Note 2: Significant accounting policies
The significant accounting policies applied by the Company in
the preparation of its financial statements are listed below. Such
accounting policies have been applied consistently to all the
periods presented in these financial statements.
(i) Statement of compliance
The financial statements are prepared and presented
in accordance with indian Accounting standards (ind
As) notified under the Companies (indian Accounting
standards) Rules 2015, as amended from time to time as
notified under section 133 of the Companies Act 2013, the
relevant provision of the Companies Act 2013 ("the Act”) and
other accounting principles generally accepted in india.
(ii) Basis of preparation
The standalone financial statements have been prepared
in confirmity with indian Accounting standards (ind As)
prescribed under section 133 of the Companies Act, 2013
read with the Companies (indian Accounting standards)
Rules, 2015 as amended
The financial statements have been prepared on accrual
basis under the historical cost basis except for certain
financial instruments which are measured at fair value at
the end of each reporting period.
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,
regardless of whether that price is directly observable or
estimated using another valuation technique. in estimating
the fair value of an asset or a liability the Company takes into
account the characteristics of the asset or liability if market
participants would take those characteristics into account
when pricing the asset or liability at the measurement date.
Fair value for measurement and/or disclosure purposes in
these financial statements is determined on such a basis,
except for leasing transactions that are within the scope of
ind As 116, and measurements that have some similarities to
fair value but are not fair value, such as net realizable value
in ind As 2 or value in use in ind As 36.
in addition, for financial reporting purposes, fair value
measurements are categorised into Level 1, 2, or 3
based on the degree to which the inputs to the fair value
measurements are observable and the significance of the
inputs to the fair value measurement in its entirety, which
are described as follows:
Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities that the entity can
access at the measurement date;
level 2 inputs are inputs, other than quoted prices included
within Level 1, that are observable for the asset or liability
either directly or indirectly; and
level 3 inputs are unobservable inputs for the asset or
liability.
(iii) Use of estimates and critical accounting judgements
I n preparation of the financial statements, the Company
makes judgements, estimates and assumptions about
the carrying values of assets and liabilities that are not
readily apparent from other sources. The estimates and the
associated assumptions are based on historical experience
and other factors that are considered to be relevant. Actual
results may differ from these estimates.
The estimates and the underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised and
future periods affected.
The following are the critical judgements, apart from those
involving estimations that the directors have made in the
process of applying the Company's accounting policies
and that have the most significant effect on the amounts
recognised in the standalone financial statements.
Deferred Income tax assets and liabilities
significant management judgement is required to determine
the amount of deferred tax assets that can be recognised,
based upon the likely timing and the level of future taxable
profits.
The amount of total deferred tax assets could change
if estimates of projected future taxable income or if tax
regulations udergo a change.
Income Taxes
Deferred tax assets are recognised to the extent that it is
regarded as probable that deductible temporary differences
can be realized. The Company estimates deferred tax assets
and liabilities based on current tax laws and rates and in
certain cases, business plans, including management's
expectations regarding the manner and timing of recovery
of the related assets. Changes in these estimates may
affect the amount of deferred tax liabilities or the valuation
of deferred tax assets and thereby the tax charge in the
standalone statement of Profit or Loss.
Provision for tax liabilities require judgements on the
interpretation of tax legislation, developments in case law
and the potential outcomes of tax audits and appeals which
may be subject to significant uncertainty.
Therefore, the actual results may vary from expectations
resulting in adjustments to provisions, the valuation of
deferred tax assets, cash tax settlements and therefore the
tax charge in the standalone statement of Profit or Loss.
Useful lives of Property, plant and equipment (‘PPE')
The Company reviews the estimated useful lives and
residual value of PPE at the end of each reporting period.
The factors such as changes in the expected level of usage,
technological developments and product life-cycle, could
significantly impact the economic useful lives and the
residual values of these assets. Consequently, the future
depreciation charge could be revised and thereby could
have an impact on the profit of the future years.
Defined benefit plans
The cost of the defined benefit plans and the present
value of the defined benefit obligation ('DBO') are based on
actuarial valuation using the projected unit credit method.
An actuarial valuation involves making various assumptions
that may differ from actual developments in the future.
