1.4. Summary of material accounting policies
(a) Property, Plant and Equipment and Depreciation:
Property, Plant and Equipment except capital work-in
progress is stated at cost, net of accumulated depreciation
and impairment losses, if any. Capital work-in-progress is
stated at cost less any recognised impairment loss. The cost
of Property, Plant & Equipment comprises its purchase price
net of any trade discounts and rebates, any import duties
and other taxes (other than those subsequently recoverable
from the tax authorities), any directly attributable expenditure
on making the asset ready for its intended use, other
incidental expenses and interest on borrowings attributable
to acquisition of qualifying Property, Plant & Equipment
up to the date the asset is ready for its intended use. The
cost of an item of Property, Plant & Equipment is recognised
as an asset if, and only if, it is probable that the economic
benefits associated with the item will flow to the Company
in future periods and the cost of the item can be measured
reliably. Expenditure incurred after the Property, Plant and
Equipment have been put into operations, such as repairs and
maintenance expenses are charged to the statement of profit
and loss during the period in which they are incurred.
The subsequent cost incurred by an entity for improvement
of Property, Plant & Equipment is added to the carrying value
of the item of Property, Plant & Equipment and for the items
replacing existing Property, Plant & Equipment, an entity
recognises in the carrying amount of an item of Property,
plant & equipment, the cost of replacing part of such an
item when that cost is incurred if the recognition criteria are
met. The carrying amount of those parts that are replaced is
derecognised in accordance with the derecognition provisions.
An item of Property, Plant & Equipment is de-recognised upon
disposal or when no future economic benefits are expected to
arise from the continued use of the assets. Any gain or loss
arising on the disposal or retirement of an item of Property,
Plant & 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.
Depreciation on Property, Plant and Equipment -
Depreciable amount of Property, Plant and Equipment is the
cost of an asset less its estimated residual value.
Property, Plant and Equipment is depreciated on the Written
Down Value method as per the useful life prescribed in
Schedule II to the Companies Act, 2013 or useful life of the
assets has been assessed as under based on technical 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.
Leasehold premises is depreciated using the straight line
method for useful life of the assets.
(b) Intangible assets and amortisation of intangible
assets:
i. Intangible assets are initially measured at cost. Such
intangible assets are subsequently measured at cost less
accumulated amortization and impairment losses, if any.
The intangible assets, that are not yet ready for their
intended use are carried at cost and are reflected
under intangible assets under development. Direct
costs associated in developing the intangible assets
are capitalized when the following criteria are met,
otherwise, it is recognised in statement of profit and
loss as incurred.
• it is technically feasible to complete the intangible
asset so that it will be available for use,
• management intends to complete the intangible
asset and put it to use,
• there is ability to use the intangible asset,
• there is an identifiable asset that will generate
expected future economic benefits and
• there is an ability to measure reliably the
expenditure attributable to the intangible asset
during its development
ii. Intangible assets are amortized on written down value
basis over the useful life prescribed in Schedule II to
the Companies Act, 2013 or technical estimate made
by the Company, whichever is lower. The useful lives of
intangible assets (computer software) is 3 years.
iii. The estimated useful life of the intangible assets is
reviewed at the end of each financial year and the
amortization method is revised to reflect the changed
pattern, if any.
iv. An intangible asset is de-recognised on disposal or
when no future economic benefits are expected from
its use. Gains or losses arising from de-recognition of an
intangible asset, measured as the difference between
the net disposal proceeds and the carrying amount of
the asset are recognised in the standalone statement of
profit and loss when the asset is de-recognised.
(c) Impairment of 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 may be impaired. If any such indication
exists, the recoverable amount of an asset is estimated to
determine the extent of impairment, if any. 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.
(d) Leases:
At inception of a contract, the Company assesses whether
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.
As a lessee
The Company recognises a right-of-use asset and a lease
liability at the lease commencement date. The right-of-use asset
is initially measured at cost, which comprises the initial amount
of the lease liability adjusted for any lease payments made at
or before the commencement date, plus any initial direct costs
incurred and an estimate of costs to dismantle and remove the
underlying asset or to restore the underlying asset or the site
on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the
straight-line method from the commencement date to the end
of the lease term, unless the lease transfers ownership of the
underlying asset to the Company by the end of the lease term
or the cost of the right-of-use asset reflects that the Company
will exercise a purchase option. In that case the right-of-use
asset will be depreciated over the useful life of the underlying
asset, which is determined on the same basis as those of
property, plant and equipment. In addition, the right-of-use
asset is periodically reduced by impairment losses, if any, and
adjusted for certain re-measurements of the lease liability.
