Financial liabilities are subsequently measured at amortised cost using the EIR method. Financial
liabilities carried at fair value through profit or loss are measured at fair value with all changes in fair
value recognised in the Statement of Profit and Loss.

Equity instruments

An equity instrument is a contract that evidences residual interest in the assets of the company after
deducting all of its liabilities. Equity instruments recognised by the Group are recognised at the
proceeds received net of direct issue cost.

2.7 Cash and Bank Balances

Cash and bank balances also include fixed deposits, margin money deposits, earmarked balances
with banks and other bank balances which are unrestricted for withdrawal and usage. Short term and
liquid investments being subject to more than insignificant risk of change in value, are not included as
part of cash and cash equivalents.

2.8 Revenue Recognition

a) Sales

i) Sales of goods are recognized on dispatch and in accordance with the terms and
conditions of the sale. Sale includes indirect taxes. Domestic sales are accounted for
on dispatch from the point of sale corresponding to transfer of significant risks and
rewards of ownership to the buyer.

ii) Contract & Machinery Hire Charges are recognized on accrual basis.

b) Other Income

The Company recognizes income on accrual basis. However, where the ultimate collection of
the same lacks reasonable certainty, revenue recognition is postponed to the extent of
uncertainty.

2.9 Impairment of Assets

At the end of each accounting year the carrying amount of property, plant and equipment intangible
assets and financial assets is reviewed for impairment. Impairment, if any, is recognized where the
carrying amount exceeds the recoverable amounts being the higher of net realizable price and value
in use. An impairment loss is charged to Statement of Profit and loss in the year in which an asset
is identified as impaired. The impairment loss recognized in prior accounting periods is reversed if
there has been a change in the estimate of recoverable amount.

2.10 Taxes on Income

Income tax expense for the year comprises of current tax and deferred tax. Current tax provision has
been determined on the basis of relief, deductions etc. available under the Income Tax Act 1961 and
Deferred tax is provided using balance sheet approach on temporary differences at the reporting date
as difference between the tax base and the carrying amount of assets and liabilities. Deferred tax is
recognized subject to the probability that taxable profit will be available against which the temporary
differences can be reversed.

2.11 Foreign Currency Transactions

1) Foreign currency transactions are recorded at the exchange rate prevailing on the date of the
transaction.

2) Monetary items denominated in foreign currencies (such as cash, receivables, payables etc.)
outstanding at the year end, are translated at exchange rates applicable on year end date.

3) Non-monetary items denominated in foreign currency, (such as plant and equipment) are

valued at the exchange rate prevailing on the date of transaction and carried at cost.

4) Any gains or losses arising due to exchange differences arising on translation or settlement
are accounted for in the Statement of Profit and Loss.