2.2 Summary of Material Accounting Policies
2.2.1 Current/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.
2.2.2 Property, Plant and Equipment & Depreciation
thereon
Property, Plant & Equipment is recognised when it
is probable that future economic benefits associated
with the item will flow to the Company and the cost
can be measured reliably.
Property, Plant and Equipment are stated at cost, net
of recoverable taxes, trade discount and rebates less
accumulated depreciation and impairment losses,
if any. Such cost includes purchase price (including
import duties and non refundable taxes), borrowing
cost and any cost directly attributable to bringing the
assets to its working condition for its intended use.
Subsequent costs are included in the asset's
carrying amount or recognised as a separate asset,
as appropriate, only when it is probable that future
economic benefits associated with the item will flow
to the entity and the cost can be measured reliably.
Property, Plant and Equipment which are significant
to the total cost of that item of Property, Plant
and Equipment and having different useful life are
accounted separately.
Items such as spare parts, stand-by equipment and
servicing equipment that meet the definition of
Property, Plant and Equipment are capitalised at cost
and depreciated over their useful life. Costs in nature
of repairs and maintenance are recognised in the
statement of Profit and Loss as and when incurred.
Cost of assets not ready for intended use, as on
the Balance Sheet Date, is shown as capital work in
progress. Advances given towards acquisition of fixed
assets outstanding at each Balance Sheet date are
disclosed as Other Non- Current Assets.
Depreciation on Property, Plant and Equipment is
provided using the Straight Line Method assuming a
residual value upto 5% of original cost. Depreciation
is provided based on useful life of the assets as
prescribed in Schedule II to the Companies Act,
2013. The residual values, useful lives and methods
of depreciation of Property, Plant and Equipment
are reviewed at each financial year end and adjusted
prospectively, if appropriate.
Gains or losses arising from derecognition of a
Property, Plant and Equipment are measured as the
difference between the net disposal proceeds and
the carrying amount of the asset and are recognised
in the Statement of Profit and Loss when the asset
is derecognised.
2.2.3 Cash and Cash Equivalents
Cash and cash equivalents comprise of cash on hand,
cash at banks, short-term deposits and short-term,
highly liquid investments that are readily convertible
to known amounts of cash and which are subject to an
insignificant risk of changes in value.
2.2.4 Borrowing Costs
Borrowing costs include exchange differences arising
from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs that are directly attributable to
the acquisition or construction of qualifying assets
are capitalised as part of the cost of such assets. A
qualifying asset is one that necessarily takes substantial
period of time to get ready for its intended use.
Interest income earned on the temporary investment
of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs
eligible for capitalisation.
All other borrowing costs are charged to the
Statement of Profit and Loss for the period for which
they are incurred.
2.2.5 Inventories
Raw Materials, Packing Material and Stores and
Spares :
Raw materials, packing materials and stores and spares
are valued at lower of Cost or net realizable value,
except in case of by-products which are valued at net
realisable value. However, materials and other items
held for use in the production of inventories are not
written down below cost if the finished products in
which they will be incorporated are expected to be sold
at or above cost. Costs are determined on FIFO Basis.
Work in Progress /Finished Goods/ Traded Goods :
Work-in-Progress/ Finished Goods/ Traded Goods are
valued at the lower of cost and net realizable value.
Cost of inventories comprises of cost of purchase,
cost of conversion and other costs including
manufacturing overheads net of recoverable taxes
incurred in bringing them to their respective present
location and condition.
Net realisable 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.
2.2.6 Impairment of Non Financial Assets - Property, plant
& Equipment and Intangible Assets
The Company assesses at each reporting date as to
whether there is any indication that any Property,
Plant and Equipment and Intangible Assets or group
of Assets, called Cash Generating Units (CGU) may be
impaired. If any such indication exists, the recoverable
amount of an asset or CGU is estimated to determine
the extent of impairment, if any. When it is not possible
to estimate the recoverable amount of an individual
asset, the Company estimates the recoverable amount
of the CGU to which the asset belongs.
An impairment loss is recognised in the Statement of
Profit and Loss to the extent, asset's carrying amount
exceeds its recoverable amount. The recoverable
amount is higher of an asset's fair value less cost of
disposal and value in use. Value in use is based on
the estimated future cash flows, discounted to their
present value using pre-tax discount rate that reflects
current market assessments of the time value of
money and risk specific to the assets.