The lease liability is initially measured at the present value of
the lease payments that are not paid at the commencement
date, discounted using the Company's incremental
borrowing rate.
The Company determines its incremental borrowing rate
by obtaining interest rates from various external financing
sources that reflects the terms of the lease and type of
the asset leased.
Lease payments included in the measurement of the lease
liability comprise the following:
• fixed payments, including in-substance fixed payments;
• variable lease payments that depend on an index or a
rate, initially measured using the index or rate as at the
commencement date;
• amounts expected to be payable under a residual
value guarantee; and
• the exercise price under a purchase option that the
Company is reasonably certain to exercise, lease
payments in an optional renewal period if the Company
is reasonably certain to exercise an extension option,
and penalties for early termination of a lease unless the
Company is reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the
effective interest method. It is re-measured when there is a
change in future lease payments arising from a change in an
index or rate, if there is a change in the Company's estimate
of the amount expected to be payable under a residual value
guarantee, if the Company changes its assessment of whether
it will exercise a purchase, extension or termination option or
if there is a revised in -substance fixed lease payment.
When the lease liability is re-measured in this way, a
corresponding adjustment is made to the carrying amount of
the right-of-use asset, or is recorded in statement of profit and
loss if the carrying amount of the right-of-use asset has been
reduced to zero.
The Company presents right-of-use assets and lease liabilities
separately on the face of the balance sheet.
Short-term leases
The Company has elected not to recognise right-of-use assets
and lease liabilities for short-term leases. The Company
recognises the lease payments associated with these leases
as an expense on a straight-line basis over the lease term.
(e) Inventories
Inventories are stated at the lower of cost and net realisable
value. Costs of inventories are determined on a first-in-first-
out basis. Net realisable value represents the estimated selling
price for inventories less all estimated costs of completion and
costs necessary to make the sale. The cost includes cost of
purchases, which are net of discounts and rebates and other
costs incurred in bringing the inventories to their present
location and condition.
(f) Foreign currency transactions
i. In preparing the Financial Statements of the Company,
transactions in foreign currencies, other than the
Company's functional currency, are recognised at
the rate of exchange prevailing at the dates of the
transactions. At the end of each reporting period,
monetary assets and liabilities denominated in foreign
currencies are translated at the rate prevailing at that
date. Non-monetary items that are measured in terms of
historical cost in a foreign currency are not re-translated.
Exchange differences on monetary items are recognised
in the statement of profit and loss in the period in which
these arise, as appropriate.
The Financial Statements are presented in Indian Rupees,
which is the functional currency of the Company and the
currency of the primary economic environment in which
the Company operates, and all values are rounded off to
the nearest Millions, up to 2 decimal places except as
otherwise indicated.
ii. Foreign Operations:
For the purpose of presenting Financial Statements,
the assets and liabilities of the Company's foreign
operations are translated at exchange rates prevailing
on the reporting date. Income and expense items are
translated at the average exchange rates for the period,
unless exchange rates fluctuate significantly during that
period, in which case the exchange rates at the date of
transactions are used. Exchange differences arising, if
any, are recognised in other comprehensive income and
accumulated in a foreign exchange translation reserve.
On the disposal of a foreign operation all of the
exchange differences accumulated in a foreign exchange
translation reserve in respect of that operation are
reclassified to profit or loss.
(g) Revenue recognition
Revenue with contracts with customers/ Income from services:
The Company recognises revenue when (or as) a performance
obligation is satisfied, i.e. when ‘control' of the goods or
services underlying the particular performance obligation is
transferred to the customer.
Revenue from sale of products or services is recognised upon
transfer of control of promised products or services to customers
in an amount that reflects the consideration expected to be
received in exchange for those products or services.
Revenue is measured based on the transaction price, which
is the consideration, adjusted for volume discounts, price
concessions and incentives, if any, as specified in the contract
with the customer. Revenue also excludes taxes collected
from customers.
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 is net
of variable consideration on account of various discounts and
schemes offered by the Company as part of the contract.