These include the determination of the discount rate, future
salary increases and mortality rates. Due to the complexities
involved in the valuation and its long-term nature, a
defined benefit obligation is highly sensitive to changes in
these assumptions. All assumptions are reviewed at each
reporting date.
Fair value measurement of derivative and other financial
instruments
The fair value of financial instruments, that are not traded
in an active market, is determined by using valuation
techniques. This involves significant judgements in selection
of a method in making assumptions that are mainly based
on market conditions existing at the Balance sheet date and
in identifying the most appropriate estimate of fair value
when a wide range of fair value measurements are possible.
(iv) Basis of Measurement
These standalone financial statements have been prepared
under the historical cost except for the following assets
and liabilities which have been measured at fair value:
. The standalone financial statements are presented in
indian Rupees ('), which is the Company's functional and
presentation currency and all amounts are rounded to the
nearest Lakh and two decimals thereof, except as stated
otherwise.
(v) Property, Plant and Equipment (PPE) and Capital Works in
Progess
Freehold land is carried at historical cost. All other items
of property, plant and equipment are stated at historical
cost less depreciation and impairment if any. Historical
cost includes expenditure that is directly attributable to the
acquisition of the items.
Cost is inclusive of inward freight, duties and taxes and
incidental expenses related to acquisition or construction.
All upgradation / enhancements are charged off as revenue
expenditure unless they bring similar significant additional
benefits. An item of property, plant and equipment is
derecognised upon disposal or when no future economic
benefits are expected to arise from the continued use of
asset. Any gain or loss arising on the disposal or retirement
of an item of property, plant and equipment is determined as
the difference between the sales proceeds and the carrying
amount of the asset and is recognised in the statement of
profit and loss
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. The carrying
amount of any component accounted for as a separate
asset is derecognised when replaced. All other repairs and
maintenance are charged to statement of Profit or Loss
during the reporting period in which they are incurred.
Projects under which tangible property, plant and equipment
are not yet ready for their intended use are carried at cost,
comprising direct cost, related incidental expenses and
attributable interest.
Machinery spares which can be used only in connection
with an item of fixed asset and whose use is expected to be
irregular are capitalised and depreciated over the useful life
of 3 years.
Property, plant and equipment acquired in business
combination are recognised at fair value at the acquisition
date. subsequent costs are included in the assets carrying
value or recognised as a separate assets as appropriate only
when it is possible that future economic benefit associated
with the item will flow to the Company.
Projects under which tangible fixed assets are not yet ready
for their intended use are carried at cost, comprising direct
cost, related incidental expenses and attributable interest.
(vi) Depreciation and Amortisation
(a) Depreciation on the property plant and equipment is
provided over the useful life of assets which is coincide
with the life specified in schedule ii to the Companies
Act, 2013 except in the case of the certain categories
of assets, in whose case the life of the assets has
been assessed as under based on techinical advice,
taking into account the nature of the asset, the
estimated usage of the asset, the operating conditions
of the asset, past history of replacement, anticipated
technological changes,manufacturers warranties and
maintenance support etc. The range of useful lives of
the Property,Plant and Equipment are as follows:
The depreciation is provided based on the useful life of
assets specified in schedule ii to the Companies Act,
2013 on straight line method. The useful lives of assets
as mentioned above is on their single shift basis, if an
asset is used for any time during the year for double
shift, the depreciation will increase by 50% for that
period and in case of triple shift the depreciation shall
be calculated on the basis of 100%for that period.
(b) Property, plant and equipment (PPE) which are added/
disposed- of during the year, depreciation is provided
on pro-rata basis from (up- to) the date on which the
PPE is available for use (disposed-of).
(c) Assets residual values and useful lives are reviewed
at each financial year end considering the physical
condition of the assets and benchmarking analysis or
whenever there are indicators for review of residual
value and useful life adjusted prospectively, if
appropriate. Freehold land is not depreciated. Lease
hold land is amortised over the period of lease.
(d) Free-hold land are not subject to amortisation.
(vii) Intangible Assets
intangible assets acquired separately are measured on
initial recognition at historical cost. intangibles assets have
a finite life and are subsequently carried at cost less any
accumulated amortization and accumulated impairment
losses if any.
i ntangible assets with finite lives are amortized over the
useful life and assessed for impairment whenever there
is an indication that the intangible asset may be impaired.
