1.5 MATERIAL ACCOUNTING POLICIES
1.5.1 PROPERTY, PLANT AND EQUIPMENT:
i) Property, Plant and Equipment are stated at original cost (net of tax/duty credit availed) less accumulated
depreciation and impairment losses. Cost includes cost of acquisition, construction and installation, taxes, duties,
freight, other incidental expenses related to the acquisition, and pre-operative expenses including attributable
borrowing costs incurred during pre-operational period.
ii) Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flow to the company and the cost
of the item can be measured reliably. The carrying amount of any component as a separate asset is derecognized
when replaced. All other repairs and maintenance are charged to profit and loss during the reporting period in
which they are incurred.
iii) The cost of Property, Plant & Equipment as at 01st April, 2016, the company's date of transition to Ind AS, was
determined with reference to its carrying value, recognized as per the previous GAAP (Deemed Cost) as at the date
of transition to Ind AS.
iv) Assets which are not ready for their intended use on reporting date are carried as capital work-in-progress at cost,
comprising direct cost and related incidental expenses.
v) Property, Plant and Equipment are depreciated and/or amortized on as per the Straight line method on the basis of
their useful lives as notified in Schedule II to the Companies Act, 2013 . The assets' residual values and useful lives
are reviewed, and adjusted if appropriate, at the end of each reporting period.
vi) Depreciation in respect of additions to assets has been charged on pro rata basis with reference to the period when
the assets are ready for use.
vii) An asset's carrying amount is written down immediately on discontinuation to its recoverable amount if the asset's
carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by
comparing proceeds with carrying amount. These are included in Profit/ Loss on Sale and Discard of Fixed Assets.
viii) Useful lives of the Property, Plant and Equipment as notified in Schedule II to the Companies Act, 2013 are as follows :
Buildings—30 to 60 years
Plant and Equipments-15 to 25 years
Furniture and Fixtures-10 years
Vehicles-8 to 10 years
Office Equipments-5 years
Computers - 3 years
ix) At each balance sheet date, the Company reviews the carrying amount of property, plant and equipment to
determine whether there is any indication of impairment loss. If any such indication exists, the recoverable amount
of the assets is estimated in order to determine the extent of impairment loss. The recoverable amount is higher
of the net selling price and the value in use, determined by discounting the estimated future cash flows expected
from the continuing use of the asset to their present value.
x) Cost is reduced by accumulated depreciation and impairment and amount representing assets discarded or
held for disposal.
1.5.2 INTANGIBLE ASSETS:
i) Intangible assets acquired by payment e.g. Computer Software are disclosed at cost less amortization on a straight¬
line basis over its estimated useful life.
ii) Intangible assets are carried at cost, net of accumulated amortization and impairment loss, if any.
iii) Intangible assets are amortized on straight-line method as follows :
Computer Software-5 years
iv) At each balance sheet date, the Company reviews the carrying amount of intangible assets to determine whether
there is any indication of impairment loss. If any such indication exists, the recoverable amount of the assets
is estimated in order to determine the extent of impairment loss. The recoverable amount is higher of the net
selling price and the value in use, determined by discounting the estimated future cash flows expected from the
continuing use of the asset to their present value.
1.5.3 Revenue Recognition
i) Revenue comprises of all economic benefits that arise in the ordinary course of activities of the Company which
result in increase in Equity, other than increases relating to contributions from equity participants. Revenue is
recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue
can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable.
The Revenue from contracts with customers is recognised when control of the goods or services are transferred
to the customer at an amount that reflects the consideration entitled in exchange for those goods or services.
Generally, control is transferred upon shipment of goods to the customer or when the goods is made available to
the customer, provided transfer of title to the customer occurs and the Company has not retained any significant
risks of ownership or future obligations with respect to the goods shipped.
Revenue is adjusted for variable consideration such as discounts, rebates, refunds, credits, price concessions,
incentives, or other similar items in a contract when they are highly probable to be provided.