The impairment loss recognised in prior accounting
period is reversed if there has been a change in the
estimate of recoverable amount.
Assets that have an indefinite useful life, for example
goodwill, are not subjected to amortisation and are
tested for impairment annually or whenever there is
any indication that the asset may be impaired.
2.2.7 Provisions and Contingencies
Provisions are recognised when the Company has a
present obligation (legal or constructive) as a result of
a past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle
the obligation and a reliable estimate can be made of
the amount of the obligation. If the effect of the time
value of money is material, provisions are discounted
using a current pre-tax rate that reflects, when
appropriate, the risks specific to the liability. When
discounting is used, the increase in the provision due
to the passage of time is recognised as a finance cost.
Disclosure of contingent liability is made when there
is a possible obligation arising from past events,
the existence of which will be confirmed only by
the occurrence or non-occurrence of one or more
uncertain future events not wholly within the control
of the Company or a present obligation that arises
from past events where it is either not probable that
an outflow of resources embodying economic benefits
will be required to settle or a reliable estimate of
amount cannot be made.
2.2.8 Employee Benefit Expenses
Short Term Employee Benefits
The undiscounted amount of short-term employee
benefits expected to be paid in exchange for the
services rendered by employees are recognised as
an expense during the period when the employees
render the services.
Post-Employment Benefits Defined Contribution Plans
The Company recognises contribution payable to
the provident fund scheme as an expense, when an
employee renders the related service. If the contribution
payable to the scheme for service received before the
balance sheet date exceeds the contribution already
paid, the deficit payable to the scheme is recognised
as a liability. If the contribution already paid exceeds
the contribution due for services received before the
balance sheet date, then excess is recognised as an
asset to the extent that the pre- payment will lead to a
reduction in future payment or a cash refund.
Defined Benefit Plans
The Company pays gratuity to the employees
who have completed five years of service with the
Company at the time of resignation/ superannuation.
The gratuity is paid @15 days basic salary for every
completed year of service as per the Payment of
Gratuity Act, 1972. The liability in respect of gratuity
and other post- employment benefits is calculated on
actuarial valuation basis.
Remeasurement gains and losses arising from
adjustments and changes in actuarial assumptions are
recognised in the period in which they occur in Other
Comprehensive Income.
Other Long Term Employee Benefits (to the extent
applicable)
Entitlements to annual leave and sick leave are
recognized when they accrue to employees subject to
a restriction on the maximum number of accumulation
of leave , if any, determined by the Company. The
Company determines the liability for such accumulated
leaves using the Projected Accrued Benefit method
with actuarial valuations being carried out at each
Balance Sheet date.
2.2.9 Tax Expenses
The tax expenses for the period comprises of current
tax and deferred income tax. Tax is recognised in
Statement of Profit and Loss, except to the extent
that it relates to items recognised in the Other
Comprehensive Income. In which case, the tax is also
recognised in Other Comprehensive Income.
Current Tax
Current tax assets and liabilities are measured at the
amount expected to be recovered from or paid to the
Income Tax authorities, based on tax rates and laws
that are enacted at the Balance sheet date.
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.
2.2.10 Foreign Currencies Transactions and Translation
Items included in the Standalone Financial Statements
of the Company are measured using the currency
of the primary economic environment in which
the Company operates (functional currency). The
Standalone Financial Statements of the Company are
presented in Indian currency (INR), which is also the
functional currency of the Company.
Foreign currency transactions are recorded on initial
recognition in the functional currency, using theexchange
rate as applicable in the period of such transaction.
Exchange differences that arise on settlement of
monetary items or on reporting of monetary items at
each reporting period are appropriately dealt in the
financial statements in accordance with the applicable
Indian Accounting standards.
Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated using
the exchange rate as at the date of initial transactions.
2.2.11 Revenue Recognition
Revenue is recognised when performance obligations
are satisfied in accordance with Ind AS 115.
Performance obligations are deemed to be satisfied
when substantial risks and rewards of ownerships are
transferred to customer and customer obtains control
of promised goods.