The amortization period and the amortization method for an
intangible asset with a finite useful life are reviewed at least
at the end of each reporting period.
Changes in the expected useful life or the expected pattern
of consumption of future economic benefits embodied in
the asset are considered to modify the amortization period
or method, as appropriate, and are treated as changes
in accounting estimates. The amortization expense on
intangible assets with finite lives is recognized in the
statement of profit and loss unless such expenditure forms
part of carrying value of another asset.
Gains or losses arising from derecognition 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 or loss when the
asset is derecognized.
(viii) Investment Property
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 property
Recognition: investment property is recognised as an
asset when and only when, (a) it is probable that the future
economic benefits that are associated with the investment
property will flow to the company (b) the cost of the
investment property can be measured reliably.
Initial Measurement:
(i) investment property is initially recognised at cost
comprising the purchase price and directly attributable
transaction costs (e.g. legal services, transfer services)
(ii) The cost of a purchased investment property comprises
its purchase price and any directly attributable
expenditure. Directly attributable expenditure
includes, for example, professional fees for legal
services, property transfer taxes and other transaction
costs.
(iii) The cost of an investment property is not increased by:
(a) start-up costs (unless they are necessary to bring
the property to the condition necessary for it to
be capable of operating in the manner intended
by the management
(b) operating losses incurred before the investment
property achieves the planned level of occupancy,
or
(c) abnormal amounts of wasted material, labour
or other resources incurred in constructing or
developing the property.
(iv) if payment for an investment property is deferred,
its cost is the cash price equivalent. The difference
between this amount and the total payments is
recognised as interest expense over the period of
credit.
(v) The fair value of an asset for which comparable market
transactions do not exist is reliably measurable if (a)
the variability in the range of reasonable fair value
estimates is not significant for that asset or (b) the
probabilities of the various estimates within the range
can be reasonably assessed and used in estimating
fair value. if the entity is able to determine reliably
the fair value of either the asset received or the asset
given up, then the fair value of the asset given up is
used to measure cost unless the fair value of the asset
received is more clearly evident.
Subsequent Measurement:
(a) subsequently investment property is carried at cost
model, which is cost less accumulated depreciation
and any accumulated impairment losses.
(b) subsequent expenditures on investment property are
capitalised when it is probable that economic benefits
in excess of the original standards flow to the company,
otherwise it is charged to P&L.
Fair Value Measurement:
The fair value of an investment property is being measured
on a continuing basis. However ,in exceptional cases, there is
clear evidence when the company first acquires an investment
property (or when an existing property first becomes
investment property after a change in use) that the fair value
of the investment property is not reliably measureable on a
continuing basis. This arises when ,and only when, the market
for comparable properties is inactive and alternative reliable
measurements of fair value are not available.
Disposasls:
investment property is derecognised (eliminated from
Balance sheet) on disposal or when the investment
property is permanently withdrawn from use and no future
economic benefits are expected from its disposal. Gains or
losses arising from the retirement or disposal of investment
property is determined as the difference between the net
disposal proceeds and the carrying amount of the asset and
is recognised in profit or loss in the period of the retirement
or disposal.
depreciation or Amortisation:
i Depreciation on the investment property is provided
over the useful life of assets which is coincide with the
life specified in schedule ii to the Companies Act, 2013.
The range of useful lives of the investment property
are as follows:
The depreciation is provided based on the useful life of
assets specified in Schedule ii to the Companies Act,
2013 on straight line method.
ii I nvestment property which are added/ disposed- of
during the year, depreciation is provided on pro-rata
basis from (up- to) the date on which the investment
property is available for use (disposed-of).
iii Assets residual values and useful lives are reviewed
at each financial year end considering the physical
condition of the assets and benchmarking analysis or
whenever there are indicators for review of residual
value and useful life adjusted prospectively, if
appropriate. Freehold land is not depreciated. Lease
hold land is amortised over the period of lease.
iv Free-hold land are not subject to amortisation.
(ix) Goodwill
The excess of cost to the company of its investments
in the subsidiary companies over its share of equity of
the subsidiary companies , at the dates on which the
investments in the subsidiary companies were made, is
recognised as 'Goodwill' being an asset in the financial
statements and is tested for impairment on annual basis
as required by ind AS 36 impairment of assets. On the
other hand, where the share of equity in the subsidiary
companies as on the date of investment is in excess of cost
of investments of the company, it is recognised as 'Capital
Reserve' and shown under the head 'Reserves & Surplus',
in the financial statements. The 'Goodwill' is determined
separately for each subsidiary Company and such amounts
are not set off between different entities.
