2.4 Significant Accounting Policies:
a) Property, Plant and Equipment
Recognition and measurement
Items of property, plant and equipment, other than Freehold Land, are measured at cost less
accumulated depreciation and any accumulated impairment losses. Freehold land is carried at
cost and is not depreciated.
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 directly attributable costs of bringing the asset to its working condition for its intended
use and estimated costs of dismantling and removing the item and restoring the item and
restoring the site on which it is located.
If significant parts 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.
Any gain or loss on derecognition of an item of property, plant and equipment is included in
profit or loss when the item is derecognized.
Subsequent costs are included in the assets carrying amount or recognized as a separate asset,
as appropriate only if it is probable that the future economic benefits associated with the item
will flow to the Company and that the cost of the item can be reliably measured. The carrying
amount of any component accounted for as a separate asset is derecognized when replaced.
All other repair and maintenance are charged to profit and loss during the reporting period in
which they are incurred.
Depreciation
Depreciation on Property Plant and Equipment is provided on Written down Method (WDV)
using the rates arrived at based on the useful lives of the respective assets prescribed in
Schedule II to the Companies Act, 2013. Depreciation on amounts of additions to fixed assets
during the year or on its disposal/ demolition/ destruction of property plant and equipment
during the year is provided on pro-rata basis as per Schedule II. As per Note 7 to the Schedule
II to the Companies Act, 2013, the carrying amount of the fixed assets as on 1st April, 2015
has been depreciated over the remaining useful life of the asset after retaining the residual
value. Wherever the remaining useful life of the asset is NIL as per Schedule II, the carrying
amount as on 1st April, 2015 is recognized in the opening balance of retained earnings.
Depreciation methods, useful lives and residual values are reviewed at each reporting date
and adjusted if appropriate.
b) Borrowing Costs
Interest and other borrowing costs attributable to qualifying assets are capitalized. Other
interest and borrowing costs are charged to revenue.
c) Impairment of non-financial assets
An impairment loss is recognized whenever the carrying value of an asset or a cash¬
generating unit exceeds its recoverable amount. Recoverable amount of an asset or a cash¬
generating unit is the higher of its fair value less costs of disposal and its value in use. An
impairment loss, if any, is recognized in the Statement of Profit and Loss in the period in
which the impairment takes place. The impairment loss is allocated first to reduce the
carrying amount of any goodwill (if any) allocated to the cash generating unit and then to the
other assets of the unit, pro rata based on the carrying amount of each asset in the unit.
d) Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a
financial liability or equity instrument of another entity. Financial instruments also include
derivative contracts such as foreign currency foreign exchange forward contracts, futures and
currency options.
Financial assets
Initial recognition and measurement
All financial assets are recognized 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 asset. Purchases or sales of financial assets that require delivery of
assets within a time frame established by regulation or convention in the market place
(regular way trades) are recognized on the trade date, i.e., the date that the Company commits
to purchase or sell the asset.
For the purpose of subsequent measurement, financial assets are classified in four categories:
• Debt instruments at amortized cost,
• Debt instruments at fair value through other comprehensive income (FVTOCI)
• Debt instruments, derivatives and equity instruments at fair value through profit
(FVTPL)
• Equity instruments measured at fair value through other comprehensive income
(FVTOCI) except unquoted shares.
on the basis of its business model for managing the financial assets and the contractual cash
flow characteristics of the financial asset.
