2 Significant Accounting Policies A Basis of Preparation and Presentation
"The Financial Statements have been prepared on the historical cost basis except for following assets and liabilities which have been measured at fair value amount:
i) Certain Financial Assets and Liabilities (including derivative instruments),
ii) Defined Benefit Plans - Plan Assets and
iii) Equity settled Share Based Payments
The Financial Statements of the Company have been prepared to comply with the Indian Accounting standards ('Ind AS'), including the rules notified under the relevant provisions of the Companies Act, 2013, (as amended from time to time) and Presentation and disclosure requirements of Division II of Schedule III to the Companies Act, 2013, (Ind AS Compliant Schedule III) as amended from time to time. The Company's Financial Statements are presented in Indian Rupees ('), which is also its functional currency and all values are rounded to the nearest Lakhs ('00,000), except when otherwise indicated.
2.01 Summary of 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 is treated as Current when it is - Expected to be realized or intended to be sold or consumed in normal operating cycle;
- Held primarily for the purpose of trading;
- Expected to be realised within twelve months after the reporting period, or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non-current.
A liability is 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 twelve 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.
The Company classifies all other liabilities as non-current. Deferred tax assets and liabilities are classified as non-current assets and liabilities.
B Property, Plant & Equipment
Property, plant and equipment are stated at cost, net of recoverable taxes,trade discounts and rebates less accumulated depreciation and impairment losses, if any. Such costs comprises of purchase price, borrowing cost and any initial directly attributable cost of bringing the asset to its working condition for its intended use. Net charges on foreign exchange contracrs and adjustments arising from exchange rate variations attributable to the assets.
Subsequent costs are included in the assets carrying amount or recognized as separate asset as appropriate only when it is probable that future economic benefits associated with the item will flow to the entity and cost can be measured reliably.
Depreciation is provided for property, plant and equipment on a Straight-Line Basis(SLM) so as to expense the cost less residual value over their estimated useful lives based on a technical evaluation. The estimated useful lives and residual values are reviewed at the end of each reporting period with the effect of any change in estimated accounted for on a prospective basis.
Gains or losses arising from derecognition of a property, plant and equipment are measured as the difference between net disposal proceeds and the carrying amount of the asset and are recognized in the statmentof profit & loss when the asset is derecognized.
asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the cash generating unit (CGU) to which the asset belongs. If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognised in the statement of profit and loss.
C Intangible Assets
Intangible assets purchased are measured at cost as at the date of acquisition, as applicable, less accumulated amortisation and accumulated impairment, if any.
Intangible assets consist of Trademark and Patent and software licenses which are amortised over license period which equates the economic useful life ranging between 5-10 years on a straight-line basis over the period of its economic useful life.
Intangible assets with finite life are evaluated for recoverability whenever there is any indication that their carrying amounts may not be recoverable. If any such indication exists, the recoverable amount (i.e., higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the cash generating unit (CGU) to which the asset belongs. If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognised in the statement of profit and loss.
Gains or losses arising from de recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the Statement of Profit and Loss when the asset is derecognized.
D Leases:
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.
Company as a Lessee
"The Company has elected to apply the requirements of Ind AS 116 Leases to short-term leases of all assets that have a lease term of 12 months or less and leases for which the underlying asset is of low value. The lease payments associated with these leases are recognised as an expense on a straight-line basis over the lease term.
The company has entered in Lease for the land as well building. The lease agreement provides for a noncancellable term of 6 months and total period covered by the agreement is 5 years. However, there is a cancellation clause available to lessor as well as the lessee and this carries no significant penalty to lessor or lessee. Hence, the lease is cancellable at any point of time without incurring any significant penalty. Owing to this the lease term is determined as 6 months which is less than 12 months and thus the exemption available for short term lease is exercised by the company. "
E Research and Development Expenditure
Revenue expenditure pertaining to research is charged to the Statement of Profit and Loss as and when incurred. Development costs are capitalized as an intangible asset if it can be demonstrated that the project is expected to generate future economic benefits, it is probable that those future economic benefits will flow to the entity and the costs of the asset can be measured reliably, else it is charged to the Statement of Profit and Loss.
F Cash and Cash Equivalent
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.
G Inventories
Inventories consists of a) Raw materials,Indegenous and Imported, b) Testing Material; and c) Comsumable Stores d) Consumable Stores e) Stock in Process f) Stationery Stock. Inventories are carried at lower of cost and net realizable value. The cost of raw materials, sub-assemblies and components is determined on a weighted average basis. Cost of finished goods produced or purchased by the Company includes direct material and labor cost and a proportion of manufacturing overheads.
H Finance Cost
Borrowing costs include exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. 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. All other borrowing costs are charged to the Statement of Profit and Loss for the period for which they are incurred.
I Impairment of Non-Financial Assets - Property, Plant and Equipment and Intangible Assets
The Company assesses at each reporting date as to whether there is any indication that any Property, Plant and Equipment and Intangible Assets or group of Assets, called Cash Generating Units (CGU) may be impaired. If any such indication exists, the recoverable amount of an asset or CGU is estimated to determine the extent of impairment, if any. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the CGU to which the asset belongs. An impairment loss is recognised in the Statement of Profit and Loss to the extent, asset's carrying amount exceeds its recoverable amount.
The recoverable amount is higher of an asset's fair value less cost of disposal and value in use. Value in use is based on the estimated future cash flows, discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value of money and risk specific to the assets. The impairment loss recognised in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.
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