(x) Cash and cash equivalents
For the purpose of presentation in the Statement of Cash
Flows, cash and cash equivalents includes cash on hand, other
short-term, highly liquid investments with original maturities
of three months or less that are readily convertible to known
amounts of cash and which are subject to an insignificant risk
of changes in value, and bank overdrafts. Bank overdrafts are
shown within borrowings in current liabilities in the Balance
Sheet.
Cash flows are reported using the indirect method, whereby
net profit before tax is adjusted for the effects of transactions
of a non-cash nature, any deferrals or accruals of past or
future cash receipts or payments. The cash flows from
operating, investing and financing activities of the Company
are segregated based on the available information.
Short term borrowings, repayments and advances having
maturity of three months or less, are shown as net in cash
flow statement.
(xi) Inventories Raw material, work in progress, stores, traded
and finished goods
inventories are valued at the lower of cost (First in First Out
- FiFO basis) and the net realisable value after providing
for obsolescence and other losses, where considered
necessary. Cost includes cost of purchase, all charges in
bringing the goods to the point of sale, including indirect
levies, transit insurance and receiving charges. Finished
goods include appropriate proportion of overheads and,
where applicable.
Cost of inventories also include all other costs incurred
in bringing the inventories to their present location and
condition.
Rejection and scrap
Rejection and scrap are valued at net realisable value.
Net realisable value is the estimated selling price in the
ordinary course of business less the estimated costs of
completion and the estimated costs necessary to make the
sale.
(xii) Employee benefits
Employee benefits include provident fund, employee state
insurance scheme, gratuity, compensated absences and
performance incentives.
(i) Short-term obligations
Liabilities for wages and salaries, including non¬
monetary benefits that are expected to be settled
wholly within 12 months after the end of the period in
which the employees render the related service are
recognised in respect of employees' services up to
the end of the reporting period and are measured at
the amounts expected to be paid when the liabilities
are settled. The liabilities are presented as current
employee benefit obligations in the Balance Sheet.
The cost of short-term compensated absences is
accounted as under:
(a) in case of accumulated compensated absences,
when employees render the services that
increase their entitlement of future compensated
absences; and
(b) in case of non-accumulating compensated
absences, when the absences occur.
(ii) Other long-term employee benefit obligations
Provisions for other long term employee benefits-
compensated absences, a defined benefit scheme, is
made on the basis of actuarial valuation at the end of
each financial year and are charged to the statement
of profit and loss. All actuarial gains or losses are
recognised immediately in the statement of profit and
loss.
The obligations are presented as current liabilities
in the balance sheet if the entity does not have an
unconditional right to defer settlement for at least
twelve months after the reporting period, regardless
of when the actual settlement is expected to occur.
(iii) Post-employment obligations
Defined contribution plans: The Company's
contribution to provident fund are considered as
defined contribution plans and are charged as an
expense based on the amount of contribution required
to be made and when services are rendered by the
employees.
Defined benefit plans: The Company provides for
gratuity, a defined benefit retirement plan ('the
Gratuity Plan') covering eligible employees. The
Gratuity Plan provides a lumpsum payment to vested
employees at retirement, death, or termination of
employment, of an amount based on the respective
employee's salary and the tenure of employment with
the Company. Liabilities with regard to the Gratuity
Plan are determined by actuarial valuation, performed
by an independent actuary, at each balance sheet date
using the projected unit credit method.
The company recognizes the net obligation of a
defined benefit plan in its balance sheet as an asset or
liability. Gains and losses through re-measurements of
the net defined benefit liability/ (asset) are recognised
in other comprehensive income. The actual return of
the portfolio of plan assets, in excess of the yields
computed by applying the discount rate used to
measure the defined benefit obligations is recognised
in Other Comprehensive income. The effect of any
plan amendments are recognised in net profits in the
Statement of Profit and Loss.
(xiii) Foreign currency Transaction
(i) Functional and presentation currency:
The financial statements are presented in indian rupee
(iNR), which is functional and presentation currency.
