3 Significant Accounting Policies
3.1 Revenue Recognition
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. The
Company is generally the principal as it typically controls the goods or services before transferring them to the
customer.
3.1.1 Sale of Goods
Revenue is generated primarily from sale of S. S. Products. Revenue is recognised at the point in time when the
performance obligation is satisfied and control of the goods is transferred to the customer in accordance with the
terms of customer contracts. In case of domestic customers, generally revenue recognition take place when goods
are dispatched and in case of export customers when goods are shipped onboard based on bill of lading as per the
terms of contract. Revenue is measured based on the transaction price, which is the consideration, adjusted for
trade discounts, if any, as specified in the contract with the customer. Revenue also excludes taxes collected from
customers.
A contract liability is the obligation to transfer goods to the customer for which the Company has received
consideration from the customer. Contract liabilities are recognised as revenue when the Company performs
under the contract.
The Company does not expect to have any contracts where the period between the transfer of the promised
goods to the customer and payment by the customer exceed one year. As a consequence, the Company does not
adjust any of the transaction prices for the time value of money.
3.1.2 Sale of Services
Revenue is recognized from rendering of services when the performance obligation is satisfied and the services
are rendered in accordance with the terms of customer contracts. Revenue is measured based on the transaction
price, which is the consideration, as specified in the contract with the customer. Revenue also excludes taxes
collected from customers.
A contract liability is the obligation to render services to the customer for which the Company has received
consideration from the customer. Contract liabilities are recognised as revenue when the Company performs
under the contract.
The Company does not expect to have any contracts where the period between the rendering of promised
services to the customer and payment by the customer exceed one year. As a consequence, the Company does not
adjust any of the transaction prices for the time value of money.
3.1.3 Export Incentive
Export incentives are accounted on accrual basis at the time of export of goods, if the entitlement can be
estimated with reasonable accuracy and conditions precedent to claim are fulfilled.
3.1.4 Job Work
Revenue from job work services is recognised based on the services rendered in accordance with the terms of
contracts.
3.1.5 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
Dividends 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 accural basis
3.2 Property, Plant and Equipment
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical
cost less accumulated deprecation and accumulated impairment losses, if any. Historical cost includes expenditure
that is directly attributable to the acquisition of the items.
The cost comprises the purchase price, borrowing cost if capitalization criteria are met and directly attributable
cost of bringing the asset to its working condition for its intended use. Any trade discounts and rebates are
deducted in arriving at the purchase price.
All other expenses on existing fixed assets, including day-to-day repair and maintenance expenditure and cost of
replacing parts, are charged to the statement of profit and loss for the period during which such expenses are
incurred.
For transition to Ind AS, the carrying value of Property Plant and Equipment under previous GAAP as on 01
April 2016 is regarded as its cost. The carrying value was original cost less accumulated depreciation and
cumulative impairment.
Property, Plant and Equipment not ready for the intended use on the date of the Balance Sheet are disclosed as
“Capital work-in-progress”.
Gains or losses arising from derecognition of fixed assets are measured as the difference between the net disposal
proceeds and the carrying amount of the asset at the time of disposal and are recognized in the statement of profit
and loss when the asset is derecognized.
Depreciation on Property, Plant and Equipment is calculated on written down value method basis using the ratio
arrived as per the useful life prescribed under Schedule II to the Companies Act, 2013.
In respect of Property, Plant and Equipment purchased during the year, depreciation is provided on a pro-rata
basis from the date on which such asset is ready to use.
The residual value, useful live and method of depreciation of Property, Plant and Equipment are reviewed at each
financial year end and adjusted prospectively, if appropriate.
3.3 Financial Instruments
3.3.1 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 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.
3.3.2 Subsequent Measurement
a Non-derivative financial instruments
i Financial assets measured at amortized cost
A financial asset 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.
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 are subsequently carried at amortized 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.
v Investment in subsidiaries, associate and joint ventures
Investments in subsidiary companies, associate and joint venture companies are carried at cost less accumulated
impairment losses, if any. Where an indication of impairment exists, the carrying amount of the investment is
assessed and written down immediately to its recoverable amount. On disposal of investments in subsidiary
companies, associate and joint venture companies, the difference between net disposal proceeds and the carrying
amounts are recognised 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.
3.3.3 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.
3.3.4 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.
3.4 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.
3.5 Income Tax
The income tax expense or credit for the period is the tax payable on the current period’s taxable income based
on the applicable income tax rate, adjusted by changes in deferred tax assets and liabilities attributable to
temporary differences and to unused tax losses.
