(c) MATERIAL ACCOUNTING POLICIES

i) Property, Plant and Equipment

Freehold land is carried at historical cost. All
other items of property, plant and equipment are
stated at acquisition cost net of accumulated
depreciation and accumulated impairment
losses, if any. The cost of an item of property,

plant and equipment comprises of its purchase
price including import duties and other non¬
refundable purchase taxes or levies, directly
attributable cost of bringing the asset to its
working condition for its intended use and the
initial estimate of decommissioning, restoration
and similar liabilities, if any. Any trade discount
or rebate is deducted in arriving at the purchase
price. Cost includes cost of replacing a part of
a plant and equipment if the recognition criteria
are met.

Items such as spare parts, stand-by equipment
and servicing equipment that meet the definition
of property, plant and equipment are capitalised
at cost and depreciated over their useful life.
Costs in nature of repairs and maintenance are
recognised in the statement of profit and loss as
and when incurred.

Capital work-in-progress includes cost of
property, plant and equipment not ready for the
intended use as at the balance sheet date.

The cost and related accumulated depreciation
are eliminated from the Financial Statements
upon sale or retirement of the property, plant and
equipment and the resultant gains or losses are
recognised in the statement of profit and loss.
Property, plant and equipment to be disposed of
are reported at the lower of the carrying value or
the fair value less cost of disposal.

Where an item of property, plant and equipment
comprises major components having different
useful lives, these components are accounted
for as separate items.

The Company had elected to continue with the
carrying value of all of its property, plant and
equipment appearing in the financial statements
prepared in accordance with accounting
standards notified under section 133 of the
Act, 2013 read with Rule 7 of the Companies
(Accounts) Rules, 2014 (Generally Accepted
Accounting Standards "Previous GAAP") and
used as the deemed cost of the property, plant
and equipment in the opening balance sheet
under Ind AS effective 1^st April, 2016.

Exchange differences arising on translation
of long-term foreign currency monetary items
recognised in the Previous GAAP financial
statements in respect of which the Company has
elected to recognise such exchange differences

as a part of cost of assets is allowed under Ind
AS 101. Such differences are added/ deducted
to/ from the cost of assets and are recognised in
the statement of profit and loss on a systematic
basis as depreciation over the balance life of the
assets.

ii) Intangible Assets

Intangible assets acquired are initially measured
at cost. Intangible assets arising on acquisition
of business are measured at fair value as at
date of acquisition. Following initial recognition,
intangible assets with defined useful lives are
carried at cost less accumulated amortisation
and accumulated impairment loss, if any.
Intangible Assets consist of Computer Software
license or rights under the license agreement are
measured on initial recognition at cost. Costs
comprise of license fees and cost of system
integration services and development.

The carrying amount of an intangible asset is
derecognised when no future economic benefits
are expected from its use.

The Company had elected to continue with the
carrying value of all of its intangible Assets
appearing in the financial statements prepared
in accordance with Indian accounting standards
notified under section 133 of the Act, 2013 read
with Rule 7 of the Companies (Accounts) Rules,
2014 (Generally Accepted Accounting Standards
"Previous GAAP") and used as the deemed cost
of the Intangible Assets in the opening balance
sheet under Ind AS effective 1^st April, 2016.

iii) Depreciation on Property, Plant and Equipment
and Amortisation of intangible Assets
Depreciation on property, plant and equipment
is provided on pro rata basis using the straight¬
line method based on useful life of the assets
as prescribed in Schedule II to the Act, 2013 in
consideration with useful life of the assets as
estimated by the management. Depreciation is
not recorded on capital work-in-progress until
construction and installation are completed
and the asset is ready for its intended use by
management Intangible Assets with finite lives
are amortised on a straight-line basis over the
estimated useful economic life. The amortisation
expense on intangible assets with finite lives is
recognised in the statement of profit and loss.

The estimated useful lives, residual values and
methods of depreciation of property, plant &
equipment are reviewed at the end of each
financial year. If any of these expectations
differ from previous estimates, such change
is accounted for as a change in an accounting
estimate and adjusted prospectively, if any.