(ii) transactions and balances :
Foreign currency transactions are translated into
the functional currency using the exchange rates
at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement
of such transactions and from the translation of
monetary assets and liabilities denominated in foreign
currencies at year end exchange rates are generally
recognised in statement of Profit and Loss.
Foreign exchange differences regarded as an
adjustment to borrowing costs are presented in the
statement of Profit and Loss, within finance costs. All
other foreign exchange gains and losses are presented
in the statement of Profit and Loss on a net basis
within other gains/(losses).
(xiv) Leases
As a lessee
The Company's lease asset classes primarily consist of
leases for land and buildings. The Company assesses
whether a contract contains a lease, at 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: (i)
the contract involves the use of an identified asset (ii) the
Company has substantially all of the economic benefits
from use of the asset through the period of the lease and
(iii) the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company
recognizes a right-of-use asset ("ROU") and a corresponding
lease liability for all lease arrangements in which it is a
lessee, except for leases with a term of twelve months or
less (short-term leases) and low value leases. For these
short-term and low value leases, the Company recognizes
the lease payments as an operating expense on a straight¬
line basis over the term of the lease.
Certain lease arrangements includes the options to extend
or terminate the lease before the end of the lease term.
ROU assets and lease liabilities includes these options
when it is reasonably certain that they will be exercised.
The right-ofuse assets are initially recognized 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.
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. Right of use assets are evaluated for recoverability
whenever events or changes in circumstances indicate
that their carrying amounts may not be recoverable. For the
purpose of impairment testing, the recoverable amount (i.e.
the 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.
The lease liability is initially measured at amortized cost
at the present value of the future lease payments. The
lease payments are discounted using the interest rate
implicit in the lease or, if not readily determinable, using
the incremental borrowing rates in the country of domicile
of these leases. 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 and lease payments have been classified as
financing cash flows.
(xv) Financial instruments-Initial recognition,subsequent
measurement
A financial instrument is any contact that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity
A. Investments and other financial assets
(i) Classification
The Company classifies its financial assets in the
following measurement categories:
- those to be measured subsequently at fair value
(either through other comprehensive income, or
through profit or loss), and
- those measured at amortised cost.
The classification depends on the entity's business
model for managing the financial assets and the
contractual terms of the cash flows.
For assets measured at fair value, gains and losses will
either be recorded in the statement of profit or loss or
other comprehensive income.
The classification criteria of the Company for debt and
equity instruments is provided as under:
(a) Debt instruments
Depending upon the business model of the Company
debt instruments can be classified under following
categories:
- Debt instruments measured at amortised cost
- Debt instruments measured at fair value through
other comprehensive income
- Debt instruments measured at fair value through
profit or loss
The Company reclassifies debt instruments when and
only when its business model for managing those
assets changes.
(b) Equity instruments
The equity instruments can be classified as:
- Equity instruments measured at fair value
through profit or loss ('FvTPL')
- equity instruments measured at fair value
through other comprehensive income ('FvTOCi')
equity instruments and derivatives are normally
measured at FvTPL. However, on initial recognition,
an entity may make an irrevocable election (on an
instrument-by-instrument basis) to present in OCi the
subsequent changes in the fair value of an investment
in an equity instrument within the scope of ind As -109.
(ii) Measurement
At initial recognition, the Company measures a
financial asset at its fair value plus, in the case of a
financial asset not at fair value through profit or loss,
transaction costs that are directly attributable to the
acquisition of the financial asset. Transaction costs
of financial assets carried at fair value through profit
or loss are expensed in the statement of profit or
loss. However, trade receivables that do not contain
a significant financing component are measured at
transaction price.
Debt instruments
subsequent measurement of debt instruments
depends on the Company's business model for
managing the asset and the cash flow characteristics
of the asset. There are three measurement categories
into which the Company classifies its debt instruments:
Amortised cost: Assets that are held for collection
of contractual cash flows where those cash flows
represent solely payments of principal and interest
are measured at amortised cost. A gain or loss on a
debt investment that is subsequently measured at
amortised cost and is not part of a hedging relationship
is recognised in the statement of profit or loss when
the asset is derecognised or impaired. Interest income
from these financial assets is included in finance
income using the effective interest rate method.
