3. SIGNIFICANT ACCOUNTING POLICIES
The company has applied following accounting policies to all periods presented in the Ind AS
Financial Statement.
a) Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable, net of
discounts, volume rebates, outgoing sales taxes and other indirect taxes excluding excise duty.
Revenue from sale of diamond &jewellery is recognized when all significant risks and rewards
of ownership of the commodity sold are transferred to the customer who generally coincides
with delivery.
Dividend Income is recognized when the rightto receive payment is established.
Interest Income is recognized on time basis using the effective interest method.
b) Property, Plant and Equipment
i. Property, Plant and Equipment
The initial cost of property, plant and equipment comprises its purchase price, including
import duties and non-refundable purchase taxes, attributableborrowing cost and any other
directly attributable costs of bringing an asset to working condition and location for its
intended use.
Expenditure incurred after the property, plant and equipment have been put into operation,
such as repairs and maintenance, are normally charged to the statements of profit and loss in
the period in which the costs are incurred. Major inspection and overhaul expenditure is
capitalized if the recognition criteria are met.
When significant parts of plant and equipment are required to be replaced at intervals, the
Company depreciates them separately based on their specific useful lives. Likewise, when a
major inspection is performed, its cost is recognized in the carrying amount of the plant and
equipment as a replacement if the recognition criteria are satisfied. All other repair and
maintenance costs are recognized in the statement of profit and loss as incurred.
Gains and losses on disposal of an item of property, plant and equipment are determined by
comparing the proceeds from disposal with the carrying amount of property, plant and
equipment, and are recognized net within other income/other expenses in statement of profit
and loss.
An item of property, plant and equipment and any significant part initially recognized is
derecognized upon disposal or when no future economic benefits are expected from its use or
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 included in the
statement of profit and loss, when the asset is derecognized.
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.
ii. Depreciation
Property, plant and equipment are stated at cost less accumulated depreciation and any
provision for impairment. Depreciation commences when the assets are ready for their
intended use.
Depreciation is calculated on the depreciable amount, which is the cost of an asset less its
residual value. Depreciation is provided at rates calculated to write off the cost, less estimated
residual value, of each asset on a written down value basis.
Depreciation methods, useful lives and residual values are reviewed at each financial year end
and changes in estimates, if any, are accounted for prospectively.
c) Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a
financial liability or equity instrument of another entity.
Financial Assets
Initial recognition and measurement
All financial assets are recognized initially at fair value plus, in the case of financial assets not
recorded at fair value through statement of profit and loss, transaction costs that are
attributable to the acquisition of the financial asset. Purchases or sales of financial assets that
require delivery of assets within a time frame established by regulation or convention in the
market place (regular way trades) are recognized on the trade date, i.e., the date that the
Company commits to purchase or sell the asset.
Subsequent Measurement
Subsequent measurement of financial assets is described below -
After initial measurement, such financial assets are subsequently measured at amortized cost
using the effective interest rate (EIR) method. Amortized cost is calculated by taking into
account any discount or premium on acquisition and fees or costs that are an integral part of
the EIR. The EIR amortization is included in finance income in the statement of profit and loss.
The losses arising from impairment are recognized in the statement of profit and loss. This
category generally applies to trade and other receivables.
However, reporting entity does not have such financial assets to be measured at amortized cost
using EIR method.
Financial Assets - Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar
financial assets) is primarily derecognized (i.e. removed from the Company’s balance sheet)
when:
Ý The rights to receive cash flows from the asset have expired, or
Ý The Company has transferred its rights to receive cash flows from the asset or has assumed
an obligation to pay the received cash flows in full without material delay to a third party
under a ‘passthrough’ arrangement; and either (a) the Company has transferred substantially
all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered
into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and
rewards of ownership. When it has neither transferred nor retained substantially all of the
risks and rewards of the asset, nor transferred control of the asset, the Company continues to
recognize the transferred asset to the extent of the Company’s continuing involvement. In that
case, the Company also recognizes an associated liability. The transferred asset and the
associated liability are measured on a basis that reflects the rights and obligations that the
Company has retained
Impairment of financial assets
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for
measurement and recognition of impairment loss on the financial assets that are debt
instruments, and are measured at amortized cost e.g., loans, debt securities, deposits and trade
receivables or any contractual right to receive cash or another financial asset that result from
transactions that are within the scope of Ind AS 18.
The Company follows 'simplified approach' for recognition of impairment loss allowance on
trade receivables. The application of simplified approach does not require the Company to
track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime
ECLs at each reporting date, right from its initial recognition.
Financial liabilities - Recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value
through statement of profit and loss, loans and borrowings, payables, or as derivatives
designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognized initially at fair value and, in the case of loans and
borrowings and payables, net of directly attributable transaction costs.
The Company’s financial liabilities include trade and other payables, loans and borrowings.
The measurement of financial liabilities depends on their classification, as described below:
Ý Financial liabilities at fair value through statement of profit and loss:
Financial liabilities at fair value through statement of profit and loss include financial liabilities
held for trading and financial liabilities designated upon initial recognition as at fair value
through statement of profit and loss. Financial liabilities are classified as held for trading if they
are incurred for the purpose of repurchasing in the near term.
Ý Loans and Borrowings:
After initial recognition, interest-bearing loans and borrowings are subsequently measured at
amortized cost using the effective interest rate (hereinafter referred as EIR) method. Gains and
losses are recognized in statement of profit and loss when the liabilities are derecognized as
well as through the EIR amortization process.
Amortized cost is calculated by taking into account any discount or premium on acquisition
and fees or costs that are an integral part of the EIR. The EIR amortization is included as
finance costs in the statement of profit and loss.
Financial liabilities - Derecognition
A financial liability is derecognized when the obligation under the liability is discharged or
cancelled or expires. When an existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an existing liability are substantially
modified, such an exchange or modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in the respective carrying
amounts is recognized in the statement of profit and loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance
sheet if there is a currently enforceable legal right to offset the recognized amounts and there is
an intention to settle on a net basis, to realize the assets and settle the liabilities
simultaneously.
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