3 Summary of Material Accounting Policies
a) Current versus Non Current Classification
The Company classifies all other liabilities as
non-current. Deferred tax assets and liabilities
are classified as non-current assets and liabilities.
The operating cycle is the time between the
acquisition of assets for processing and their
realisation in cash and cash equivalents. The
Company has identified twelve months as its
operating cycle.
The Company classifies all other liabilities as
non-current. Deferred tax assets and liabilities
are classified as non-current assets and liabilities.
The operating cycle is the time between the
acquisition of assets for processing and their
realisation in cash and cash equivalents. The
Company has identified twelve months as its
operating cycle.
b) Foreign Currencies
(i) Functional and presentation currency
The Company's financial statements are
presented in Indian Rupee (INR), which is also
the Company's functional currency
(ii) Transactions and balances
Foreign currency transactions are
translated into the functional currency
using the exchange rates at the dates of
the transactions. Foreign exchange gains
and losses resulting from the settlement of
such transactions and monetary assets and
liabilities denominated in foreign currencies
are translated at the functional currency spot
rates of exchange at year end exchange rates
are generally recognised in profit or loss.
Non-monetary items that are measured at
fair value in a foreign currency are translated
using the exchange rates at the date when
the fair value is determined. Translation
differences on assets and liabilities carried at
fair value are reported as part of the fair value
gain or loss.
c) Property, plant and equipment
i) Recognition and measurement
Items of property, plant and equipment
are measured at cost, less accumulated
depreciation and accumulated impairment
losses, if any.
Cost of an item of property, plant and
equipment comprises its purchase price, and
any directly attributable cost of bringing the
asset to working condition for its intended
use.
General and specific borrowing costs
directly attributable to the construction of a
qualifying asset are capitalized as part of the
cost.
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. The cost of replacing part of
an item of property, plant and equipment or
major inspections performed, are recognized
in the carrying amount of the item if it is
probable that the future economic benefits
embodied within the part will flow to the
Company and its cost can be measured
reliably. The costs of all other repairs and
maintenance are recognized in the statement
of profit & loss as incurred.
Capital work-in-progress includes cost
of property, plant and equipment under
installation / under development as at the
balance sheet date.Such costs include direct
costs, attributable overheads, and borrowing
costs eligible for capitalization in accordance
with Ind AS 23, where applicable. Advances
paid towards the acquisition of property,
plant and equipment outstanding at each
balance sheet date is classified as capital
advances under other non-current assets.
An item of property, plant and equipment
is derecognized when no future economic
benefit are expected to arise from the
continued use of the asset or upon disposal.
Any gain or loss arising on derecognition
of the asset (calculated as the difference
between the net disposal proceeds and the
carrying amount of the asset) is recognized
in the statement of profit and loss in the
period in which the asset is derecognised.
The residual values, useful lives, and method
of depreciation of property, plant and
equipment are reviewed at each financial
year-end and adjusted prospectively, if
appropriate.
Subsequent Expenditure
Subsequent expenditures relating to
property, plant and equipment is capitalized
only when it is probable that future economic
benefits associated with these will flow to
the company and the costs of the item can
be measured reliably. The cost and related
accumulated depreciation are eliminated
from the financial statements upon sale
or retirement of the Property, Plant and
Equipment and the resultant gain or losses
are recognized in the statement of profit and
loss.
ii) Depreciation
Depreciation is calculated on cost of items
of property, plant and equipment less
their estimated residual values, and is
recognized in the statement of profit and
loss. Depreciation on property, plant and
equipment is provided on Straight Line
Method at the rates determined on the basis
of useful life of the assets as prescribed in
Schedule II of the Companies Act, 2013.
Depreciation on additions to or on disposal
of assets is calculated on pro-rata basis i.e.
from (upto) the date on which the property,
plant and equipment is available for use
(disposed off).
Property, Plant and Equipment individually
costing below Rs. 5,000 are fully depreciated
during the year they are put to use.