The estimated useful life of items of property,
plant and equipment and intangible assets are:

Freehold land is not depreciated.

The management believes that these estimated
useful lives are realistic and reflect fair
approximation of the period over which the
assets are likely to be used.

iv) Impairment of Assets

At each balance sheet date, the Company
reviews the carrying value of its property, plant
and equipment and intangible assets which
are subject to depreciation and amortisation
respectively, to determine whether there is any
indication that the carrying value of those assets
may not be recoverable through continuing use.
If any such indication exists, the recoverable
amount of the asset is reviewed in order to
determine the extent of impairment loss (if any).
An impairment loss on such assessment will
be recognised wherever the carrying value of
an asset exceeds its recoverable amount. The
recoverable amount of the assets is net selling
price or value in use, whichever is higher. While
assessing value in use, the estimated future
cash flows are discounted to the present value

by using weighted average cost of capital. A
previously recognised impairment loss is further
provided or reversed depending on changes in
the circumstances and to the extent that carrying
value of the assets does not exceed the carrying
value that would have been determined if no
impairment loss had previously been recognised.
Assets that have an indefinite useful life, for
example goodwill, are not subject to amortisation
and are tested for impairment annually and
whenever there is an indication that the asset
may be impaired.

v) Leases

A contract is, or contains, a lease, if the contract
conveys the right to control the use of an
assets for a period of time in exchange for
consideration.

The Company as a Lessee

The Company assesses whether a contract

is qualifies to be a lease at the inception of

contract.

At the date of the commencement of the lease,
the Company recognises a right-of-use asset
("ROU") and a corresponding lease liability for all
lease contracts in which it is a lessee, except for
leases contract for a period of twelve months or
less (short term leases), variable leases and low
value leases, in those cases the lease payments
are recognised in the statement of profit and
loss on a straight-line basis over the term of the
lease.

ROU is initially recognised at cost, which
comprises of 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
incentive received and estimated of costs to
be incurred by the lessee in dismantling and
removing the underlying asset or restoring the
underlying asset or site on which it is located.
They are subsequently measured at cost less
accumulated depreciation and impairment
losses.

ROU is depreciated from the commencement
date on a straight-line basis over the lease term
or useful life of the underlining asset, whichever
is shorter. ROU is tested for impairment and
account for as per impairment of assets policy
of the Company.

The lease liability is initially measure at the
present value of the future lease payments,
which comprises of the fixed payments and
with agreed time based incremental, variable
lease payments, guaranteed residual value
or exercise price of purchase option, if the
Company is reasonably certain to exercise the
option. The lease payments are discounted
using interest rate implicit in the lease or, if
not readily determinable, using incremental
borrowing rates. Lease liabilities are remeasured
with a corresponding adjustment to the related
right of use asset if the Company changes
its assessment if whether it will exercise an
extension or a termination option.

Lease liability and ROU asset have been
separately presented in the Balance Sheet.
Interest expense on lease liability is reported
as finance cost in the statement of profit and
loss account and lease payments have been
classified as financing cash flows.

The Company as a Lessor
Leases for which the Company is a lessor
is classified as a finance or operating lease.
Whenever the terms of the lease transfer
substantially all the risks and rewards of
ownership to the lessee, the contract is classified
as a finance lease. All other leases are classified
as operating leases. For operating leases mainly
of workers quarters and part of the factory
premises given to a subsidiary are recognised in
the statement of profit and loss on straight line
basis.

vi) Investment in Subsidiaries and Joint Venture

Investment in subsidiaries and joint venture are
carried at cost less accumulated impairment
losses, if any. Where an indication of impairment
exits, the carrying amount of the investments is
assessed and written down immediately to its
recoverable amount. On disposal of investments
in subsidiaries and joint venture, the difference
between net disposal proceeds and the carrying
amounts are recognised in the statement of
profit and loss.

vii) Inventories

• Raw Materials, Work-in-Progress and
Finished goods are valued at the lower
of cost or net realisable value. The cost is
determined using FIFO method.

