Note No. 29: Material Accounting Policies
a. Basis of preparation and measurement
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (“Ind AS”) notified under section 133 of the Companies Act, 2013 (“the Act”) read with Companies (Indian Accounting Standards) Rules, 2015 and subsequent amendments thereto along with other provisions of the Act and relevant guidelines issued by the Securities and Exchange Board of India (“SEBI”).
The financial statements for the year ended March 31, 2024 are authorised for issue by the Board of Directors at their meeting held on May 9, 2024.
The financial statements have been prepared on accrual and going concern basis. Historical cost is used in preparation of financial statements except following assets and liabilities which have been measured at fair value.
• Certain financial assets and liabilities, including derivative instruments and Investments
• Defined benefit plan
• Share based payment
Classification of Current or Non-Current Assets and Liabilities All the 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 Division II of Schedule III to the Companies Act, 2013 and Ind AS 1 “Presentation of financial statements”.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
Assets
An asset is classified as current when it satisfies any of the following criteria
• Expected to be realised or intended to be sold or consumed in normal operating cycle
• Held primarily for the purpose of trading
• Expected to be realised within twelve months after the reporting period, or
• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non-current.
Liabilities
A liability is classified as current when it satisfies any of the following criteria
• Expected to be settled in normal operating cycle
• Held primarily for the purpose of trading
• Due to be settled within twelve months after the reporting period, or
• There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as noncurrent assets and liabilities.
Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
Figures have been rounded off to the nearest crore of rupees upto two decimal places, unless otherwise stated. The figure 0.00 wherever stated represents amount less than H50,000.
b. Use of Accounting Judgements, Estimates and Assumptions
The preparation of financial statements in conformity with Ind AS requires the Company's management to make judgements, estimates and assumptions about the carrying amount of assets and liabilities recognised in the financial statements that are not readily apparent from other sources. The judgements, estimates and associated assumptions are based on historical experience and other factors including estimation of effects of uncertain future events that are considered to be relevant, however actual results may differ from these estimates.
The following are the judgements, estimates & assumptions that have been made by the management in the process of applying the Company's accounting policies.
• Management uses judgement in deciding whether individual item or group of items are material in the financial statements. Materiality is judged by reference to the size and nature of the item. The deciding factor is whether omission, misstatement or obscuring the information could individually or collectively influence the economic decision that users make on the basis of the financial statements.
• Tax expense is calculated using applicable tax rate and laws that have been enacted or substantially enacted. In arriving at taxable profit and all tax bases of assets and liabilities, the Company determines the taxability based on tax enactments, relevant judicial pronouncements and tax expert opinions and makes appropriate provisions which includes an estimation of the likely outcome of any open tax assessments / litigations. Any difference is recognised on closure of assessment or in the period in which they are agreed.
• Defined benefit obligations are measured at fair value for financial reporting purposes. Fair value determined by actuary is based on actuarial assumptions. Management judgement is required to determine such actuarial assumptions. Such assumptions are reviewed annually using the best information available with the management.
• When the fair value of financial assets and financial liabilities recorded in these financial statements cannot be measured based on quoted price in active markets, their fair value is measured using valuation techniques. The inputs to these valuation techniques are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include consideration of inputs such as liquidity risk, credit risk and volatility etc.
• The Company makes allowance for expected credit loss based on a provision matrix which takes into account historical credit loss experience and adjusted for current estimates.
• The determination of depreciation and amortisation charge depends on the useful lives for which judgements and estimates are required. The residual values, useful lives, and method of depreciation/amortisation of property, plant and equipment and intangible assets are reviewed at each financial year end and adjusted prospectively, if appropriate.
• Inventories are stated at the lower of cost and net realisable value. In estimating the net realisable value of inventories the Company makes an estimate of future selling prices and costs necessary to make the sale.
• Management judgement is required for estimating the possible outflow of resources, if any, in respect of contingencies / claims / litigations against the Company as it is not possible to predict the outcome of pending matters with accuracy.
• The Company evaluates if an arrangement qualifies to be a lease as per the requirements of Ind AS 116 “Leases”. Identification of a lease requires judgment in assessing the lease term (including anticipated renewals) and the applicable discount rate.
• The contracts with customers include transfer of promised goods to the customers. Judgement is required to determine the transaction price for the contract. The transaction price could be either a fixed amount of customer consideration or variable consideration with elements such as rebates and discounts etc. The estimated amount of variable consideration is adjusted in the transaction price only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur and is reassessed at the end of each reporting period.
c. Property, Plant and Equipment
Property, Plant and Equipment are stated at cost less accumulated depreciation and impairment loss, if any. Freehold land is disclosed at cost less impairment, if any. The cost comprises its purchase price, other nonrefundable taxes, duties and any directly attributable costs of bringing the asset to its working condition for its intended use.
Subsequent expenditure is recognised as an increase in the carrying amount of the asset when it is probable that future economic benefits deriving from the cost incurred will flow to the Company and the cost of the item can be measured reliably.
The Company identifies and determines cost of each component of the asset separately, if the component has a cost which is significant to the total cost of the asset and has useful life that is materially different from that of the remaining asset.