*Change in life of Plant & Machinery (Furnace)
from 15 Years to 25 Years w.e.f. 01st April,
2021
d) Intangible assets
i) Recognition & measurement and
amortization
Intangible Assets are recognized, if the future
economic benefits attributable to the assets
are expected to flow to the company and
cost of the asset can be measured reliably. All
other expenditure is expensed as incurred.
The same are amortized over the expected
duration of benefits. Such intangible assets
are measured at cost less any accumulated
amortization and impairment losses, if any
and are amortized over their respective
individual estimated useful life on straight
line method.
The estimated useful lives are as follows:
Computer Software 4 years
The amortization period and the amortization
method for an intangible asset with a finite
useful life are reviewed at least at the end
of each reporting period and adjusted
prospectively, if appropriate.
Intangible assets are tested for impairment
when there are indications that the carrying
value may not be recoverable. All impairment
losses are recognised immediately in profit
or loss.
An item of intangible asset is derecognised
when no future economic benefit are
expected to arise from the continued use of
the asset or upon disposal.
Any gain or loss on disposal of an item of
intangible assets is recognized in statement
of profit or loss.
e) Impairment of non-financial assets
At each reporting date, the Company reviews the
carrying amounts of its non-financial assets (other
than deferred tax assets) to determine whether
there is any indication on impairment. If any such
indication exists, then the asset's recoverable
amount is estimated.
For impairment testing, assets that do not
generate independent cash flows are grouped
together into the smallest group of assets that
generates cash inflows from continuing use that
are largely independent of the cash inflows of
other assets or Cash Generating Units ('CGUs').
The recoverable amount of an asset or CGU is the
greater of its value in use and its fair value less
costs to sell. Value in use is based on the estimated
future cash flows, 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
or CGU.
An impairment loss is recognized if the carrying
amount of an asset or CGU exceeds its estimated
recoverable amount. Impairment losses are
recognized in the statement of profit and loss.
In respect of assets for which impairment loss has
been recognized in prior periods, the company
reviews at each reporting date whether there is
any indication that the loss has decreased or no
longer exists. An impairment loss is reversed if
there has been a change in the estimates used
to determine the recoverable amount. Such a
reversal is made only to the extent that the asset's
carrying amount does not exceed the carrying
amount that would have been determined, net
of depreciation or amortization, if no impairment
loss had been recognized.
After impairment, depreciation is provided on
the revised carrying amount of the assets over its
remaining useful life.
f) Financial instruments
i) 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,
except for trade receivables which are initially
measured at fair value of the consideration
received or receivable. Transaction costs that
are directly attributable to the acquisition
or issue of financial assets and financial
liabilities, that are not at fair value through
profit or loss, are added to the fair value on
initial recognition. Regular way purchase and
sale of financial assets are accounted for at
trade date.
ii) Subsequent measurement
(i) Financial assets carried 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. When the financial asset
is derecognized or impaired, the gain
or loss is recognized in the statement of
profit and loss.
(ii) Financial assets at fair value through
other comprehensive income
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. Movements in the carrying
amount are taken through OCI, except
for the recognition of impairment gains
or losses, interest revenue and foreign
exchange gains and losses which are
recognized in profit and loss.
When the financial asset is derecognized,
the cumulative gain or loss previously
recognized in OCI is reclassified
from equity to profit and loss. Equity
instruments are subsequently measured
at fair value. On initial recognition
of an equity investment that is not
held for trading, the Company may
irrevocably elect to present subsequent
changes in the investment's fair value
in OCI (designated as FVOCI - equity
investment). This election is made on
an investment by investment basis.
Fair value gains and losses recognized
in OCI are not reclassified to profit and
loss.
(iii) Financial assets at fair value through
profit or loss
A financial asset which is not classified
in any of the above categories are
subsequently fair valued through profit
or loss.
