3 Significant accounting policies
a) Operating Cycle
All assets and liabilities have been classified as current
or non-current as per the Company's normal operating
cycle and other criteria set out in the Schedule III to
the Companies Act, 2013 and Ind AS 1 — Presentation
of Financial Statements based on the nature of
products and the time between the acquisition of
assets for processing and their realisation in cash and
cash equivalents.
b) Financial instruments
A financial instrument is any contract that gives rise to
a financial asset of one entity and a financial liability or
equity instrument of another entity.
i. Financial Assets
Initial recognition and measurement
All financial assets are recognised initially at fair
value plus, in the case of financial assets not
recorded at fair value through profit or loss,
transaction costs that are attributable to the
acquisition of the financial asset. However, trade
receivables that do contain a significant financing
component are measured at transaction price.
Regular way purchase and sale of financial assets
are accounted for at trade date.
Subsequent measurement
For purposes of subsequent measurement,
financial dssets are classified in three categories:
• Amortised cost
• Fair value through other comprehensive
income (FVTOCI)
• Fair value through profit or loss (FVTPL)
Financial assets are not reclassified subsequent
to their initial recognition, except if and in the
period the Company changes its business model
for managing financial assets.
Financial assets at amortised cost:
A financial asset is measured at amortised cost
if it is held within a business model whose
objective is to hold the asset in order to collect
contractual cash flows and the contractual
terms of the financial asset give rise on specified
dates to cash flows that are solely payments of
principal and interest on the principal amount
outstanding.
Financial assets at FVTOCI:
A financial asset is measured at FVTOCI if it is
held within a business model whose objective
is achieved by both collecting contractual
cash flows and selling financial assets and the
contractual terms of the financial asset give
rise on specified dates to cash flows that are
solely payments of principal and interest on the
principal amount outstanding.
Financial assets included within the FVTOCI
category are measured initially as well as at
each reporting date at fair value. Fair value
movements are recognized in the other
comprehensive income (OCI).
Financial assets at FVTPL
A financial asset which is not classified in any of
the above categories are measured at FVTPL.
Financial assets included within the FVTPL
category are measured at fair value with all
changes recognised in the Statement of Profit &
Loss.
Other equity investments
All other equity investments are measured at
fair value, with value changes recognised in
Statement of Profit and Loss, except for those
equity investments for which the Company has
elected to present the value changes in 'Other
Comprehensive income'.
Derecognition
The Company derecognizes a financial asset
when the contractual rights to the cash flows
from the financial asset expire or it transfers
the financial asset and the transfer qualifies for
derecognition under Ind AS 109.
ii. Financial liability
Initial recognition and measurement
Financial liabilities are initially recognised at
fair value plus any transaction cost that are
attributable to the acquisition of the financial
liabilities except financial liabilities at fair value
through profit or loss which are intially measured
at fair value.
Subsequent measurement
For purposes of subsequent measurement,
financial liabilities are classified in following
categories:
• Financial liabilities through profit or loss
(FVTPL)
• Financial liabilities at amortised cost
Financial Iiabilities th ou h FVTPL
A financial liability is classified as at FVTPL if it is
classified as held-for-trading, or it is a derivative
or it is designated as such on initial recognition.
Financial liabilities at FVTPL are measured at fair
Vdlue and net gains and losses, including any
interest expense, are recognised in profit or loss.
Financial liabilities at amortised cost
Other financial liabilities are subsequently
measured at amortised cost using the effective
interest method. Interest expense and any gain
or loss on derecognition are recognised in profit
or loss.
Interest bearing loans and borrowings are
subsequently measured at amortised cost
using the EIR method. Gains and losses are
recognised in profit or loss when the liabilities
are derecognised as well as through the EIR
amortisation process. For trade and other
payables maturing within one year from the
balance sheet date, the carrying amounts
approximates fair value due to the short
maturity of these instruments.
Derecognition
A financial liability (or a part of a financial
liability) is derecognized from the Company's
Balance Sheet when the obligation specified
in the contract is discharged or cancelled or
expires.
iii. Offsetting of financial instruments
Financial assets and financial liabilities are offset
and the net amount presented in the balance
sheet when, and only when, the Company
currently has a legally enforceable right to set
off the amounts and it intends either to settle
them on a net basis or to realise the asset and
settle the liability simultaneously.