The present value of the expected cost for decommissioning of an asset, if any, after its use is included in the cost of the respective asset if the recognition criteria for a provision are met.
The cost of self-constructed assets includes the cost of material, direct labour, borrowing cost and any other costs directly attributable to bringing the assets to the location and condition necessary for it to be capable of operating in the manner intended by management.
Property, Plant and Equipment not ready for their intended use as on the balance sheet date are disclosed as “Capital work-in-progress”. Advances given towards acquisition / construction of property, plant and equipment outstanding at each reporting date are disclosed as capital advances under other non-current assets. Other indirect expenses incurred related to project, net of income earned during the project development stage prior to its intended use, are considered as pre-operative expense and included in capital work-in-progress.
An item of property, plant and equipment and any significant part initially recognised, is derecognised upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition of the asset (difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss when the asset is derecognised.
d. Intangible Assets
Intangible assets are stated at cost less accumulated amortisation and impairment loss, if any. The cost comprises its purchase price, other non- refundable taxes, duties and any directly attributable costs of bringing the asset to its working condition for its intended use.
Intangible assets which are not ready for intended use as on the date of balance sheet are disclosed as “Intangible assets under development”.
Subsequent expenditure is recognised as an increase in the carrying amount of the asset when it is probable that future economic benefits deriving from the cost incurred will flow to the Company and the cost of the item can be measured reliably.
Revenue expenditure pertaining to research is charged to the statement of profit and loss. Development costs of products are also charged to the statement of profit and loss unless a product's commercial feasibility has been established, in which case such expenditure is capitalised.
Intangible asset initially recognised, is derecognised upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition of the asset (difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss when the asset is derecognised.
e. Leases
The Company as a lessee
The Company assesses whether the contract is or contains a lease, if the contract involves:
(a) The use of an identified asset,
(b) The right to obtain substantially all the economic benefits from use of the identified asset, and
(c) The right to direct the use of the identified asset.
Lease Liabilities
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless this is not readily determinable, in which case the Company's incremental borrowing rate on commencement of the lease is used.
Principal payment of lease liabilities have been classified within financing activities.
Right-of-use Assets
Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for
• Lease payments made at or before commencement of the lease
• Initial direct costs incurred and
• The amount of any provision recognised where the Company is contractually required to dismantle, remove or restore the leased asset.
Subsequently, the right-of-use assets are measured at cost less any accumulated depreciation and impairment losses, if any.
Right-of-use assets are depreciated on a straight line method over the remaining term of the lease or useful life of the assets whichever is shorter.
Right-of-use assets are tested for impairment whenever there is any indication that their carrying amount may not be recoverable. Impairment loss, if any, is recognised in the statement of profit and loss.
Modifications to a lease agreement beyond the original terms and conditions are generally accounted for as a remeasurement of the lease liability with a corresponding adjustment to the right-of-use asset. Any gain or loss on modification is recognised in the statement of profit and loss.
f. Inventories
The cost of raw material, packing material, stores and spares includes purchase price, non-refundable taxes, duties, freight inward and other costs incurred in bringing the inventories to their present location and condition. Trade discounts, rebates and other similar items are deducted in determining the cost.
The cost of work-in-progress and finished goods includes all cost of purchases, conversion and other costs incurred in bringing the inventories to their present location and condition.
The cost of stock-in-trade includes purchase price, nonrefundable taxes, duties, freight inward and other costs incurred in bringing the inventories to their present location and condition.
Material and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be used are expected to be sold at or above cost.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and other costs necessary to make the sale.
Inventories are valued at the lower of cost and net realisable value. Cost is determined on moving weighted average basis.
g. Impairment of Non-Financial Assets
The carrying amount of assets are reviewed at each reporting date if there is any indication of impairment based on internal and external factors.
An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. An asset's recoverable amount is the higher of fair value less costs of disposal 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. In determining fair value less cost of disposal, recent market transactions are taken into account. If no such transaction can be identified, an appropriate valuation model is used.
A previously recognised impairment loss is further provided or reversed depending on changes in circumstances.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognised for the asset in prior periods. A reversal of an impairment loss is recognised as income immediately.
h. Financial Instruments
Financial assets and financial liabilities are recognised when a Company becomes a party to the contractual provisions of the instruments.
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 assets. These include trade receivables, cash & cash equivalents, bank balances other than cash & cash equivalents and other financial assets.
Classification and Subsequent Measurement Financial assets are subsequently measured at amortised cost or fair value through other comprehensive income or fair value through profit or loss depending on its business model for managing those financial assets and the asset contractual cash flow characteristics.
Financial Assets at Amortised Cost A financial asset is subsequently 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 Fair Value through Other Comprehensive Income (FVTOCI)
A financial asset is subsequently measured at fair value through other comprehensive income 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. The company may make an irrevocable election to present subsequent changes in the fair value of equity investment not held for trading in other comprehensive income.
Financial Assets at Fair Value through Profit or Loss (FVTPL) A financial asset which is not classified in any of the above categories is subsequently measured at fair value through profit or loss.
