B. SIGNIFICANT ACCOUNTING POLICIES
a. BASIS OF PREPARATION
The financial statements have been prepared in accordance with the applicable Accounting
Standards notified under Section 133 of the the Companies Act, 2013 read with Rule 7 of
Companies (Accounts Rules), 2014 under historical cost convention on accural basis.
All the assets and liabilities have been classified as current or non-current as per Company’s
normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013.
Based on the nature of activities, the Company has ascertained its operating cycle as 12 months
for the purpose of current and non-current classification of assets and liabilities.
b. USE OF ESTIMATES
The preparation of the financial statements is in conformity with Indian GAAP (Generally
Accepted Accounting Principles) which requires the management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosures of
contingent liabilities as on the date of the financial statements. The estimates and assumptions
made and applied in preparing the financial statements are based upon management's best
knowledge of current events and actions as on the date of financial statements. However, due to
uncertainties attached to the assumptions and estimates made actual results could differ from
those estimates. Any revision to accounting estimates is recognised prospectively in current and
future periods.
c. REVENUE RECOGNITION:
(i) Revenue from sale of goods is recognised when significant risk and rewards of ownership
of the goods have been passed to the buyer and it is reasonable to expect ultimate collection. Sale
of goods is recognised net of GST and other taxes as the same is recovered from customers and
passed on to the government.
(ii) Interest is recognised on a time proportion basis taking into account the amount
outstanding and the rate applicable.
(iii) Other items of income and expenses are recognised on accrual basis.
(iv) Income from export entitlement is recognised as on accrual basis.
d. FOREIGN CURRENCY TRANSACTIONS.
Initial recognition
Transactions in foreign currency are accounted for at exchange rates prevailing on the date of the
transaction.
Measurement of foreign currency monetary items at Balance Sheet date
Foreign currency monetary items (other than derivative contracts) as at Balance Sheet date are
Restated Standalone at the year end rates.
Exchange difference
Exchange differences arising on settlement of monetary items are recognised as income or
expense in the period in which they arise.
Any expense incurred in respect of Forward contracts entered into for the purpose of hedging is
charged to the Statement of Profit
and loss.
Forward Exchange Contract
The Premium or discount arising at the inception of the Forward Exchange contracts entered into
to hedge an existing asset/liability, is amortized as expense or income over the life of the
contract. Exchange Differences on such contracts are recognised in the Statement of Profit and
Loss in the reporting period in which the exchange rates change. Any Profit or Loss arising on
cancellation or renewal of such a forward contract is recognized as income or expense in the
period in which such cancellation or renewal is made.
The Foreign currency exposures that have not been hedged by a derivative instrument.
e. INVESTMENTS
Non-Current/ Long-term Investments are stated at cost. Provision is made for diminution in the
value of the investments, if, in the opinion of the management, the same is considered to be other
than temporary in nature. On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the Statement of Profit and Loss.
f. PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS
(i)Tangible Assets
Property, plant and equipment are stated at historical cost less accumulated depreciation, and
accumulated impairment loss, if any. Historical cost comprises of the purchase price including
duties and non-refundable taxes, borrowing cost if capitalization criteria are met, directly
attributable expenses incurred to bring the asset to the location and condition necessary for it to
be capable of being operated in the manner intended by management and initial estimate of
decommissioning, restoring and similar liabilities.
Subsequent costs related to an item of property, plant and equipment are recognized as a separate
asset, as appropriate, only when it is probable that future economic benefits associated with the
item will flow to the group and the cost of the item can be measured reliably. The carrying
amount of any component accounted for as a separate asset is derecognized when replaced. All
other repairs and maintenance are recognized in statement of profit and loss during the reporting
period when they are incurred
An item of property, plant and equipment is derecognized on disposal or when no future
economic benefits are expected from its use or disposal. The gains or losses arising from
de-recognition are measured as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of profit and loss when the asset is
de-recognized.
g. DEPRECIATION AND AMORTISATION:
Depreciation is calculated using the Written Down Value Method over their estimated useful
lives.