The Company recognizes revenue generally at a point in time when the products are delivered to customer or when
it is delivered to a carrier for export sale, which is when the control over product is transferred to the customer
In revenue arrangements with multiple performance obligations, the Company accounts for individual products
and services separately if they are distinct - i.e. if a product or service is separately identifiable from other items in
the arrangement and if a customer can benefit from it. The consideration is allocated between separate products
and services in the arrangement based on their stand-alone selling prices. Revenue from sale of by products are
included in revenue.
ii) Services: Revenue from Services are recognized as and when the services are rendered.
iii) Export Benefits are accounted on accrual basis.
1.5.4 Other Income
a. Interest Income
Interest income is recognized using effective interest rate method. The effective interest rate is the rate that exactly
discounts estimated future cash receipts through expected life of the financial asset to the gross carrying amount of
the financial asset. When calculating the effective interest rate, the company estimates the expected cash flows by
considering all the contractual terms of the financial instrument but does not consider the expected credit losses.
b. Dividend income
Dividend are recognised in the Statement of Profit and Loss only when the right to receive payment is established,
it is probable that the economic benefits associated with the dividend will flow to the Company, and the amount
of the dividend can be measured reliably.
c. Gain or loss on derecognition of Financial Assets
Gain or Loss on derecognition of financial asset is determined as the difference between the sale price (net of
selling costs) and carrying value of financial asset.
d. All other Incomes are recognised and accounted for on accrual basis
1.5.5 EMPLOYEE BENEFITS:
a. Short Term employee benefits
Short term employee benefits for salary and wages including accumulated leave that are expected to be settled
wholly within 12 months after the end of the reporting period in which employees render the related service are
recognized as an expense in the statement of profit and loss.
b. Post- employment benefits
Gratuity
The Company provides for gratuity, a defined benefit plan ("the Gratuity Plan") covering the eligible employees
of the Company. The Gratuity Plan provides a lump-sum payment to vested employees at retirement, death,
incapacitation or termination of employment, of an amount based on the respective employee's salary and the
tenure of the employment with the Company.
Liability with regard to the Gratuity Plan are determined by actuarial valuation, performed by an independent
actuary, at each balance sheet date using the projected unit credit method.
The Company recognises the net obligation of a defined benefit plan as a liability in its balance sheet. Gains or losses
through re-measurement of the net defined benefit liability are recognised in other comprehensive income and
are not reclassified to profit and loss in the subsequent periods. Actuarial gains and losses arise due to difference in
the actual experience and the assumed parameters and also due to changes in the assumptions used for valuation.
The Company recognizes these remeasurements in the Other Comprehensive Income (OCI).
Provident Fund
Eligible employees of the Company receive benefits from provident fund, which is a defined contribution plan.
Both the eligible employees and the Company make monthly contributions to the Government administered
provident fund scheme equal to a specified percentage of the eligible employee's salary. Amounts collected under
the provident fund plan are deposited with in a government administered provident fund. The Company have no
further obligation to the plan beyond its monthly contributions.
c. Compensated Absences
The Company has a policy on compensated absences which are both accumulating and non-accumulating in nature.
The expected cost of accumulating compensated absences is determined by actuarial valuation performed by an
independent actuary at each balance sheet date using the projected unit credit method on the additional amount
expected to be paid/availed as a result of the unused entitlement that has accumulated at the balance sheet date.
Expense on non-accumulating compensated absences is recognised is the period in which the absences occur.
1.6 Valuation of Inventories
i) The cost of inventories has been computed to include all cost of purchases, cost of conversion and other related costs
incurred in bringing the inventories to their present location and condition. The costs of Raw Materials, Stores and spare
parts etc., consumed consist of purchase price including duties and taxes (other than those subsequently recoverable by
the enterprise from the taxing authorities), freight inwards and other expenditure directly attributable to the procurement.
ii) Stock of Raw Materials are valued at cost and of those in transit and at port related to these items are valued at cost to date.