Derecognition
The Company derecognises a financial asset only when the contractual right to the cash flow from the asset expires or it transfer the financial asset and substantially all the risk and reward of ownership of the asset to another entity and does not retain control of the asset.
Impairment of Financial Assets
Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. The Company recognises a loss allowance for expected credit losses on financial assets. In case of trade receivables, the Company follows the simplified approach permitted by Ind AS 109 “Financial Instruments” for recognition of impairment loss allowance. The application of simplified approach does not require the Company to track changes in credit risk. The Company calculates the expected credit losses on trade receivables using a provision matrix on the basis of its historical credit loss experience.
Financial Liabilities
Initial Recognition and Measurement
Financial liabilities include borrowings, lease liability, trade
payables and other financial liabilities.
All financial liabilities are recognised initially at fair value and in the case of borrowings and trade payables, net of directly attributable transaction costs.
Classification and Subsequent Measurement The financial liabilities are classified as either ‘financial liabilities at fair value through profit or loss' or ‘financial liabilities at amortised cost'.
Financial liabilities at Fair Value through Profit or Loss Financial liabilities are classified at fair value through profit or loss when the financial liability is held for trading or are designated upon initial recognition as fair value through profit or loss. It includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships. All changes in the fair value of such liability are recognised in the statement of profit and loss.
Financial liabilities at Amortised Cost Other financial liabilities (including borrowings and trade payables etc.) are subsequently measured at amortised cost using effective interest method.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired. Any gain or loss arising on derecognition is included in the statement of profit and loss when the liability is derecognised.
Offsetting
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.
Effective Interest Method (EIR)
Financial assets and liabilities are subsequently measured at amortised cost using the effective interest rate method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR.
Derivative Financial Instruments
Initial recognition and subsequent measurement The Company uses derivative financial instruments, such as forward currency contracts to hedge its foreign currency risks. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value.
Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken to statement of profit and loss.
Financial Liabilities and Equity Instruments
Classification as Debt or Equity
Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definition of a financial liabilities and an equity instrument.
Equity Instruments
An Equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by Company
are recognised at the value of the proceeds. Transaction costs related to issue of equity instruments is reduced from equity. Dividend paid on equity instruments is reduced from equity.
i. Foreign Currency Transactions and Translations
Items included in the financial statements are measured using the currency of the primary economic environment in which the Company operates (‘the functional currency'). The Company's financial statements are presented in Indian rupee (INR) which is also the Company's functional and presentation currency.
Foreign currency transactions are recorded on initial recognition in the functional currency, using the exchange rate between the functional & foreign currency prevailing at the date of transaction.
Foreign-currency denominated monetary assets and liabilities at the reporting date are translated at the rate prevailing on reporting date. The difference thereon and also the exchange difference on settlement of foreign currency transactions during the year is recognised as income or expense in statement of profit and loss.
Foreign-currency denominated non-monetary assets and liabilities are carried at historical cost and reported using the exchange rate at the date of transaction.
j. Cash and Cash Equivalents
Cash and cash equivalents comprise of balances with banks, cash on hand and short-term deposits with an original maturity of three months or less, which are subject to insignificant risk of change in value.
k. Government grants
Government grants and subsidies are recognised when there is reasonable assurance that the grant / subsidy will be received and all attaching conditions will be complied with.
Where the government grant / subsidy relates to revenue, it is recognised as income on a systematic basis in the statement of profit and loss over the period necessary to match them with the related cost, which they are intended to compensate. Government grant and subsidy receivable against an expense are deducted from such expense.
Where the grant / subsidy relates to an asset, government grant and subsidy receivable against an asset are deducted from the carrying value of such asset. The grant is recognised as income over the life of a depreciable asset by way of a reduced depreciation charge.
l. Income Taxes
Income tax expense represents the sum of current and deferred tax. Tax expense is recognised in the statement of profit and loss except to the extent that it relates to items recognised directly in equity or other comprehensive income, in such case the tax expense is also recognised directly in equity or in other comprehensive income. Any subsequent change in income tax on items initially recognised in equity or other comprehensive income is also recognised in equity or other comprehensive income, such change could be for change in tax rate.
Current Tax
Current tax is measured at the amount expected to be paid to or recovered from the tax authorities in accordance with the provisions of Income Tax Act, 1961 including the relevant transfer pricing regulations prescribed thereunder, read with applicable judicial precedents or interpretations, wherever relevant.
Current tax assets and liabilities are offset when there is a legally enforceable right to set-off the recognised amounts and there is an intention to settle the asset and the liability on a net basis.
Deferred Tax
Deferred tax is recognised on temporary differences between the carrying amount of assets and liabilities in the balance sheet and the corresponding tax bases used in the computation of taxable profit and are accounted for using the balance sheet approach.
Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, carry forward tax losses and allowances to the extent it is probable that future taxable profits will be available against which those deductible temporary differences, carry forward tax losses and allowances can be utilised.
Deferred tax asset and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or liability is settled, based on tax rates and tax laws that have been enacted or substantially enacted at the reporting date.
The carrying amount of deferred tax asset is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available against which the temporary differences can be utilised.
Deferred tax assets and liabilities are offset when there is legally enforceable right to set-off current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority.
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