2. MATERIAL ACCOUNTING POLICIES
2.1 Basis of Preparation
The standalone financial statements of the Company have been prepared in accordance with Indian Accounting Standards
(Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) and
presentation requirements of Division II of Schedule III to the Companies Act, 2013, (Ind AS compliant Schedule III) and the
guidelines issued by the Securities and Exchange Board of India (SEBI), as applicable.
2.2 property, plant and equipment (ppE)
2.2.1 Freehold land is stated at historical cost.
2.2.2 All other items of PPE including capital work in progress are stated at cost of acquisition less accumulated depreciation
and accumulated impairment losses, if any. PPE is recognized when the cost of an asset can be reliably measured and it is
probable that the entity will obtain future economic benefits from the asset.
2.2.3 PPE is measured initially at cost. Cost includes the fair value of the consideration given to acquire the asset (net of discounts
and rebates) and any directly attributable cost of bringing the asset to working condition for its intended use (inclusive of
import duties and non-refundable purchase taxes).
2.2.4 The Company has elected to use the exemption available under Ind AS 101 to continue the carrying value for all of its PPE
as recognised in the standalone financial statements as at the date of transition to Ind AS, measured as per the previous
GAAP and use that as its deemed cost as at the date of transition (April 1,2016).
2.2.5 Capital work in progress (CWIP) comprises of cost of acquisition of assets, duties, levies and any cost directly attributable to
bringing the asset to its working condition for the intended use. Expenditure incurred on project under implementation
is treated as incidental expenditure incurred during construction and is pending allocation to the assets which will be
allocated / apportioned on completion of the project.
2.3 Depreciation/Amortization
2.3.1 The depreciable amount of PPE (being the gross carrying value less the estimated residual value) is depreciated over
its useful life as prescribed in Schedule II to The Companies Act, 2013 on Written down value basis.
2.3.2 The management believes that the estimated useful lives are realistic and reflects fair approximation of the period
over which the assets are likely to be used. At each financial year end, management reviews the residual values,
useful lives and method of depreciation of property, plant and equipment and values of the same are adjusted
prospectively where needed.
2.4 Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Cost comprises the acquisition price,
development cost and any attributable / allocable incidental cost of bringing the asset to its working condition for its
intended use. The useful life of intangible assets is assessed as either finite or indefinite. All finite-lived intangible assets,
are accounted for using the cost model whereby intangible assets are stated at cost less accumulated amortisation and
impairment losses, if any. Intangible assets are amortised over the estimated useful economic life. Residual values and
useful lives are reviewed at each reporting date.
2.5 Impairment of non-financial Assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually
for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other
assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may
not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use.
For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash inflows which are largely independent of the cash inflows from other assets or group of assets (cash-generating
units). Assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the
end of each reporting period.
2.6 Leases
The Company evaluates if an arrangement qualifies to be a lease as per the requirements of Ind AS 116. Identification of
a lease requires significant judgement. The Company uses significant judgement in assessing the lease term (including
anticipated renewals) and the applicable discount rate.
The Company determines the lease term as the non-cancellable period of a lease, together with both periods covered
by an option to extend the lease if the Company is reasonably certain to exercise that option; and periods covered by an
option to terminate the lease if the Company is reasonably certain not to exercise that option.
In assessing whether the Company is reasonably certain to exercise an option to extend a lease, or not to exercise an
option to terminate a lease, it considers all relevant facts and circumstances that create an economic incentive for the
Company to exercise the option to extend the lease, or not to exercise the option to terminate the lease. The Company
revises the lease term if there is a change in the non-cancellable period of a lease.
The discount rate is generally based on the incremental borrowing rate specific to the lease being evaluated or for a
portfolio of leases with similar characteristics.
2.7 Financial instruments
The Company recognizes financial assets and financial liabilities when it becomes party to the contractual provision of
the instrument.
2.7.1 Financial assets
a. Initial recognition and measurement
Financial assets are initially measured at its fair value. Transaction costs that are directly attributable to the
acquisition or issue of financial assets (other than financial assets at fair value through profit or loss) are added
to or deducted from the fair value of the concerned financial assets, as appropriate, on initial recognition.