The Company recognises revenue from sale of goods
measured upon satisfaction of performance obligation
which is at a point in time when control of the goods
is transferred to the customer, generally on dispatch/
delivery of the goods. Depending on the terms of the
contract, which differs from contract to contract, the
goods are sold on a reasonable credit term. Revenue is
measured based on the transaction price, which is the
consideration, adjusted for volume discounts, rebates,
scheme allowances, price concessions, incentives, and
returns, if any, as specified in the contracts with the
customers. Revenue excludes taxes collected from
customers on behalf of the government.
Revenue from rendering of services are recognised
over time by measuring the progress towards
complete satisfaction of performance obligations at
the reporting period.
Guarantee Commission, Trade Mark License Fees,
Management Consultancy Fees is recognized over
period of time.
Interest Income from a Financial Assets is recognised
using effective interest rate method.
Dividend Income is recognised when the Company's
right to receive the amount has been established.
2.2.12 Financial Instruments
Financial Assets
Initial Recognition and Measurement
All Financial Assets are initially recognised at fair
value. Trade Receivable that do not contain, significant
financing component are measured at transaction
price. Transaction costs that are directly attributable to
the acquisition or issue of Financial Assets, which are
not at Fair Value Through Profit or Loss, are adjusted
to the fair value on initial recognition. Purchase and
sale of Financial Assets are recognised using trade
date accounting.
Subsequent Measurement
Financial Assets measured at Amortised Cost (AC)
A Financial Asset is measured at Amortised 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 to cash flows on specified dates that
represent solely payments of principal and interest on
the principal amount outstanding.
Financial Assets measured at Fair Value through Other
Comprehensive Income (FVTOCI)
A Financial Asset is measured at FVTOCI 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 represents solely payments of principal and
interest on the principal amount outstanding.
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.
Investment in Subsidiaries, Associates and Joint
Ventures
The Company has accounted for its investment in
Subsidiaries at cost less impairment loss.
The Company has accounted for its investment in
Associates as per Equity Method.
The Company has no Investment in Joint Ventures.
Other Equity Investments
All other equity investments are measured at fair value,
with value changes recognised in Statement of Profit
and Loss, except for those equity investments for
which the Company has elected to present the value
changes in 'Other Comprehensive Income'. However,
dividend on such equity investments are recognised
in Statement of Profit and loss, when the Company's
right to receive payment is established.
Impairment on Financial Assets
In accordance with Ind-AS 109, the Company uses
'Expected Credit Loss' (ECL) model, for evaluating
impairment of Financial Assets other than those
measured at Fair Value Through Profit and Loss (FVTPL).
ECL Measurement-
An Expected Credit Loss of atleast 2% of Outstanding
Debtors more than 180 Days from Due Date & Net of
Provision to be Charged Every Quarter.
In case of undisputable debtors which are outstanding
for more than 2 Years, Minimum 25% of Outstanding
Amount should be provided p.a.
In case of disputable debtors which are outstanding
for more than 2 Years, Minimum 30% of Outstanding
Amount should be provided p.a..
Further, the Company shall assess Credit Risk of Trade
Receivables at Closure of Each Quarter applying above
mentioned factors using Significant Judgment.
An Expected Credit Loss is further recognized for the
difference between the carrying net amount of the
financial asset and its Expected Recoverable Amount.
The management reviews and assess the same based
on the conclusive evident and facts of the case.
Financial Liabilities
Initial Recognition and Measurement
All Financial Liabilities are recognised at fair value and
in case of borrowings, net of directly attributable cost.
Fees for recurring nature are directly recognised in the
statement of Profit and Loss account as finance cost.
Subsequent Measurement
Financial Liabilities are carried at amortised cost using
the effective interest method. For trade and other
payables maturing within one year from the balance
sheet date, the carrying amounts approximate fair
value due to the short maturity of these instruments.
Derivative Financial Instruments and Hedge
Accounting
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. Such derivative
financial instruments are initially recognised at fair value
on the date on which a derivative contract is entered
into and are also subsequently measured at fair value.
