2.3 Material Accounting Policies :
a) Property, Plant and Equipment (PPE)
These tangible assets are held for use in production, supply of goods or services or for
administrative purposes. Property, Plant and Equipment are stated at cost less accumulated
depreciation and accumulated impairment losses except for freehold land which is not
depreciated. Cost includes purchase price after deducting trade discount/rebate, import duties,
non-refundable taxes, Net of GST input credit wherever applicable, cost of replacing the
component parts, borrowing costs and other directly attributable cost of bringing the asset to its
working condition in the manner intended by the management.
If significant parts of an item of PPE have different useful lives, then they are accounted for as
separate items (major components) of PPE.
The cost of an item of PPE is recognised as an asset if, and only if, it is probable that the
economic benefits associated with the item will flow to the Company in future periods and the
cost of the item can be measured reliably. Expenditure incurred after the PPE have been put
into operations, such as repairs and maintenance expenses are charged to the Statement of
Profit and Loss during the period in which they are incurred.
De-recognised upon disposal
An item of PPE is derecognised on disposal or when no future economic benefits are expected
from use or disposal. Any gain or loss arising on derecognition of an item of property, plant and
equipment is determined as the difference between the net disposal proceeds and the carrying
amount of the asset and is recognized in Statement of Profit and Loss when asset is
derecognised.
Depreciation
The depreciable amount of an asset is determined after deducting its residual value. Where the
residual value of an asset increases to an amount equal to or greater than the asset's carrying
amount, no depreciation charge is recognized till the asset's residual value decreases below the
asset's carrying amount. Depreciation of an asset begins when it is available for use, i.e., when it
is in the location and condition necessary for it to be capable of operating in the intended
manner. Depreciation of an asset ceases at the earlier of the date that the asset is classified as
held for sale in accordance with IND AS 105 and the date that the asset is derecognised.
The Company depreciates its property, plant and equipment (PPE) over the useful life in the
manner prescribed in Schedule II to the Act. Management believes that useful life of assets are
same as those prescribed in Schedule II to the Act.
The assets residual values, useful lives and methods of depreciation are reviewed at each
financial year end and adjusted prospectively, if appropriate.
b) Intangible assets
Intangible assets with finite useful lives that are acquired separately are carried at cost less
accumulated amortisation and accumulated impairment losses, if any. Amortisation is
recognised on a straight-line basis over their estimated useful lives. The estimated useful life
and amortisation method are reviewed at the end of each reporting period, with the effect of
any changes in estimate being accounted for on a prospective basis.
c) Leases
At the inception of a lease, the lease arrangements is classified as either a finance lease or an
operating lease, based on the substance of the lease arrangement..
As a Lessee:
Leases of property, plant and equipment where the Company, as lessee, has substantially all the
risks and rewards of ownership are classified as finance leases. Finance leases are capitalized at
the lease's inception at the fair value of the leased property or, if lower, the present value of
minimum lease payments. The corresponding rental obligations, net of finance charges, are
included in borrowing or other financial liabilities as appropriate.
Each lease payment is allocated between the liability and finance cost. The finance cost is
charged to profit or loss over the lease period so as to produce a constant periodic rate of
interest on the remaining balance of the liability for each period.
Leases in which a significant portion of the risks and rewards of ownership are not transferred to
the Company as lessee are classified as operating leases. Payments made under operating leases
(net of any incentives received from lessor) are charged to profit or loss on straight-line basis
over the period of the lease unless the payments are structured to increase in line with expected
general inflation to compensate for the lessor's expected inflationary cost increases.
The Company recognises a right-of-use asset and a lease liability at the lease commencement
date except for leases with a term of twelve months or less (short-term leases) and low value
leases. For these short-term and low value leases, the lease are recognized payments associated
with these leases as an expense in the Statement of Profit and Loss on a straight-line basis over
the lease term.
Lease term is a non-cancellable period together with periods covered by an option to extend the
lease if the Company is reasonably certain to exercise that option; and periods covered by an
option to terminate the lease if the Company is reasonably certain not to exercise that option.
The right-of-use asset is initially measured at cost, which comprises the initial amount of the
lease liability adjusted for any lease payments made at or before the commencement date, plus
any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying
asset or to restore the underlying asset or the site on which it is located, less any lease
incentives received. The right-of-use asset is subsequently amortised using the straight-line
method from the commencement date to the end of the lease term, unless the lease transfers
ownership of the underlying asset to the Company by the end of the lease term or the cost of
the right of-use asset reflects that the Company will exercise a purchase option. In that case the
right-of-use asset will be amortised over the useful life of the underlying asset. In addition, the
right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments to be paid over
the lease term at the commencement date, discounted using the interest rate implicit in the
lease or, if that rate cannot be readily determined, the Company's incremental borrowing rate.