Transaction costs directly attributable to acquisition of financial assets at fair value through profit or loss are
recognized immediately in profit or loss. However, trade receivable that do not contain a significant financing
component are measured at transaction price.
b. Subsequent measurement
For subsequent measurement, the Company classifies financial assets in following broad categories:
• Financial assets carried at amortized cost.
• Financial assets carried at fair value through other comprehensive income (FVTOCI)
• Financial assets carried at fair value through profit or loss (FVTPL)
c. Financial asset carried at amortized cost (net of any write down for impairment, if any)
Financial assets are subsequently measured at amortised cost if these financial assets are held within a business
whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of
the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest
on the principal amount outstanding
d. Financial asset carried at FVTOCI
Financial asset under this category are measured initially as well as at each reporting date at fair value, when
asset is held with a business model whose objective is to hold asset for both collecting contractual cash flows
and selling financial assets. Fair value movements are recognized in the other comprehensive income.
e. Financial asset carried at FVTPL
Financial asset under this category are measured initially as well as at each reporting date at fair value. Changes
in fair value are recognized in the statement of profit or loss.
f. Derecognition of Financial Assets
A financial asset is primarily derecognized when rights to receive cash flows from the asset have expired or the
Company has transferred its contractual rights to receive cash flows of the financial asset and has substantially
transferred all the risk and reward of the ownership of the financial asset.
g. Impairment of financial assets
The Company assesses at each reporting date, whether a financial asset or a group of financial assets is impaired.
Ind AS 109 on Financial Instruments, requires expected credit losses to be measured through a loss allowance.
For trade receivables only, the Company recognises expected lifetime losses using the simplified approach
permitted by Ind AS 109, from initial recognition of the receivables. For other financial assets (not being equity
instruments or debt instruments measured subsequently at FVTPL) the expected credit losses are measured at
the 12 month expected credit losses or an amount equal to the lifetime expected credit losses if there has been
a significant increase in credit risk since initial recognition.
2.7.2 Financial liabilities
a. Initial recognition and measurement
The Company recognizes a financial liability in its Balance Sheet when it becomes party to the contractual
provisions of the instrument. The Company classifies all financial liabilities as subsequently measured at
amortised cost or FVTPL.
All financial liabilities are recognized initially at fair value and in the case of loans, borrowings and payables,
net of directly attributable transaction costs. Financial liabilities include trade and other payables, loans and
borrowings including bank overdrafts and derivative financial instruments.
b. Subsequent measurement
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial
liabilities designated upon initial recognition as at fair value through profit or loss. Interest-bearing loans
and borrowings are subsequently measured at amortized cost using the Effective Interest Rate (EIR) method.
Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through
EIR amortization process. Amortized 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.
The EIR amortization is included as finance costs in the statement of profit and loss.
c. derecognition of financial liabilities
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms,
or the terms of an existing liability are substantially modified, such an exchange or modification is treated as
the derecognition of the original liability and the recognition of a new liability. The difference in the respective
carrying amounts is recognized in the Statement of Profit and Loss.
2.7.3 Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the Balance Sheet, if there is a
currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis,
or to realise the assets and settle the liabilities simultaneously.
2.7.4 Derivative financial instrument
a. Company uses derivative financial instruments such as forward contracts to mitigate its foreign currency
fluctuation risks. Such derivative financial instruments are initially recognized at fair value on the date on which
a derivative contract is entered into and are subsequently re-measured at fair value at each reporting date.
Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair
value is negative.
b. Any gains or losses arising from changes in the fair value of derivatives are taken directly to the Statement
of Profit and Loss, except for the effective portion of cash flow hedges, which is recognized in OCI and later
reclassified to profit or loss when the hedge item affects profit or loss or treated as basis adjustment if a hedged
forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability.
c. For the purpose of hedge accounting, hedges are classified as:
• Fair value hedges when hedging the exposure to changes in the fair value of a recognized asset or liability
or an unrecognized firm commitment;
• Cash flow hedges when hedging the exposure to variability in cash flows that is attributable to a particular
risk associated with a recognized asset or liability or a highly probable forecast transaction or the foreign
currency risk in an unrecognized firm commitment;
• Hedges of a net investment in a foreign operation.