Fair value through other comprehensive income:
Assets that are held for collection of contractual
cash flows and for selling the financial assets, where
the assets' cash flows represent solely payments
of principal and interest, are measured at fair value
through other comprehensive income. Movements in
the carrying amount are taken through OCi, except for
the recognition of impairment gains or losses, interest
revenue and foreign exchange gains and losses which
are recognised in profit and loss. when the financial
asset is derecognised, the cumulative gain or loss
previously recognised in OCI is reclassified from
equity to profit or loss and recognised in other gains/
(losses). interest income from these financial assets
is included in other income using the effective interest
rate method.
Fair value through profit or loss: Assets that do not meet
the criteria for amortised cost or FvOCi are measured
at fair value through profit or loss. A gain or loss on a
debt investment that is subsequently measured at fair
value through profit or loss and is not part of a hedging
relationship is recognised in the statement of profit or
loss and presented net in the statement of profit and
loss within other gains/ (losses) in the period in which
it arises. interest income from these financial assets is
included in other income.
Investment in equity shares
The Company subsequently measures all equity
investments at fair value (Other than the investment
in wholly owned subsidiaries which are measured at
cost). where the management has elected to present
fair value gains and losses on equity investments in
other comprehensive income, there is no subsequent
reclassification of fair value gains and losses to
profit or loss. Dividends from such investments are
recognised in the statement of profit or loss as other
income when the Company's right to receive payments
is established.
Changes in the fair value of financial assets at fair
value through profit or loss are recognised in other
gain/ (losses) in the statement of profit and loss.
impairment losses (and reversal of impairment losses)
on equity investments measured at FvOCi are not
reported separately from other changes in fair value.
(iii) Derecognition of financial assets
A financial asset is derecognised only when:
- the Company has transferred the 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
derecognised. where the Company has not transferred
substantially all risks and rewards of ownership of the
financial asset, the financial asset is not derecognised.
i. Financial liabilities
(i) Classification
The Company classifies its financial liabilities in the
following measurement categories:
- Financial liabilities measured at fair value
through profit or loss
- Financial liabilities measured at amortized cost
(ii) Measurement
The measurement of financial liabilities depends on
their classification, as described below:
Financial liabilities measured at fair value through
profit or loss:
Financial liabilities at fair value through profit or loss
include financial liabilities held for trading. At initial
recognition, such financial liabilities are recognised at
fair value.
Financial liabilities at fair value through profit or loss
are, at each reporting date, measured at fair value with
all the changes recognized in the Statement of Profit
and Loss.
Financial liabilities measured at Amortized Cost :
At initial recognition, all financial liabilities other than
fair valued through profit and loss are recognised
initially at fair value less transaction costs that
are attributable to the issue of financial liability.
Transaction costs of financial liability carried at
fair value through profit or loss is expensed in the
statement of profit or loss.
After initial recognition, financial liabilities are
subsequently measured at amortised cost using the
effective interest method. Any difference between
the proceeds (net of transaction costs) and the
redemption amount is recognised in the statement of
profit or loss over the period of the financial liabilities
using the effective interest method. Fees paid on the
establishment of loan facilities are recognised as
transaction costs of the loan to the extent that it is
probable that some or all of the facility will be drawn
down.
(iii) De-recognition of financial liability
A financial liability is derecognised when the obligation
under the liability is discharged or cancelled or
expires. The difference between the carrying amount
of a financial liability that has been extinguished or
transferred to another party and the consideration paid,
including any non-cash assets transferred or liabilities
assumed, is recognised in the statement of profit or loss
as other income or finance costs.
(xvi) derivative financial instruments
The Company uses derivative financial instruments, such as
forward contracts to hedge its foreign currency exposure. The
recognizing of the resulting gain or loss depends on whether
the derivative is designated as a hedging instrument, and if so,
on the nature of the item being hedged. Any gains or losses
arising from changes in the fair value of derivatives are taken
directly to profit or loss.