Goods and materials in transit are valued at actual cost incurred up to the date of balance sheet. Material and supplies
held for use in the production of inventories are not written down if the finished products in which they will be used are
expected to be sold at or above cost.
iii) Stock of Stores and spare parts, Packing Material, Power & Fuel and Folders are valued at cost; and of those in transits and
at port related to these items are valued at cost.
iv) Work-in-process is valued at lower of cost or net realizable value.
v) Stock of Finished goods and By-products is valued at lower of cost or net realizable value.
vi) Stock-in-trade is valued at lower of cost or net realizable value.
1.7 Cash flow statement
Cash flows are reported using indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash
nature and any deferrals or accruals of past or future cash receipts or payments. The cash flow from regular revenue generating,
financing and investing activities of the Company is segregated.
Cash and cash equivalents in the balance sheet comprise cash at bank, cash/Cheques in hand and short-term investments with
an original maturity of three months or less.
1.8 Impairment
1.8.1 Financial assets
The Company recognizes loss allowances for expected credit losses on financial assets measured at amortized cost.
At each reporting date, the Company assesses whether financial assets carried at amortized cost is credit impaired. A
financial asset is 'credit -impaired' when one or more events that have a detrimental impact on the estimated future cash
flows of the financial asset have occurred.
Loss allowances for trade receivables are always measured at an amount equal to lifetime expected credit losses. The
Company follows 'simplified approach' for recognition of impairment loss allowance on trade receivables. Under the
simplified approach, the Company is not required to track changes in credit risk. Rather, it recognizes impairment loss
allowance based on lifetime expected credit losses together with appropriate management estimates for credit loss at
each reporting date, right from its initial recognition.
The Company uses a provision matrix to determine impairment loss allowance on the group of trade receivables. The
provision matrix is based on its historically observed default rates over the expected life of the trade receivable and is
adjusted for forward looking estimates. At every reporting date, the historical observed default rates are updated and
changes in the forward-looking estimates are analyzed.
1.8.2 Non financial assets
The company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication
exists the company estimates the asset's recoverable amount.
An asset's recoverable amount is the higher of an assets net selling price and its value in use. The recoverable amount is
determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those
from other assets or groups of assets.
Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written
down to its recoverable amount. The impairment loss is recognized in the statement of profit and loss.
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 net selling price, recent market transactions are taken into account, if available. If no such transactions can
be identified, an appropriate valuation model is used.
1.9 FINANCIAL INSTRUMENTS:
1.9.1 Initial recognition
The company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of
the instrument.
All financial assets and liabilities except investment in subsidiaries are recognized at fair value on initial recognition.
Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities, which
are not at fair value through profit or loss, are added to or deducted from the fair value of financial assets or financial
liabilities on initial recognition.
Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit
or loss are recognised immediately in profit or loss.
Regular way purchase and sale of financial assets are accounted for at trade date.
1.9.2. Subsequent Measurement
a. Non-derivative financial instruments
i. Financial assets measured at amortized cost
A financial asset except equity instruments (other than those of subsidiaries) is subsequently measured at
amortized 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.
ii. Financial assets measured at fair value through other comprehensive income (FVOCI)
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
has elected to measure Equity instruments (other than those of subsidiaries) at fair value through other
comprehensive income.
iii. Financial assets measured at fair value through profit or loss (FVTPL)
A Financial Asset which is not classified in any of the above categories are measured at FVTPL. Financial
assets are reclassified subsequent to their recognition, if the Company changes its business model for
managing those financial assets. Changes in business model are made and applied prospectively from the
reclassification date which is the first day of immediately next reporting period following the changes in
business model in accordance with principles laid down under Ind AS 109 - Financial Instruments.
iv. Financial liabilities
Financial liabilities and equity instruments issued by the Company are classified according to the
substance of the contractual arrangements entered into and the definitions of a financial liability and an
equity instrument.
I nterest bearing bank loans and issued debt are initially measured at fair value and are subsequently
measured at amortized cost using the effective interest rate method. Any difference between the proceeds
(net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the
borrowings in the statement of profit and loss.
b. Equity instruments
An equity instrument is a contract that evidences residual interest in the assets of the company after deducting
all of its liabilities. Incremental costs directly attributable to the issuance of equity instruments are recognized as a
deduction from equity instrument net of any tax effects.
