2. SIGNIFICANT ACCOUNTING POLICIES
2.1 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES
The standalone financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value:
- Certain financial assets and liabilities (including derivative instruments) and
- Defined benefit plans - plan assets
The financial statements of the Company have been prepared to comply with the Indian Accounting standards (‘Ind AS’), including the rules notified under the relevant
provisions of the Companies Act, 2013. Upto the year ended March 31, 2017, the Company has prepared its financial statements in accordance with the requirement of
Indian Generally Accepted Accounting Principles (GAAP), which include Standards notified under the Companies (Accounting Standards) Rules, 2006 and considered
as “Previous GAAP”. These financial statements are the Company's first Ind AS standalone financial statements. Company’s financial statements are presented in
Indian Rupees (INR), which is also its functional currency.
2.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Property, Plant and Equipment (PPE)
i) 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, borrowing cost and any cost directly attributable to bringing the assets to its working condition for its intended use, net charges
on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the assets.
ii) 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. In the carrying amount of an item of PPE, the cost of replacing the
part of such an item is recognized when that cost is incurred if the recognition criteria are met. The carrying amount of those parts that are replaced is
derecognized in accordance with the derecognition principles.
iii) Expenses incurred relating to project, net of income earned during the project development stage prior to its intended use, are considered as pre - operative
expenses and disclosed under Capital Work - in - Progress.
iv) Depreciation on property, plant and equipment is provided using straight line method. Depreciation is provided based on useful life of the assets as prescribed in
Schedule II to the Companies Act, 2013 except, in respect of Rolls, where useful life taken for one year only as per the technical advice.Each part of an item of
Property, Plant & Equipment with a cost that is significant in relation to total cost of the Machine is depreciated separately, if its useful life is different than the life
of the Machine.
v) 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.
vi) 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.
vii) Spare parts procured along with the Plant & Machinery or subsequently which meet the recognition criteria are capitalized and added in the carrying amount of
such item. The carrying amount of those spare parts that are replaced is derecognized when no future economic benefits are expected from their use or upon
disposal. Other machinery spares are treated as “stores & spares” forming part of the inventory.
b) Leases
i) Leases are classified as finance leases whenever the terms of the lease, transfers substantially all the risks and rewards of ownership to the lessee. All other
leases are classified as operating leases.
ii) Leased assets: Assets held under finance leases are initially recognised as assets of the Company at their fair value at the inception of the lease or, if lower, at the
present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.
iii) Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining
balance of the liability. Finance expenses are recognised immediately in Statement of Profit and Loss, unless they are directly attributable to qualifying assets, in
which case they are capitalized. Contingent rentals are recognised as expenses in the periods in which they are incurred.
iv) A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of
the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
c) Intangible assets
i) Intangible Assets are stated at cost of acquisition net of recoverable taxes, trade discount and rebates less accumulated amortization /depletion and impairment
loss, if any. Such cost includes purchase price, borrowing costs, and any cost directly attributable to bringing the asset to its working condition for the intended use,
net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the intangible assets.
ii) 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.
iii) Gains or losses arising from derecognition of an intangible asset 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.
d) Capital Work in Progress
i) Expenditure incurred on assets under construction (including a project) is carried at cost under CapitalWork in Progress. Such costs comprises purchase price of
asset including import duties and non-refundable taxes after deducting trade discounts and rebates and costs that are directly attributable to bringing the asset to the
location and condition necessary for it to be capable of operating in the manner intended by management.
ii) Cost directly attributable to projects under construction include costs of employee benefits, expenditure in relation to survey and investigation activities of the
projects, cost of site preparation, initial delivery and handling charges, installation and assembly costs, professional fees, expenditure on maintenance and up-
gradation etc. of common public facilities, depreciation on assets used in construction of project, interest during construction and other costs if attributable to
construction of projects. Such costs are accumulated under “Capital works in progress” and subsequently allocated on systematic basis over major assets, other
than land and infrastructure facilities, on commissioning of projects.
iii) Capital Expenditure incurred for creation of facilities, over which the Company does not have control but the creation of which is essential principally for
construction of the project is capitalized and carriedunder “Capital work in progress” and subsequently allocated on systematic basis over major assets, other than
land and infrastructure facilities, on commissioning of projects, keeping in view the “attributability” and the “Unit of Measure” concepts in Ind AS 16- “Property,
Plant & Equipment”. Expenditure of such nature incurred after completion of the project, is charged to Statement of Profit and Loss.
e) Research and Development Expenditure
Revenue expenditure pertaining to research is charged to the Statement of Profit and Loss. Development costs of products are charged to the Statement of Profit and
Loss unless a product’s technological and commercial feasibility has been established, in which case such expenditure is capitalised.
f) Finance Cost
i) 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 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 capitalised as part of the cost of the asset. A qualifying asset is one that necessarily takes substantial period of time to get ready for its
intended use.
ii) 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.
iii) All other borrowing costs are expensed in the period in which they occur.
g) Inventories
i) Items of inventories are measured at lower of cost and net realisable value after providing for obsolescence, if any, except in case of by-products which are valued
at net realisable 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.
ii) Cost of raw materials, stores and spares, packing materials, trading and other products are determined at Cost, with moving average price on FIFO basis
h) Impairment of non-financial assets - property, plant and equipment and intangible assets
i) The Company assesses at eachreporting 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.
ii) 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.
iii) The impairment loss recognised in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.
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