(xvii) Borrowings
Borrowings are initially recognised at fair value, net of
transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the
proceeds (net of transaction costs) and the redemption
amount is recognised in statement of Profit and Loss over
the period of the borrowings. Fees paid on the establishment
of loan facilities are recognised as transaction costs of
the loan to the extent that it is probable that some or all
of the facility will be drawn down. in this case, the fee is
deferred until the draw down occurs. To the extent there is
no evidence that it is probable that some or all of the facility
will be drawn down, the fee is capitalised as a prepayment
for liquidity services and amortised over the period of the
facility to which it relate
Borrowings are removed from the Balance sheet when the
obligation specified in the contract is discharged, cancelled
or expired. The difference between the carrying amount of a
financial liability that has been extinguished or transferred
to another party and the consideration paid, including any
non-cash assets transferred or liabilities assumed, is
recognised in statement of Profit and Loss as other gains/
(losses).
Borrowings are classified as current liabilities unless the
Company has an unconditional right to defer settlement of
the liability for at least 12 months after the reporting period.
where there is a breach of a material provision of a long-term
loan arrangement on or before the end of the reporting period
with the effect that the liability becomes payable on demand
on the reporting date, the entity does not classify the liability
as current, if the lender agreed, after the reporting period and
before the approval of the financial statements for issue, not
to demand payment as a consequence of the breach.
(xviii) Borrowing costs
a) Borrowing costs that are attributable to the acquisition,
construction, or production of a qualifying asset are
capitalised as a part of the cost of such asset till such
time the asset is ready for its intended use or sale. A
qualifying asset is an asset that necessarily requires a
substantial period of time to get ready for its intended
use or sale.
b) All other borrowing costs are recognised as expense in
the period in which they are incurred.
(xix) Income tax
The income tax expense or credit for the period is the tax
payable on the current period's taxable income based on
the applicable income tax rate for each year adjusted by
changes in deferred tax assets and liabilities attributable to
temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of
the tax laws enacted or substantively enacted at the end of
the reporting period. Management periodically evaluates
positions taken in tax returns with respect to situations in
which applicable tax regulation is subject to interpretation.
it establishes provisions where appropriate on the basis of
amounts expected to be paid to the tax authorities.
Deferred tax is recognised on temporary differences arising
between the tax bases of assets and liabilities and their
carrying values in the financial statements. Deferred tax
is determined using tax rates (and laws) that have been
enacted or substantially enacted by the end of the reporting
period and are expected to apply when the related deferred
income tax asset is realised or the deferred income tax
liability is settled.
Deferred tax assets are recognised for all deductible
temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to
utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is
a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to the
same taxation authority. Current tax assets and tax liabilities
are offset where the entity has a legally enforceable right to
offset and intends either to settle on a net basis, or to realise
the asset and settle the liability simultaneously.
The carrying value of deferred tax assets is reviwed 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 all or part of thte asset to be recovered.
Current and deferred tax is recognised in statement of
Profit and Loss, except to the extent that it relates to items
recognised in Other Comprehensive income. in this case,
the tax is also recognised in Other Comprehensive income.
(xx) Revenue recognition
Revenue towards satisfaction of a performance obligation is
measured at the amount of transaction price (net of variable
consideration) allocated to that performance obligation.
(a) Sale of goods
The Company derives revenue from sale of Goods
and revenue is recognized upon transfer of control
of promised goods to customers in an amount that
reflects the consideration the Company expects to
receive in exchange for those goods. To recognize
revenues, the Company applies the following five
step approach: ( 1) identify the contract with a
customer, (2) identify the performance obligations
in the contract, (3) determine the transaction price,
(q) allocate the transaction price to the performance
obligations in the contract, and (5) recognize
revenues when a performance obligation is satisfied.
The Company recognises revenue at point in time ,
Any change in scope or price is considered as a
contract modification. The Company accounts for
modifications to existing contracts by assessing
whether the services added are distinct and whether
the pricing is at the standalone selling price.
The Company accounts for variable considerations
like, volume discounts, rebates and pricing
incentives to customers as reduction of revenue on
a systematic and rational basis over the period of
the contract. The Company estimates an amount of
such variable consideration using expected value
method or the single most likely amount in a range of
possible consideration depending on which method
better predicts the amount of consideration to which
we may be entitled.
Revenues are shown net of allowances/ returns,
goods and services tax and applicable discounts and
allowances.
(b) Interest income
interest income is accrued on a time proportion basis,
by reference to the principle outstanding and the
effective interest rate applicable.