d. At the inception of a hedge relationship, the Company formally designates and documents the hedge
relationship to which the Company wishes to apply hedge accounting and the risk management objective and
strategy for undertaking the hedge. The documentation includes the Company's risk management objective
and strategy for undertaking hedge, the hedging/economic relationship, the hedged item or transaction, the
nature of the risk being hedged, hedge ratio and how will the entity assess the effectiveness of changes in the
hedging instrument's fair value in offsetting the exposure to changes in the hedged item's fair value or cash
flows attributable to the hedged risk. Such hedges are expected to be highly effective if achieving offsetting
changes in fair value or cash flows and are assessed on an on-going basis to determine that they actually have
been highly effective throughout the financial reporting periods for which they were designated.
e. Hedges that meet the strict criterial for hedge accounting are accounted for, as described below:
S Fair value hedges
The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the
carrying value of the hedged item and is also recognized in the Statement of Profit and Loss as finance costs.
For fair value hedges relating to items carried at amortized cost, any adjustment to carrying value
is amortized through profit or loss over the remaining term of the hedge using the EIR method. EIR
amortization may begin as soon as an adjustment exists and no later than when the hedged item ceases
to be adjusted for changes in its fair value attributable to the risk being hedged.
If the hedged item is derecognized, the unamortized fair value is recognized immediately in profit or loss.
When an unrecognized form commitment is designated as a hedged item, the subsequent cumulative
change in the fair value of the firm commitment attributable to the hedged risk is recognized as an asset
or liability with a corresponding gain or loss recognized in the Statement of profit and loss.
S cash flow hedges
The effective portion of the gain or loss on the hedging instrument is recognized in the OCI in the cash
flow hedge reserve, while any ineffective portion is recognized immediately in the Statement of profit and
loss. The Company uses forward contracts as hedges of its exposure to foreign currency risk in forecast
transactions and firm commitments. The ineffective portion relating to foreign currency contracts is
recognized in finance costs.
Amounts recognized in OCI are transferred to Statement of profit and loss when the hedged transaction
affects profit or loss, such as when the hedged financial income or financial expense is recognized or when
a forecast sale occurs. When the hedged item is a cost of a non-financial asset or non-financial liability,
the amounts recognized in OCI are transferred to the initial carrying amount of the non-financial asset
or liability. If the hedging instrument expires or is sold, terminated or exercised without replacement or
rollover (as part of the hedging strategy), or if its designation as a hedge is revoked, or when the hedge
no longer meets the criteria for hedge accounting, any cumulative gain or loss previously recognized
in OCI remains separately in equity until the forecast transaction occurs or the foreign currency firm
commitment is met.
The Company does not use hedges of net investment.
f. Derecognition
On derecognition of hedged item, the unamortized fair value, of the hedging instrument adjusted to the
hedged items is recognized in the Statement of Profit or Loss.
2.8 Fair value measurement
When the fair value of financial assets and financial liabilities recorded in the balance sheet cannot be measured based
on quoted prices in active markets, their fair value is measured using valuation techniques including the Discounted
Cash Flow model. The inputs to these models 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 considerations of inputs such
as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value
of financial instruments.
2.9 Investment in subsidiaries
Investment in subsidiaries are recorded at cost and reviewed for impairment at each reporting date.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion
and estimated costs necessary to make the sale.
Identification of a specific item and determination of estimated net realizable value involve technical judgements of the
management supported by valuation from an independent valuer and quality report from gemmologist.
2.11 Revenue recognition
According to IND AS 115, entity shall recognize revenue when (or as) the entity satisfies a performance obligation by
transferring a promised good or service.
Revenue is recognized upon transfer of control of promised products or services to customers in an 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.
2.11.1 Sale of goods
a. In case of domestic customer, generally performance obligation satisfied and transferred the control when
goods are dispatched or delivery is handed over to transporter, in case of export customers, generally
performance obligation satisfied and transferred the control, when goods are shipped on board based on
bill of lading.
b. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of
returns and allowances, trade discounts and volume rebates.
2.11.2 Sale of services
a. Sale of services comprises of jewellery making charges.
b. Revenue from Jewellery making charges is recognized when it is probable that the economic benefit will flow
to the company and the amount of income can be measured reliably.