Equity investments
All equity investments within the scope of Ind-AS 109 are measured at fair value. Equity
instruments which are held for trading are classified as at FVTPL. For all other equity
instruments, the Company decides to classify the same either as at FVTOCI or FVTPL. The
Company makes such election on an instrument-by-instrument basis. The classification is
made on initial recognition and is irrevocable. If the Company decides to classify an equity
instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends,
are recognized in the Other Comprehensive Income (OCI). There is no recycling of the
amounts from OCI to profit and loss, even on sale of investment. However, the Company
may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all
changes recognized in the profit and loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or a part of a group of
similar financial assets) is primarily derecognized (i.e., removed from the Company’s balance
sheet) when:
The contractual rights to receive cash flows from the financial asset have expired, or The
Company has transferred its rights to receive cash flows from the asset or has assumed an
obligation to pay the received cash flows in full without material delay to a third party under
a ‘pass-through’ arrangement; and either (a) the Company has transferred substantially all the
risks and rewards of the asset, or (b) the Company has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has
entered into a pass-through arrangement, it evaluates if and to what extent it has retained the
risks and rewards of ownership. When it has neither transferred nor retained substantially all
of the risks and rewards of the asset, nor transferred control of the asset, the Company
continues to recognize the transferred asset to the extent of the Company’s continuing
involvement. In that case, the Company also recognizes an associated liability. The
transferred asset and the associated liability are measured on a basis that reflects the rights
and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is
measured at the lower of the original carrying amount of the asset and the maximum amount
of consideration that the Company could be required to repay.
The Company assess on a forward-looking basis the Expected Credit Losses (ECL)
associated with its financial assets that are debt instruments and are carried at amortized cost.
The impairment methodology applied depends on whether there has been a significant
increase in credit risk.
For trade receivables, the Company applies a simplified approach. It recognizes impairment
loss allowance based on lifetime ECLs at each reporting date, right from its initial
recognition. Trade receivables are tested for impairment on a specific basis after considering
the sanctioned credit limits, security deposit collected etc. and expectations about future cash
flows.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value
through profit or loss, loans and borrowings, payables, or as derivatives designated as
hedging instruments in an effective hedge, as appropriate. Such liabilities, including
derivatives that are liabilities, shall be subsequently measured at fair value.
All financial liabilities are recognized initially at fair value and, in the case of loans and
borrowings and payables, net of directly attributable and incremental transaction cost.
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.
The Company’s financial liabilities include trade and other payables, loans and borrowings
including bank overdrafts, financial guarantee contracts and derivative financial instruments.
Derecognition
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 or loss.
Loans and borrowing
After initial recognition, interest-bearing loans and borrowings are subsequently measured at
amortized cost using the EIR method. Gains and losses are recognized in Statement of Profit
and Loss when the liabilities are derecognized as well as through the 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.
Financial guarantee contracts issued by the Company are those contracts that require
specified payments to be made to reimburse the holder for a loss it incurs because the
specified debtor fails to make a payment when due in accordance with the terms of a debt
instrument. Financial guarantee contracts are recognized initially as a liability at fair value,
adjusted for transaction costs that are directly attributable to the issuance of the guarantee.
Subsequently, the liability is measured at the higher of the amount of loss allowance
determined as per impairment requirements of Ind-AS 109 and the amount recognized less
cumulative amortization.
Where guarantees in relation to loans or other payables of subsidiaries are provided for no
compensation, the fair values are accounted for as contributions and recognized as fees
receivable under “other financial assets” or as a part of the cost of the investment, depending
on the contractual terms.
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 recognized amounts
and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities
simultaneously.
e) Inventories
Inventories are valued at lower of cost and net realizable value. Net realizable value is the
estimated selling price in the ordinary course of business, less estimated costs of completion
and the estimated costs necessary to make the sale.
Raw materials, packing materials and stores: Costs includes cost of purchase and other costs
incurred in bringing each product to its present location and condition.
Finished goods and work in progress: In the case of manufactured inventories and work in
progress, cost includes all costs of purchases, an appropriate share of production overheads
based on normal operating capacity and other costs incurred in bringing each product to its
present location and condition
If payment for inventory is deferred beyond normal credit terms, then the cost is determined
by discounting the future cash flows at an interest rate determined with reference to market
rates. The difference between the total cost and the deemed cost is recognized as interest
expense over the period of financing under the effective interest method.
f) Cash and Cash Equivalents
Cash and cash equivalents in the balance sheet includes cash at bank and on hand, deposits
held at call with financial institutions, other short term highly liquid investments, with
original maturities less than three months which are readily convertible into cash and which
are subject to insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents cash and short-term
deposits as defined above is net of outstanding bank overdrafts as they are considered an
integral part of the Company’s cash management.
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