(c) Rental Income
Rental income is recognized on a time-apportioned
basis in accordance with the underlying substance of
the relevant contract.
(d) Dividend Income
Dividend income from investments is recognised when
the shareholder's rights to receive payment have been
established.
(e) Commision Income
Commission income is recognised when the services
are rendered.
xxi) Government grants / Assistance
Government grants are recognised where there is reasonable
assurance that the grant will be received and all attached
conditions will be complied with.Government grants related
to assets are presented in the balance sheet as deferred
income and is recognised in the Statement of profit or loss
on a systematic basis over the expected useful life of the
related asset. The grant which is received to compensate
the import cost of assets subject to an export obligation as
prescribed in the export promotion capital goods scheme
is recognised as income in the statement of profit and loss
linked to fulfilment of associated export obligations. The
benefit of a government loan at a below-market rate of
interest is treated as government grant, measured as the
difference between proceeds received and the fair value of
the loan based on prevailing market interest rates and are
presented in the balance sheet as deferred income.
(xxii) Dividend Distribution
Annual dividend distribution to the shareholders is
recognised as a liability in the period in which the dividends
are approved by the shareholders. Any interim dividend paid
is recognised on approval by Board of Directors. Dividend
payable and corresponding tax on dividend distribution is
recognised directly in equity.
(xxiii) Fair Value measurement
The Company measures financial instruments at fair value
at each balance sheet date. 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 the asset or liability, or in the absence of a
principal market, in the most advantageous market for the
asset or liability The principal or the most advantageous
market must be accessible by the Company. The fair value
of an asset ora liability is measured using the assumptions
that market participants would use when pricing the asset
or liability, assuming that market participants act in their
economic best interest. A fair value measurement of a non¬
financial asset takes into account a market participant's
ability to generate economic benefits by using the asset in
its highest and best use or by selling it to another market
participant that would use the asset in its highest and
best use. The Company uses valuation techniques that are
appropriate in the circumstances and for which sufficient
data are available to measure fair value, maximising the
use of relevant observable inputs and minimising the use of
unobservable inputs. All assets and liabilities for which fair
value is measured or disclosed in the financial statements
are categorised within the fair value hierarchy, described as
follows, based on the lowest level input that is significant to
the fair value measurement as a whole:
Level 1: Quoted (unadjusted) prices in active markets for
identical assets and liabilities
Level 2: Other techniques for which all inputs which have a
significant effect on the recorded fair value are observable
either directly or indirectly
Level 3: Techniques which use inputs that have a significant
effect on the recorded fair value that are not based on
observable market data. For assets and liabilities that
are recognised in the financial statements on a recurring
basis, the Company determines whether transfers have
occurred between levels in the hierarchy by re-assessing
categorisation (based on the lowest level input that is
significant to the fair value measurement as a whole) at the
end of each reporting period. For the purpose of fair value
disclosures, the Company has determined classes of assets
& liabilities on the basis of the nature, characteristics and
the risks of the asset or liability and the level of the fair
value hierarchy as explained above.
(xxiv) Earnings per share
Basic earnings per equity share is computed by dividing
the net profit attributable to the equity holders of the
company by the weighted average number of equity shares
outstanding during the year.
Diluted earnings per equity share is computed by dividing
the net profit attributable to the equity holders of the
company by the weighted average number of equity shares
considered for deriving basic earnings per equity share
and also the weighted average number of equity shares
that could have been issued upon conversion of all dilutive
potential equity shares.
(xxv) Impairment of assets
At each balance sheet date, the Company reviews the
carrying values of its property, plant and equipment and
intangible assets 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).
Where the assets does not generate cash flows that are
independent from other assets, the Company estimates the
recoverable amount of the cash generating unit to which
the asset belongs.
Recoverable amount is the highest of fair value less costs
to sell and value in use. in assessing value in use, the
estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the
risks specific to the asset for which the estimates of future
cash flows have not been adjusted. An impairment loss is
recognised in the statement of profit and loss as and when
the carrying value of an asset exceeds its recoverable
amount.
where an impairment loss subsequently reverses, the
carrying value of the asset (or cash generating unit) is
increased to the revised estimate of its recoverable amount
so that the increased carrying value does not exceed the
carrying value that would have been determined had no
impairment loss been recognised for the asset (or cash
generating unit) in prior years.
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