1.9.3 Effective Interest rate (EIR) method
The effective interest method is a method of calculating the amortized cost of a financial instrument and of allocating
interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts future
cash receipts or payments through the expected life of the financial instrument, or where appropriate, a shorter period.
1.9.4 De-recognition
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. A financial liability is
derecognized when obligation specified in the contract is discharged or cancelled or expires.
1.9.5 Off-setting
Financial assets and liabilities are offset and the net amount is presented in the balance sheet when the company currently
has a legally enforceable right to offset the recognized amounts and intends either to settle on a net basis or to realize the
asset and settle the liability simultaneously.
1.10 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 assumes 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.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic
benefit by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its
highest and best use.
The company uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to
measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair
value hierarchy. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are
either observable or unobservable and consists of the following three levels:
Level 1 - inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 - inputs are other than quoted prices included within level 1 that are observable for the asset or liability either directly
(i.e. as prices) or indirectly (i.e. derived prices)
Level 3 - inputs are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part
using a valuation model based on assumption that are neither supported by prices from observable current market transactions
in the same instrument nor are they based on available market data.
1.11 FOREIGN CURRENCY TRANSACTIONS:
i) Foreign currency transactions are recorded on initial recognition in the functional currency, using the exchange rate
at the date of the transaction. At each balance sheet date, foreign currency monetary items are reported using the
closing exchange rate. Exchange differences that arise on settlement of monetary items or on reporting at each balance
sheet date of the Company's monetary items at the closing rate are recognized as income or expenses in the period in
which they arise.
ii) Non-monetary items which are carried at historical cost denominated in foreign currency are reported using the exchange
rate at the date of the transaction. Non-monetary items measured at fair value in a foreign currency are translated using
the exchange rate at the date when the fair value is determined.
1.12 BORROWING COSTS:
i) Borrowing costs are interest and other costs (including exchange differences relating to foreign currency borrowings to
the extent that they are regarded as an adjustment to interest costs) incurred in connection with the borrowing of funds.
ii) General and specific borrowing costs that are directly attributable to the acquisition or construction of qualifying assets
are capitalized as part of the cost of such assets during the period of time that is required to complete and prepare
the asset for its intended use. A qualifying asset is one that takes necessarily substantial period of time to get ready for
its intended use.
iii) All other borrowing costs are expensed in the period in which they are incurred.
1.13 ACCOUNTING FOR TAXES ON INCOME:
i) Tax expenses comprise of current tax and deferred tax including applicable surcharge and cess.
ii) Current Income tax is computed using the tax effect accounting method, where taxes are accrued in the same period
in which the related revenue and expenses arise. A provision is made for income tax annually, based on the tax liability
computed, after considering tax allowances and exemptions. Provisions are recorded when it is estimated that a liability
due to disallowances or other matters is probable.
iii) Deferred tax is provided using the balance sheet approach on temporary differences at the reporting date between
the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized for all
deductible temporary differences; the carry forward of unused tax credits and any unused tax losses. Deferred tax assets
are recognized to the extent that it is probable that taxable profits against which the deductible temporary differences,
and the carry forward unused tax credits and unused tax losses can be utilized.
iv) 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 profit will be available to allow all or part of the deferred tax assets to be utilized.
Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it is become
probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are
measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based
on the tax rates and tax laws that have been enacted or substantively enacted at the reporting date.
v) Deferred tax is recognized in the statement of profit and loss, except to the extent that it relates to items recognized in
other comprehensive income. As such, deferred tax is also recognized in other comprehensive income.
vi) Deferred Tax Assets and Deferred Tax Liabilities are offset, if a legally enforceable right exists to set off current tax assets
against current tax liabilities and the Deferred Tax Assets and Deferred Tax Liabilities relate to taxes on income levied by
same governing taxation laws.
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