3.5.1 Current Tax
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the
end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject to interpretation. It establishes provisions, wherever
appropriate, on the basis of amounts expected to be paid to the tax authorities.
Current tax is recognised in the Statement of Profit and Loss, except to the extent that it relates to items
recognized in Other Comprehensive Income or directly in equity. In this case, the tax is also recognised in Other
Comprehensive Income or directly in equity, respectively.
Current tax for current and prior periods is recognized at the amount expected to be paid to or recovered from
the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the balance
sheet date.
Current tax assets and current tax liabilities are offset, where company has a legally enforceable right to set off the
recognized amounts and where it intends either to settle on a net basis, or to realize the asset and settle the
liability simultaneously.
3.5.2 Deferred Tax
Deferred tax is recognized in profit or loss, except when it relates to items that are recognized in other
comprehensive income or directly in equity, in which case, the deferred tax is also recognized in other
comprehensive income or directly in equity, respectively.
Deferred tax liabilities are recognized for all taxable temporary differences, except to the extent that the deferred
tax liability arises from initial recognition of goodwill; or initial recognition of an asset or liability in a transaction
which is not a business combination and at the time of transaction, affects neither accounting profit nor taxable
profit or loss.
Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax losses and
carry forward of unused tax credits to the extent that it is probable that taxable profit will be available against
which those temporary differences, losses and tax credit can be utilized, except when deferred tax asset on
deductible temporary differences arise from the initial recognition of an asset or liability in a transaction that is
not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit
or loss.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the
asset is realized or the liability is settled, based on the tax rules and tax laws that have been enacted or
substantively enacted by the end of the reporting period.
Deferred tax assets and deferred tax liabilities are offset, where company has a legally enforceable right to set off
the recognized amounts and where it intends either to settle on a net basis, or to realize the asset and settle the
liability simultaneously.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable
that the related tax benefit will be realized.
3.6 Impairment
3.6.1 Financial assets other than investments in subsidiary and associates
The company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which
are not fair valued through profit or loss.
Loss allowance for trade receivables with no significant financing component is measured at an amount equal to
lifetime ECL.
For all other financial assets, expected credit losses are measured at an amount equal to the 12-month ECL, unless
there has been a significant increase in credit risk from initial recognition in which case those are measured at
lifetime ECL.
The impairment loss allowance (or reversal) recognized during the period is recognized as income / expense in
the statement of profit and loss.
3.6.2 Financial assets — investment in subsidiary and associates
The company assesses at each reporting date whether there is an indication that an asset may be impaired. Such
indication include, though are not limited to, significant or sustained decline in revenues or earnings and material
adverse changes in the economic environment.
If any indication exists, the company estimates the asset’s recoverable amount based on value in use.
To calculate value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market rates and the risk specific to the asset
Where the carrying amount of an asset exceeds its value in use amount, the asset is considered impaired and is
written down to its recoverable amount. The impairment loss is recognized in statement of profit and loss.
3.6.3 Non financial assets - Tangible 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.
3.7 Borrowing Costs
Borrowing cost includes interest and other costs that company has incurred in connection with the borrowing of
funds.
Borrowing costs 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 as part of the cost of the
respective asset.
All other borrowing costs are charged to the Statement of Profit and Loss for the period for which they are
incurred.
Investment income earned on temporary investment of specific borrowing pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for capitalization.
3.8 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.
The company measures the expected cost of absences as the additional amount that it expects to pay as a result of
the unused entitlement that has accumulated at the reporting date. As per Company’s policy, no leave is expected
to be carried forward beyond 12 months from the reporting date.
Retirement benefit in the form of provident fund is a defined contribution scheme. The company has no
obligation, other than the contribution payable to the provident fund. The company recognizes contribution
payable to the provident fund scheme as an expenditure, when an employee renders the related service.
The company operates one defined benefit plan for its employees, viz., gratuity plan. The costs of providing
benefits under the plan are determined on the basis of actuarial valuation at each year-end. Actuarial valuation is
carried out using the projected unit credit method made at the end of each reporting date. Re-measurement of the
net defined benefit liability (asset) comprise of actuarial gains and losses, the effect of the asset ceiling, excluding
amounts included in net interest on the net defined benefit liability (asset) and the return on plan assets (excluding
amounts included in net interest on the net defined benefit liability / (asset)). Re-measurement are recognized in
other comprehensive income and will not be reclassified to profit or loss in a subsequent period.
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