• The cost of Inventories of work-in-progress
and finished goods comprises the cost of
purchases and the cost of conversion and in
case of finished goods it also includes the
cost of packing materials.

The cost of purchase comprises of the
purchase price including duties and taxes
(other than those subsequently recoverable
by the Company from the taxing authorities),
freight inward and other expenditure directly
attributable to the acquisition but net of
trade discount, rebates, duties for import
under advance licenses and other similar
items.

The cost of conversion comprises of
depreciation and repairs and maintenance of
factory buildings and plant and machineries,
power and fuel, factory management and
administration expenses and consumable
stores and spares.

• Packing Materials, Consumable Stores and
Spares and Fuel are valued at lower of cost
or net realisable value.

The cost is determined using FIFO method.

• Scrap is valued at net realisable value.

Net realisable value is the estimated selling
price in the ordinary course of business,
less estimated costs of completion and
estimated cost to make sale.

viii) Financial Assets and Financial Liabilities

The Company recognises financial assets and
financial liabilities when it becomes a party to
the contractual provisions of the instrument. All
financial assets and liabilities are recognised at
fair value on initial recognition and adjusted for
transaction costs that are directly attributable to
the acquisition or issues of financial assets and
financial liabilities in case of financial assets or
financial liabilities not at fair value through profit
or loss account.

Where the fair value of financial assets and
financial liabilities at initial recognition is
different from its transaction price, the difference
between the fair value and transaction price is
recognised in the statement of profit and loss.
However, trade receivables that do not contain

Fair value movements are recognised in the
other comprehensive income.

The Company in respect of equity instruments
(other than equity instruments of subsidiaries
and joint venture) which are not held for trading
has made an irrevocable election to present the
subsequent changes in fair value of such equity
instruments in other comprehensive income.
Such an election is made by the Company on
an instrument-by-instrument basis at the time
of initial recognition of such equity investments.
On de-recognition, cumulative gain or loss
previously recognised in other comprehensive
income is reclassified from the equity to retained
earnings in the statement of changes in equity.

A financial asset not classified as either
amortised cost or at fair value through other
comprehensive income is carried at fair value
through the statement of profit and loss.
Impairment of Financial Assets
The Company applies loss allowance using the
Expected Credit Loss (ECL) model for the financial
assets which are measured at amortised cost or
fair value through other comprehensive income.
Loss allowance for trade receivables with no
significant financing component is measured
following simplified approach wherein an
amount equal to lifetime ECL is measured and
recognised as a loss allowance.

The application of simplified approach does
not require the Company to track changes in
credit risk. Rather, it recognises impairment
loss allowance based on life time ECLs at each
reporting date, right from its initial recognition.
For all other financial assets (apart from trade
receivables that do not constitute of financing
transaction), ECLs are measured at an amount
equal to 12-month ECL, unless there has been
a significant increase in credit risk for initial
recognition in which case those are measured at
lifetime ECL.

De-recognition of Financial Assets

A financial asset is de-recognised only when

• The contractual rights to cash flows from
the financial asset expire;

• The Company has transferred the
contractual rights to receive cash flows
from the financial asset or;

• Retains the contractual rights to receive
the cash flows of the financial asset, but
assumes a contractual obligation to pay the
cash flows to one or more recipients.

Where the Company has transferred an asset, the
Company evaluates whether it has transferred
substantially all risks and rewards of ownership
of the financial asset. In such cases, the financial
asset is de-recognised. Where the Company
has not transferred substantially all risks and
rewards of ownership of the financial asset, the
financial asset is not de-recognised.

Where the Company has neither transferred
a financial asset nor retained substantially all
risks and rewards of ownership of the financial
asset, the financial asset is de-recognised if the
Company has not retained control of the financial
asset. Where the Company retains control
of the financial asset, the asset is continued
to be recognised to the extent of continuing
involvement in the financial asset.

b) Financial Liabilities

Classification as debt or equity
Financial liabilities and equity instruments issued
by the Company are classified according to the
substance of the contractual arrangements
entered into and the definitions of a financial
liability and an equity instrument.