(h) Other income
i. Dividend from investments is recognised when the
right to receive the payment is established and when
no significant uncertainty as to measurability or
collectability exists.
ii. Rental income under operating leases is recognised in
the statement of profit and loss on a straight line basis
over the term of the lease.
iii. For all financial instruments measured at amortised cost,
interest income is recorded using the effective interest
rate (EIR), which is the rate that exactly discounts the
estimated future cash payments or receipts through the
expected life of the financial instrument to the gross
carrying amount of the financial asset.
iv. Interest income is recognised on accrual basis.
(i) Employee benefits
i. Short-term employee benefits
Short-term employee benefits are determined as per
Company's policy/scheme on an undiscounted basis. A
liability is recognised for benefits accruing to employees
in respect of salaries, performance incentives and
compensated absences in the period the related service
is rendered at the undiscounted amount of the benefits
expected to be paid in exchange for that service.
ii. Defined benefit plan
A defined benefit plan is a post-employment benefit
plan other than a defined-contribution plan. The
Company's obligation in respect of defined benefit plans
is calculated separately for each plan by estimating the
amount of future benefit that employees have earned in
the current and prior periods.
The Company's gratuity plan is funded, the defined
benefit obligation of which is determined annually
by a qualified actuary using the projected unit credit
method as at each balance sheet date. The liability or
asset recognised in the Balance Sheet is the present
value of the defined benefit obligation at the end of
the reporting period less the fair value of plan assets.
Rashi Peripherals Private Limited Employee Gratuity
Trust (the Trust) is administered by the Company. The
Trust makes contribution to the group gratuity scheme
administered by the HDFC Standard Life Insurance
Company Limited and Kotak Life Insurance Company
Limited out of payments received from the Company.
Re-measurement of defined benefit obligation, which
comprises of actuarial gains and losses are recognised
in other comprehensive income in the period in which
they occur. The Company determines the net interest
expenses on the net defined benefit obligation, taking
into account any changes in the net defined benefit
liability during the period as a result of contribution
and benefit payments. Net interest expenses related to
defined benefit plan are recognised in employee benefit
expenses in the statement of profit and loss.
The benefit vests upon completion of five years of
continuous service and once vested it is payable
to employees on retirement or on termination of
employment. In case of death while in service, the
gratuity is payable irrespective of vesting.
iii. Defined contribution plan
A defined contribution plan is a post-employment benefit
plan under which an entity pays fixed contributions to a
separate entity and will have no legal or constructive
obligation to pay further amounts. The Company makes
monthly contributions towards Government administered
schemes such as the provident fund and employee
state insurance scheme. Obligations for contributions
to defined contribution plans are recognised as an
employee benefit expense in the statement of profit and
loss in the periods during which the related services are
rendered by the employees.
iv. Long-term employee benefits
The Company's obligation in respect of long-term
employee benefits other than post-employment
benefits is the amount of future benefit that employees
have earned in return for their service in the current
and prior periods. The obligation is measured on the
basis of an annual independent actuarial valuation
using the projected unit credit method as at each
balance sheet date.
(j) Current Tax
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in profit
or loss because it excludes items of income or expense that
are taxable or deductible in other years and it further excludes
items that are never taxable or deductible. The Company's
liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the end of the
reporting period.
Deferred tax
Deferred tax is recognised on temporary differences between
the carrying amounts of the assets and liabilities in the
financial statement and the corresponding tax bases used in
the computation of the taxable profit.
Deferred tax liabilities are generally recognised for all taxable
temporary differences and deferred tax assets are recognised
for all deductible temporary differences to the extent that
it is probable that taxable profits will be available against
which deductible temporary differences can be utilised. Such
deferred tax assets and liabilities are not recognised if the
temporary difference arises from the initial recognition (other
than in a business combination) of assets and liabilities in
a transaction that affects neither the taxable profit nor the
accounting profit.
The carrying amount of deferred tax assets is reviewed at
each reporting date and reduced to the extent that it is no
longer probable that sufficient taxable profits will be available
to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised based on tax laws and rates that have been enacted
or substantively enacted at the reporting date.
The measurement of deferred tax liabilities and assets reflects
the tax consequences that would follow from the manner
in which the Company expects, at the end of the reporting
period, to recover or settle the carrying amount of its assets
and liabilities.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes
levied by the same taxation authority and the Company intends
to settle its current tax assets and liabilities on a net basis.
Current tax and deferred tax for the year
Current and deferred tax are recognised in statement of profit
or loss, except when they relate to items that are recognised
in other comprehensive income or directly in equity, in which
case, the current and deferred tax are also recognised in other
comprehensive income or directly in equity respectively.
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