Note 2 - SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of Preparation of Financial Statements
The 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).
The standalone financial statements have been prepared on an accrual basis and under
the historical cost convention.
The standalone financial statements are presented in Indian Rupee and all the values are
rounded off to the nearest Lakhs except number of shares, face value of share, earning
per share or wherever otherwise indicated.
2.2 Summary of material accounting policies
a. Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ non¬
current classification. An asset is treated as current when it is:
- 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.
A liability is current when: -It is expected to be settled in normal operating cycle
-It is held primarily for the purpose of trading
- It is 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 non-current assets and liabilities.
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.
b. Fair value measurement
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 or a 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. 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.
c. Inventories
Stock in trade are valued at lower of cost and net realizable value. Cost of Stock is
determined on FIFO basis. 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.
d. Property, plant and equipment
PPE are stated at cost, net of accumulated depreciation and accumulated impairment
losses. Cost comprises the purchase price, including import duties and non- refundable
purchase taxes, and any directly attributable cost of bringing the asset to its working
condition for its intended use. Individual Assets whose actual cost does not exceed Rs.
5,000/- are fully depreciated in the year of purchase. However, since the detailed Fixed
asset register has not been provided by the Erstwhile Board of Directors. Hence, details
such as date of purchase, useful life, cost, accumulated depreciation, method and rate of
depreciation, scrap value, etc. are not available. In absence of such information, the fixed
assets are valued at the book value less depreciation.
e. Depreciation Charges
Detailed Fixed asset register from the Erstwhile Board of Directors is not provided.
Hence, details such as date of purchase, useful life, cost, accumulated depreciation,
method and rate of depreciation, scrap value, etc. are not available. In absence of such
information, depreciation has been calculated by on Fixed Assets is provided on Straight
Line Method (SLM) as per the last available audited balance sheet and is not possible to
systematically allocate over the useful life of an asset as specified in part C of Schedule II
of The Companies Act, 2013. In respect of Assets costing less than Rs. 5,000/- the rate of
depreciation is taken as 100%. Depreciation is not computed on pro-rata with reference
to the number of months of use during the year.
f. Borrowing costs
As per AS-16 Borrowing cost includes interest, Amortization of ancillary costs incurred
in connection with the arrangement of borrowings and exchange differences arising from
foreign currency borrowings to the extent they are regarded as an adjustment to the
interest cost. Borrowing costs, if any, directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period of time to get ready
for its intended use or sale are capitalized, if any. All other borrowing costs are expensed
in the period in which they occur.
g. Impairment of assets
The company assesses at each balance sheet date whether there is any indication that an
asset may be impaired. If any such indication exists, the Company estimates the
recoverable amount of the asset If such recoverable amount of the asset or the
recoverable amount of the cash generating unit to which the asset belongs is less than it
carrying amount is reduced to its recoverable amount. The reduction is treated as an
impairment loss and is recognized in the profit and loss account. If at the balance sheet
date there is an indication that if previously assessed impairment loss no longer exists,
the recoverable amount is reassessed and the asset is reflected at the recoverable
amount.
h. Revenue recognition
AS 9 - Revenue from Contracts with Customers which establishes a comprehensive
framework for determining whether, how much and when revenue is to be recognized.
The impact of the adoption of the standard on the financial statements of the Company is
insignificant. Revenue from sale of goods is recognized when control of the products
being sold is transferred to customer and when there are no longer any unfulfilled
obligations. The Performance Obligations in contracts are fulfilled at the time of dispatch,
delivery or upon formal customer acceptance depending on contract terms. Revenue is
measured at fair value of the consideration received or receivable, after deduction of any
trade discounts, volume rebates and any taxes or duties collected on behalf of the
government such as goods and services tax, etc. Revenue is only recognized to the extent
that it is highly probable a significant reversal will not occur. Customers have the
contractual right to return goods only when authorized by the Company. An estimate is
made of goods that will be returned and a liability is recognized for this amount using a
best estimate based on accumulated experience.
Other Income
[a] In respect of Interest Income, revenue is recognised on a time proportion basis
taking into account the amount outstanding and the rate applicable.
(b] In respect of Dividend Income, revenue is recognised when the right to receive
payments is established.
(c) The members of the suspended board have not provided details of any other
interest-bearing deposits / loans and advances.
i. Income taxes
Provision for tax is made for both Current and Deferred taxes.
Provision for current income tax is made on current tax rates based on assessable income
in accordance with the provision of the Income Tax Act, 1961.
Deferred Tax Assets and Deferred Tax Liabilities are recognized on timing difference
being the difference between taxable incomes and accounting income. Deferred Tax
Assets or Liabilities are measured using the tax rates and tax laws that have been enacted
or substantively enacted at the Balance Sheet date. Deferred Tax Assets arising from
timing differences are recognized to the extent there is a reasonable certainty that the
assets can be realized in future.
On reassessing the deferred tax asset and liability, the deferred tax asset is in excess as
the deductible temporary difference is higher than the taxable temporary difference.
However, the Company has not recognized deferred tax asset as there is no probable
certainty that there will be sufficient future taxable income against which such losses can
be adjusted.
However, the Company has not recognised deferred tax assets as there is no probable
certainty that there will be sufficient future taxable income against which such losses can
be adjusted.
j. Earnings Per Share
Basic earnings per share are calculated by dividing the net profit or loss for the period
attributable to equity shareholders (after deducting preference dividends and
attributable taxes] by the weighted average number of equities shares outstanding
during the period. Partly paid equity shares are treated as a fraction of an equity share to
the extent that they are entitled to participate in dividends relative to a fully paid equity
share during the reporting period. The weighted average number of equity shares
outstanding during the period is adjusted for events such as bonus issue, bonus element
in a rights issue, share split, and reverse share split (consolidation of shares] that have
changed the number of equity shares outstanding, without a corresponding change in
resources.
For the purpose of calculating diluted earnings per share, the net profit or loss for the
period attributable to equity shareholders and the weighted average number of shares
outstanding during the period are adjusted for the effects of all dilutive potential equity
shares.
The members of the suspended board have not provided details of shareholders holding
less than 5% of the equity share capital.
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