Equity Instrument

An equity instrument is any contract that
evidences a residual interest in the assets of
the Company after deducting all its liabilities.
Equity instruments are recorded at the proceeds
received, net of direct issue costs.

Financial Liability

Trade and other payables are initially measured
at fair value, net of transaction costs and are
subsequently measured at amortised cost using
the effective interest rate 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.

Interest bearing loans and overdrafts are initially
measured at fair value, and are subsequently
measured at amortised cost using effective
interest rate method. Any difference between
proceeds (net of transaction cost) and the
settlement amount of borrowing is recognised
over the terms of the borrowings in the statement
of profit and loss.

De-recognition

A financial liability is de-recognised when the
obligation specified in the contract is discharged,
cancelled or has expired.

c) Financial Guarantee Contracts

Financial guarantee contracts are those
contracts that require specific payment to
be made to reimburse the holder for a loss
it incurs because the specified debtor fails
to make payment when due in accordance
with the terms of a debt instrument. Financial
guarantee contracts are recognised initially as
a liability at fair value adjusted for transaction
cost that are directly attributable to the issuance
of the guarantee. Subsequently, the liability
is measured at the higher of the amount of
loss allowance determined as per impairment
requirements of Ind AS 109 and the amount
recognised less cumulative amount of income
recognised in accordance with the principles of
Ind AS 115 amortisation.

d) Derivative Financial Instruments

The Company enters into derivative financial
contracts in the nature of forward currency
contracts with banks to reduce business risks
which arise from its exposures to foreign
exchange. The instruments are employed as
hedges of transactions included in the financial
statements or for highly probable forecast
transactions/ firm contractual commitments.

Derivatives are initially accounted for and
measured at fair value from the date the derivative
contract is entered into and are subsequently re¬
measured to their fair value at the end of each
reporting period. Any change therein is generally
recognised in the statement of profit and loss.
Derivatives are carried as financial assets when
fair value is positive and as financial liabilities
when fair value is negative.

e) Offsetting Financial Instruments

Financial assets and liabilities are offset and
the net amount is reported in the Balance Sheet
where there is a legally enforceable right to
offset the recognised amounts and there is an
intention to settle on a net basis or realise the
asset and settle the liability simultaneously. The
legally enforceable right must not be contingent
on future events and must be enforceable in
the normal course of business and in the event
of default, insolvency or bankruptcy of the
Company or the counterparty.

ix) Fair Value Measurement

The Company measures financial instruments at
fair value in accordance with the accounting policies
mentioned above. Fair value is the price that would
be received to sell an asset or paid to transfer a
liability in an orderly transaction between market
participants at the measurement date. The fair value
measurement is based on the presumption that the
transaction to sell the asset or transfer the liability
takes place either in the principal market for asset or
liability or in the absence of a principal market, in the
most advantageous market for the asset or liability.

All assets and liabilities for which fair value is
measured or disclosed in the financial statements
are categorised within the fair value hierarchy that
categorises into three levels, described as follows:-

• Level 1— quoted (unadjusted) market prices in
active markets for identical assets or liabilities

• Level 2— inputs other than quoted prices
included within Level 1 that are observable for
the asset or liability, either directly or indirectly

• Level 3— inputs that are unobservable for the
asset or liability

For assets and liabilities that are recognised in the
financial statements at fair value on a recurring
basis, the Company determines whether transfers
have occurred between levels in the hierarchy by re¬
assessing categorisation at the end of each reporting
period and discloses the same.

x) Non-Current Assets held for sale

The Company classifies non-current assets as held
for sale if their carrying amounts will be recovered
principally through a sale rather than through
continuing use of the assets and actions required
to complete such sale indicate that it is unlikely that
significant changes to the plan to sell will be made
or that the decision to sell will be withdrawn. Also,
such assets are classified as held for sale only if the
management expects to complete the sale within
one year from the date of classification.

Non-Current assets classified as held for sale are
measured at the lower of their carrying amount and
the fair value less cost to sell and are presented
separately from other assets in the balance sheet.
The liabilities related to the assets held for sale are
presented separately from other liabilities in the
balance sheet. Non-Current assets held for sale are
not depreciated or amortised.