Generally, the Company uses its incremental borrowing rate as the discount rate. Subsequently,
the lease liability is measured at amortised cost using the effective interest method
As a Lessor:
Lease income from operating leases where the Company is a lessor is recognised in other
income on straight-line basis over the lease term unless the receipts are structured to increase
in line with expected general inflation to compensate for the expected inflationary cost
increases. The respective leased assets are included in the balance sheet based on their nature.
d) Borrowing Cost
Borrowing cost includes interest expense, amortisation of discounts, ancillary costs incurred in
connection with borrowing of funds and exchange difference, arising from foreign currency
borrowings, to the extent they are regarded as an adjustment to the interest cost.
Borrowing costs that are attributable to the acquisition or construction or production of a
qualifying asset are capitalized as part of the cost of such asset till such time the asset is ready
for its intended use. A qualifying asset is an asset that necessarily takes a substantial period of
time to get ready for its intended use. All other borrowing costs are recognised as an expense in
the period in which they are incurred.
Investment income earned on the temporary investment of specific borrowings pending their
expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.
All other borrowing cost are recognised in the Statement of Profit and Loss in the period in
which they are incurred.
e) Impairment of Assets
At the end of each reporting period, the Company reviews the carrying amounts of its PPE and
other intangible assets to determine whether there is any indication that these assets have
suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment loss. Where it is not possible to
estimate the recoverable amount of an individual asset, the Company estimates the recoverable
amount of the cash-generating unit (CGU) to which the asset belongs. When the carrying
amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired
and is written down to its recoverable amount. The resulting impairment loss is recognised in
the Statement of Profit and Loss Recoverable amount is the higher of fair value less costs to sell
and value in use. 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 fair value less costs of disposal, recent market transactions are taken into
account. If no such transactions can be identified, an appropriate valuation model is used.
Where an impairment loss subsequently reverses, the carrying amount of the asset or CGU is
increased to the revised estimate of its recoverable amount, but so that the increased carrying
amount does not exceed the carrying amount that would have been determined had no
impairment loss been recognised for the asset or CGU in prior years. A reversal of an
impairment loss is recognised in the Statement of Profit and Loss.
f) Taxes
Income tax expense represents the sum of tax currently payable and deferred tax. Tax is
recognized in the Statement of Profit and Loss, except to the extent that it relates to items
recognized directly in equity or in other comprehensive income.
i) Current Tax
Current tax includes provision for Income Tax computed under Special provision (i.e.,
Minimum alternate tax) or normal provision of Income Tax Act. Tax on Income for the
current period is determined on the basis on estimated taxable income and tax credits
computed in accordance with the provisions of the relevant tax laws and based on the
expected outcome of assessments/appeals.
ii) Deferred Tax
Deferred tax is recognised on temporary differences between the carrying amounts of
assets and liabilities in the balance sheet and the corresponding tax bases used in the
computation of taxable profit. Deferred tax liabilities are generally recognised for all
taxable temporary differences.
Deferred tax assets are generally recognised for all deductible temporary differences,
unabsorbed losses and unabsorbed depreciation to the extent that it is probable that
future taxable profits will be available against which those deductible temporary
differences, unabsorbed losses and unabsorbed depreciation can be utilized.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and
reduced to the extent that it is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to
apply in the period in which the liability is settled or the asset realized, based on tax
rates (and tax laws) that have been enacted or substantively enacted by the balance
sheet date. The measurement of deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner in which the Company expects, at the
reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to
set off current tax assets against current tax liabilities and when they relate to income
taxes levied by the same taxation authority and the Company intends to settle its
current tax assets and liabilities on a net basis.
g) Employees Benefits
i) Employee Benefits
All employee benefits payable wholly within twelve months of rendering services are
classified as short term employee benefits. Benefits such as salaries, wages, short-term
compensated absences, performance incentives etc., are recognized during the period
in which the employee renders related services and are measured at undiscounted
amount expected to be paid when the liabilities are settled.
ii) Post-employment obligations
Defined contribution plans
The Company pays provident fund contributions to publicly administered funds as per
local regulations when liability to pay arise . The Company has no further payment
obligations once the contributions have been paid. The contributions are accounted for
as defined contribution plans and the contributions are recognized as employee benefit
expense when they are due.
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