Property, Plant and Equipment
i. Recognition and measurement
Items of property, plant and equipment are
measured at cost, which includes capitalised
borrowing costs, less accumulated depreciation
and accumulated impairment losses, if any. The
cost of an item of property, plant and equipment
comprises its purchase price, including import
duties and non-refundable purchase taxes, after
deducting trade discounts and rebates, any
directly attributable cost of bringing the item to
its working condition for its intended use and
estimated costs of dismantling and removing
the item and restoring the site on which it is
located. Borrowing costs directly attributable
to the acquisition or construction of those
qualifying property, plant and equipment, which
necessarily take a substantial period of time to
get ready for their intended use, are capitalised.
If significant parts of an item of property, plant
and equipment have different useful lives, then
they are accounted for as separate components
of property, plant and equipment.
Assets retired from active use and held for
disposal are stated at the lower of their net book
value and net realisable value and shown under
'Other current assets'.
Property, plant and equipment is eliminated
from the financial statements on disposal or
when no further benefit is expected from its
use and disposal. Any gain or loss on disposal
of an item of property, plant and equipment is
recognised in profit or loss.
Expenses incurred relating to project, net of
income earned during the project development
stage prior to its intended use, are considered
as pre - operative expenses and disclosed under
Capital Work - in - Progress.
ii. Subsequent expenditure
Subsequent expenditure is capitalized only when
it is probable that the future economic benefits
associated with the expenditure will flow to the
Company. Ongoing repairs and maintenance are
expensed as incurred.
iii. Depreciation and amortisation
Depreciation and amortisation for the year is
recognised in the Statement of Profit and Loss.
Depreciation on property, plant & equipments
are provided on straight line method over the
useful lives of assets, at the rates and in the
manner specified in Part C of Schedule II of the
Act.
Freehold land is not depreciated. Leasehold land
(includes development cost) is amortised on a
straight line basis over the period of respective
lease, except land acquired on perpetual lease.
Depreciation methods, useful lives and residual
values are reviewed at each financial year end
and adjusted as appropriate.
d) Intangible Assets
Intangible assets with finite useful lives that
are acquired separately are carried at cost less
accumulated amortisation and any accumulated
impairment losses. Amortisation is recognised on a
straight-line basis over their estimated useful lives.
An intangible asset is derecognised on disposal, or
when no future economic benefits are expected from
use or disposal. Estimated useful life of the Computer
Software is 5 years.
e) Inventories
Items of inventories are measured at lower of
cost and net realisable value after providing for
obsolescence, if any. Cost of inventories comprises of
cost of purchase, cost of conversion and other costs
including manufacturing overheads net of recoverable
taxes incurred in bringing them to their respective
present location and condition. Cost of raw materials
is determined on FIFO basis.
Value of stores and spares, packing materials, tradings
and other products are determined on weighted
average basis.
f) Impairment
Impairment of non-financial assets
The Company's non-financial assets are reviewed
at each reporting date to determine whether there
is any indication of impairment. For impairment
testing, assets that do not generate independent cash
inflows are grouped together into cash-generating
units (CGUs). Each CGU represents the smallest
Company of assets that generates cash inflows that
are largely independent of the cash inflows of other
assets or CGUs. 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 cdsh
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.
g) Employee Benefits
i. Short-term employee benefits
The undiscounted amount of short term
employee benefits expected to be paid in
exchange for the services rendered by employees
are recognised as an expense during the period
when the employees render the services.
ii. Defined contribution plans
A defined contribution plan is a post-employment
benefit plan under which the Company makes
specified monthly contributions towards
Provident Fund. The Company's contribution is
recognised as an expense in the Statement of
Profit and Loss during the period in which the
employee renders the related service.
iii. Defined benefit plans
The Company pays gratuity to the employees
whoever has completed five years of service
with the Company at the time of resignation.
The gratuity is paid @15 days salary for every
completed year of service as per the Payment of
Gratuity Act 1972.
The liability in respect of gratuity and other post¬
employment benefits is calculated using the
Projected Unit Credit Method and spread over
the period during which the benefit is expected
to be derived from employees' services. Re¬
measurement of defined benefit plans in respect
of post-employment are charged to the Other
Comprehensive Income.
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