h. INVENTORIES:
Items of inventories are measured at lower of cost or net realisable value. Cost of inventories
comprises of all cost of purchase, cost of conversion and other costs incurred in bringing them to
their respective present location and condition. Cost of raw materials, stores and spares, packing
material and fuel are determined on weighted average basis. Cost of WIP is determined on
absorption costing method. Valuation of FG is cost or NRV, whichever is less.
i. IMPAIRMENT OF ASSETS:
The Company assesses at each reporting date whether there is an indication that an asset may be
impaired. If any indication exists, or when annual impairment testing for an asset is required, the
Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher
of an asset’s or cash-generating unit’s (CGU) 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 or CGU exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount. 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.
The Company bases its impairment calculation on detailed budgets and forecast calculations
which are prepared separately for each of the Company’s cash-generating units to which the
individual assets are allocated. These budgets and forecast calculations are generally covering a
period of five years. For longer periods, a long term growth rate is calculated and applied to
project future cash flows after the fifth year.
Impairment losses of continuing operations are recognised in the statement of profit and loss.
An assessment is made at each reporting date as to whether there is any indication that
previously recognised impairment losses.
j. RETIREMENT BENEFITS:
Accumulated leave, which is expected to be utilised within the next 12 months, is treated as
short-term employee benefit. The Company measures the expected cost of such absences as the
additional amount that it expects to pay as a result of the unused entitlement that has
accumulated at the reporting date.
The Company recognises termination benefit as a liability and an expense when the Company
has a present obligation as a result of 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 termination benefits fall due more than 12 months
after the balance sheet date, they are measured at present value of future cash flows using the
discount rate determined by reference to market yields at the balance sheet date on government
bonds.
k. BORROWING COST
Borrowing costs are interest, commitment charges and other costs incurred by an enterprise in
connection with Short Term/ Long Term borrowing of funds. Borrowing cost directly
attributable to acquisition or construction of qualifying assets are capitalized as a part of the cost
of the assets, upto the date the asset is ready for its intended use. All other borrowing costs are
recognized in the Statement of Profit and Loss in the year in which they are incurred.
l. EARNINGS PER SHARE:
The earnings in ascertaining the Company's EPS comprises the net profit after tax attributable to
equity shareholders and includes the post tax effect of any extraordinary items. The number of
shares used in computing basic EPS is the weighted average number of shares outstanding during
the year.
Diluted earnings per share is computed by dividing the profit/(loss) after tax attributable to
Equity Shareholders (including the post tax effect of extra ordinary items, if any) as adjusted for
dividend, interest and other charges to expense or income relating to the dilutive potential equity
shares, by the weighted average number of equity shares which could have been issued on
conversion of all dilutive potential equity shares. Potential equity shares are deemed to be
dilutive only if their conversion to equity shares would decrease the net profit per share from
continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at
the beginning of the period, unless they have been issued at a later date. Dilutive potential equity
shares are determined independently for each period.
m. TAXATION:
Tax expense for the year comprising current tax & deferred tax are considered in determining the
net profit for the year. Provision is made for current tax and based on tax liability computed in
accordance with relevant tax laws applicable to the Company. Provision is made for deferred tax
for all timing difference arising between taxable incomes & accounting income at currently
enacted or substantively enacted tax rates, as the case may be. Deferred tax assets (other than in
situation of unabsorbed depreciation and carry forward losses) are recognized only if there is
reasonable certainty that they will be realized and are reviewed for the appropriateness of their
respective carrying values at each Balance Sheet date. Deferred tax assets, in situation of
unabsorbed depreciation and carry forward losses under tax laws are recognised only to the
extent that where is virtual certainty supported by convincing evidence that sufficient future
taxable income will be available against which such deferred tax assets can be recognised.
Deferred Tax Assets and Deferred Tax Liability are been offset wherever the Company has a
legally enforceable right to set off current tax assets against current tax liability and where the
Deferred Tax Asset and Deferred Tax Liability relate to Income taxes is levied by the same
taxation authority.
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