2A Significant Accounting Policies
a) Property, Plant and Equipment & Depreciation
i) Recognition and Measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and
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 costs directly attributable to bringing the asset to the location and condition necessary for it to be
capable of operating in the manner intended by management.
tf significant part of an item of property, plant and equipment have different useful lives, then they are
accounted for as separate items (major components) of property, plant and equipment.
Property, plant and equipment are derecognised from financial statement, either on disposal or when
no economic benefits are expected from its use or disposal. The gain or loss arising from disposal of
property, plant and equipment are determined by comparing the proceeds from disposal with the
carrying amount of property, plant and equipment recognised in the statement of profit and loss
account in the year of occurrence.
ii) Subsequent expenditure
Subsequent expenditure is capitalised only if its is probable that the future economic benefits
associated with the expenditure will flow to the company.
iii) Depreciation
Depreciation amount for assets is the cost of an asset, or other amount substituted for cost, less its
estimated residual value.
Depreciation on assets has been provided on Straight line basis at the useful lives specified in the
Schedule II of the Companies Act, 2013. Depreciation on additions / deductions is calculated pro-rata
from / to the month of additions / deductions.
Assets costing less than INR 5,000/- are depreciated at 100% in the year of acquisition.
b) Revenue recognition
Revenue is recognized to the extent it is probable that the economic benefits will flow to the Company
and the revenue can be reliably measured, regardless of when the payment is being made. Revenue
is measured at the fair value of the consideration received or receivable, taking into account
contractually defined terms of payment.
Interest income: Interest income is accrued on a time basis, by reference to the principal outstanding
and atthe effective interest rate applicable.
c) Inventories
Raw materials and stores, work-in-progress, traded and finished goods are stated at the lower of cost,
calculated on weighted average basis, and net realizable value. Cost of raw materials and stores
comprise of cost of purchase. Cost of work-in-progress and finished goods comprises direct
materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure,
the latter being allocated on the basis of normal operating capacity. Cost of inventories also include
all other cost incurred in bringing the inventories to their present location and condition. Costs of
purchased inventory are determined after deducting rebates and discounts. Net realizable value is
the estimated selling price in the ordinary course of business less the estimated costs of completion
and the estimated costs necessary to make the sale. Items held for use in the production of inventory
are not written below cost if the finished product in which these will be incorporated are expected to
be sold at or above cost.
d) Foreign Currencies
Functional currency: The functional currency of the Company is the Indian rupee.
Transactions and translations: Foreign currency transactions are translated into the functional
currency using the exchange rates at the dates of the transactions. Foreign-currency-denominated
monetary assets and liabilities are translated into the relevant functional currency at exchange rates
in effect at the Balance Sheet date. The gains or losses resulting from such translations are included
in net profit in the Statement of Profit and Loss. Non-monetary assets and non-monetary liabilities
denominated in a foreign currency and measured at fair value are translated at the exchange rate
prevalent at the date when the fair value was determined. Non-monetary assets and non-monetary
liabilities denominated in a foreign currency and measured at historical cost are translated at the
exchange rate prevalent at the date of the transaction.
Transaction gains or losses realized upon settlement of foreign currency transactions are included in
determining net profit for the period in which the transaction is settled. Revenue, expense and cash
flow items denominated in foreign currencies are translated into the relevant functional currencies
using the exchange rate in effect on the date of the transaction.
e) Income tax
Income tax expense comprises current tax expense and the net change in the deferred tax asset or
liability during the year. Current and deferred taxes are recognised in Statement of Profit and Loss,
except when they relate to items that are recognised in other comprehensive income or directly in
equity, in which case, the current and deferred tax are also recognised in other comprehensive
income or directly in equity, respectively.
Current tax: Current tax is measured at ttie amount of tax expected to be payable on the taxable
income for the year as determined in accordance with the provisions of the Income Tax Act, 1961.
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off
the recognized amounts and there is an intention to settle the asset and the liability on a net basis.
Deferred tax: Deferred income tax is recognised using the Balance Sheet approach. Deferred
income tax assets and liabilities are recognised for deductible and taxable temporary differences
arising between the tax base of assets and liabilities and their carrying amount, except when the
deferred income tax arises from the initial recognition of an asset or liability in a transaction that is not
a business combination and affects neither accounting nor taxable profit or loss at the time of the
transaction.
Deferred tax assets are recognised only to the extent it is probable that either future taxable profits or
reversal of deferred tax liabilities will be available, against which the deductible temporary
differences, and the carry forward of unused tax credits and unused tax losses can be utilised. The
carrying amount of a deferred tax asset is reviewed at the end of 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 income tax asset to be utilised.
Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been
enacted or substantively enacted by the end of the reporting period and are expected to apply when
the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets and
liabilities are offset when there is a legally enforceable right to set current tax assets and liabilities and
when the deferred tax balances relate to the same taxation authority.
f) Impairment of Assets
Non Financial Assets :The carrying value of assets / cash generating units at each balance sheet date
are reviewed for impairment if any indication of impairment exists.
if the carrying amount of the assets exceed the estimated recoverable amount, an impairment is
recognised for such excess amount. The impairment loss is recognised as an expense in the
Statement of Profit and Loss, unless the asset is carried at revalued amount, in which case any
impairment loss of the revalued asset is treated as a revaluation decrease to the extent a revaluation
reserve for that asset.
When there is indication that an impairment loss recognised for an asset (other than a revalued asset)
in earlier accounting periods which no longer exists or may have decreased, such reversal of
impairment loss is recognised in the Statement of Profit and Loss, to the extent the amount was
previously charged to the Statement of Profit and Loss. In case of revalued assets, such reversal is not
recognised.
Financial assets: The Company assesses on a forward-looking basis the expected credit losses
associated with its financial assets. The impairment methodology applied depends on whether there
has been a significant increase in credit risk. For trade receivables only, the Company applies the
simplified approach permitted by Ind AS 109 Financial Instruments, which requires expected lifetime
losses to be recognised from initial recognition of the receivables.
|