2.11.3 Other operating revenue
a. Other operating revenue comprises of sale of dust & Technological support services.
b. Revenue from sale of dust & Technological support services are recognized when it is probable that the
economic benefit will flow to the company and the amount of income can be measured reliably.
2.12 Other Income
a. Other income comprises of interest income and dividend from investment and profits on redemption of investments.
b. Income other than mentioned above is recognized only when it is reasonably certain that the ultimate
collection will be made.
2.13 Foreign currency Transactions and Translations
Transactions in foreign currency are recorded at the exchange rate prevailing on the date of the transaction. Foreign
currency denominated monetary assets and liabilities at the Balance Sheet date are translated at the exchange rate
prevailing on the date of Balance Sheet.
Exchange rate differences resulting from foreign currency transactions settled during the period including year-end
translation of assets and liabilities are recognized in the Statement of Profit and Loss.
Non-monetary assets, which are measured in terms of historical cost denominated in a foreign currency, are reported
using the exchange rate at the date of the initial transaction.
Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when
the fair value was measured. The gain or loss arising on translation of non-monetary items measured at fair value is treated
in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items
whose fair value gain or loss is recognized in Other Comprehensive Income (OCI) or Statement of Profit and Loss are also
recognized in OCI or Statement of Profit and Loss, respectively).
2.14 Employee benefits
2.14.1 Short Term employee Benefits
Short term employee benefits are recognized in the period during which the services have been rendered.
2.14.2 Long Term employee Benefits
a. provident Fund, Family pension Fund & employees' State Insurance Scheme
As per the Employees Provident Funds and Miscellaneous Provisions Act, 1952 all employees of the Company
are entitled to receive benefits under the provident fund & family pension fund which is a defined contribution
plan. These contributions are made to the fund administered and managed by Government of India. In addition,
some employees of the Company are covered under Employees' State Insurance Scheme Act 1948, which are
also defined contribution schemes recognized and administered by Government of India.
The Company's contributions to these schemes are recognized as expense in Statement of Profit and Loss
account during the period in which the employee renders the related service. The Company has no further
obligation under these plans beyond its monthly contributions.
b. Leave Encashment
The Company provides for the liability at year end on account of unavailed earned leave as per the
actuarial valuation.
c. Gratuity
The Company provides for gratuity obligations through a Defined Benefits Retirement plan ('The Gratuity Plan')
covering all employees. The present value of the obligation under such Defined benefits plan is determined
based on actuarial valuation using the Project Unit Credit method, which recognizes each period of service as
giving rise to additional unit of employee benefit entitlement and measure each unit separately to build up
final obligation.
d. Share based payment
The cost is recognised, together with a corresponding increase in Employee stock options outstanding in
equity, over the period in which the performance and/or service conditions are fulfilled in employee benefits
expense. The cumulative expense recognised for equity-settled transactions at each reporting date until the
vesting date reflects the extent to which the vesting period has expired and the Company best estimate of the
number of equity instruments that will ultimately vest. The statement of profit and loss expense or credit for a
period represents the movement in cumulative expense recognised as at the beginning and end of that period
and is recognised in employee benefits expense.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted
earnings per share
2.15 Tax
The tax expense for the period comprises current and deferred tax. Taxes are recognised in the statement of profit and
loss, except to the extent that it relates to the items recognised in the comprehensive income or in Equity. In which case,
the tax is also recognised in the comprehensive income or in Equity.
2.15.1 current tax
Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the
Indian Income-tax Act. Current income tax relating to items recognised outside statement of profit and loss is
recognised outside statement of profit and loss (either in OCI or in equity).
2.15.2 Deferred tax
Deferred Tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred Tax Assets
are recognised to the extent it is probable that taxable profit will be available against which the deductible temporary
differences, and the carry forward of unused tax losses can be utilised. Deferred Tax Liabilities and Assets are
measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised,
based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The carrying amount of deferred tax liabilities and assets are reviewed at the end of each reporting period.
2.16 Segment reporting
The Company is engaged primarily in the business of 'Jewellery' and hence there is no separate reportable segment
within the criteria defined under Indian Accounting Standard (Ind AS) -108 'Operating Segments'.
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