Derivatives are carried as Financial Assets when the fair
value is positive and as Financial Liabilities when the
fair value is negative. Any gains or losses arising from
changes in the fair value of derivatives are taken directly
to Statement of Profit and Loss, except for the effective
portion of cash flow hedge which is recognised in Other
Comprehensive Income and later to Statement of Profit
and Loss when the hedged item affects profit or loss
or is treated as basis adjustment if a hedged forecast
transaction subsequently results in the recognition of a
Non-Financial Assets or Non- Financial liability.
Derecognition of Financial Instruments
The Company derecognises 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 (or a part of a Financial
liability) is derecognised from the Company's Balance
Sheet when the obligation specified in the contract is
discharged or cancelled or expires.
Offsetting
Financial Assets and Financial Liabilities are offset
and the net amount is presented in the balance sheet
when, and only when, the Company has a legally
enforceable right to set off the amount and it intends,
either to settle them on a net basis or to realize the
asset and settle the liability simultaneously.
2.2.13 Earnings per Share
Basic earnings per share is calculated by dividing the
net profit after tax by the weighted average number
of equity shares outstanding during the year adjusted
for bonus element in equity share. Diluted earnings per
share adjusts the figures used in determination of basic
earnings per share to take into account the conversion
of all dilutive potential equity shares. Dilutive potential
equity shares are deemed converted as at the beginning
of the period unless issued at a later date.
2.2.14 Segment Reporting
The Company has only one primary reportable segment.
2.2.15 Investment Property
Property that is held for long term rental yields or for
capital appreciation or both, and that is not occupied
by the Company, is classified as investment property.
Investment property is initially measured at its cost,
including related transaction costs.
Subsequent expenditure is capitalized to the assets'
carrying amount only when it is probable that
the future economic benefits associated with the
expenditure will flow to the Company and the cost
of the item can be measured reliably. All other repairs
and maintenance cost are expensed when incurred.
Depreciation on investment property is provided
on pro rata basis on straight line method over the
estimated useful lives. Useful life of the asset, as
assessed by the Management, corresponds to those
prescribed by Schedule II.
2.2.16 Exceptional Items
When items of income or expense within the
Statement of Profit & Loss from ordinary activities are
of such size, nature or incidence that their disclosure
is relevant to explain the performance of the Company
for the period, the nature and amount of such material
items are disclosed separately as exceptional items.
3.0 CRITICAL ACCOUNTING ESTIMATES AND
ASSUMPTIONS
The preparation of the Company's Financial Statements requires
management to make judgement, estimates and assumptions
that affect the reported amount of revenue, expenses, assets and
liabilities and the accompanying disclosures. Uncertainty about
these assumptions and estimates could result in outcomes that
require a material adjustment to the carrying amount of assets or
liabilities affected in next financial years.
The Company had elected to continue with the carrying
value of all its Property, Plant and Equipment, capital work in
progress recognised as on 1st April, 2016 and measured as
per previous GAAP and use that carrying value as its deemed
cost as permitted by transitional provisions under first time
implementation of Ind-AS.
3.1 Income taxes (Refer to Note No 29.5)
The Company's tax jurisdiction is India. Significant
judgements are involved in estimating budgeted profits
for the purpose of paying advance tax, determining the
provision for income taxes, including amount expected to
be paid/recovered for uncertain tax positions.
3.2 Property, Plant and Equipment / Intangible Assets &
Depreciation (Refer to Note No 5A, 5C)
Estimates are involved in determining the cost attributable
to bringing the assets to the location and condition necessary
for it to be capable of operating in the manner intended by
the management. Property, Plant and Equipment / Intangible
Assets are depreciated / amortised over their estimated
useful life, after taking into account estimated residual
value. Management reviews the estimated useful life and
residual values of the assets annually in order to determine
the amount of depreciation / amortisation to be recorded
during any reporting period. The useful life and residual
values are based on the Company's historical experience
with similar assets and take into account anticipated
technological changes. The depreciation / amortisation for
future periods is revised if there are significant changes
from previous estimates.
3.3 Recoverability of Trade Receivables (Refer to Note No 10)
Judgements are required in assessing the recoverability
of overdue trade receivables and determining whether a
provision against those receivables is required. Factors
considered include the credit rating of the counter party,
the amount and timing of anticipated future payments and
any possible actions that can be taken to mitigate the risk
of non-payment.
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