(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.
iii) Impairment of financial assets
Financial assets, other than those at FVTPL, are
assessed for indicators of impairment at the
end of each reporting period. The Company
recognizes a loss allowance for expected
credit losses on financial asset. In case of
trade receivables, the Company follows the
simplified approach permitted by Ind AS 109
- Financial Instruments for recognition of
impairment loss allowance. The application
of simplified approach does not require the
Company to track changes in credit risk. The
Company applies the simplified approach
permitted under Ind AS 109 for trade
receivables and recognizes lifetime expected
credit losses using a provision matrix that is
based on historical loss experience, adjusted
for current conditions and forward-looking
information, including macroeconomic
factors affecting customers' ability to settle
the receivables.
iv) Derecognition
Financial Assets
Company derecognizes a financial asset
when the contractual rights to the cash flows
from the financial asset expire or it transfers
the rights to receive the contractual cash
flows in a transaction in which substantially
all of the risks and rewards of ownership of
the financial asset are transferred or in which
the company neither transfers nor retains
substantially all of the risks and rewards of
ownership and does not retain control of the
financial asset.
If the company enters into transactions
whereby it transfers assets recognized on
its balance sheet, but retains either all or
substantially all of the risks and rewards of
the transferred assets, the transferred assets
are not derecognized.
Financial liabilities
The company derecognizes a financial
liability when its contractual obligations are
discharged or cancelled, or expire.
v) Reclassification of financial assets and
financial liabilities
The company determines classification
of financial assets and liabilities on initial
recognition. After initial recognition, no
reclassification is made for financial assets
which are equity instruments and financial
liabilities. For financial assets which are debt
instruments, a reclassification is made only
if there is a change in the business model
for managing those assets. Changes to the
business model are expected to be infrequent.
The Company's senior management
determines change in the business model as
a result of external or internal changes which
are significant to the Company's operations.
Such changes are evident to external parties.
A change in the business model occurs
when the Company either begins or ceases
to perform an activity that is significant to
its operations. If the company reclassifies
financial assets, it applies the reclassification
prospectively from the reclassification date
which is the first day of the immediately
next reporting period following the change
in business model. The company does not
restate any previously recognized gains,
losses (including impairment gains or losses)
or interest.
vi) Derivative financial instruments
The Company uses derivative financial
instruments, such as forward currency
contracts to hedge its foreign currency
risks. Derivative financial instruments are
initially recognized at fair value on the
date a derivative contract is entered into
and are subsequently re-measured at their
fair value at the end of each period. The
method of recognizing the resulting gain or
loss depends on whether the derivative is
designated as a hedging instrument, and if
so, on the nature of the item being hedged.
Any gains or losses arising from changes in
the fair value of derivatives are taken directly
to statement of profit or loss.
vii) Offsetting
Financial assets and financial liabilities are
offset and the net amount presented in the
balance sheet when, and only when, the
company has a legally enforceable right to
set off the amounts and it intends either to
settle them on a net basis or to realize the
asset and settle the liability simultaneously.
g) 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, regardless of whether
that price is directly observable or estimated
using other valuation technique. In estimating the
fair value of an asset or a liability, the Company
takes into account the characteristics of the asset
or liability if market participants would take those
characteristics into account when pricing the
asset or liability at the measurement date.
Fair values for measurement and/ or disclosure
purposes are categorized into Level 1, 2, or 3
based on the degree to which the inputs to the
fair value measurements are observable and
the significance of the inputs to the fair value
measurement in its entirety, which are described
as follows:
Level 1 - This includes financial instruments
measured using quoted prices.
Level 2 - The fair value of financial instruments that
are not traded in an active market is determined
using valuation techniques which maximize
the use of observable market data and rely as
little as possible on entity-specific estimates. If
all significant inputs required to fair value an
instrument are observable, the instrument is
included in level 2. Inputs 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 from prices).
Level 3 - If one or more of the significant inputs
is not based on observable market data, the
instrument is included in level 3.
The fair value hierarchy gives the highest priority
to Level 1 inputs and the lowest priority to Level 3
inputs.
Transfers between levels of the fair value hierarchy
are recognized at the end of the reporting period
during which the change has occurred.
The Company's management determines the
policies and procedures for both recurring
fair value measurement, such as financial
instruments, and non-recurring measurement,
such as impairment of assets.
Where appropriate, valuation techniques such as
discounted cash flow analysis and other valuation
models are used to determine fair value.
Disclosures include quantitative and qualitative
information about the significant unobservable
inputs used in Level 3 measurements and
the impact of those inputs on the fair value
measurement.
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