II MATERIAL ACCOUNTING POLICIES
1 BASIS OF PREPARATION AND PRESENTATION OF
FINANCIAL STATEMENTS
The financial statements of Sigachi Industries Limited
("the Company") for the year ended 31st March, 2025
have been prepared and presented in accordance with
the Indian Accounting Standards ("Ind AS") notified under
the Companies (Indian Accounting Standards) Rules, 2015
and and relevant amendment rules issued there after and
presentation requirements of Division II of Schedule III to the
Companies Act, 2013.
The financial statements for the year ended 31 March 2025
were authorized and approved for issue by the Board of
Directors on 30th May 2025.
The Financial Statements have been prepared on historical
cost convention on accrual basis of accounting except for
certain financial instruments that are measured at fair value.
GAAPs of Indian Accounting Standards as specified in Section
133 of the Act read together with Rule 4 of Companies
(Indian Accounting Standard) Amendment Rules, 2016 to
the extent applicable, pronouncements of regulatory bodies
applicable to the Company and other provisions of the Act.
Accounting Policies have been consistently applied except
where a newly issued IND AS is initially adopted or revision
to existing IND AS requires a change in the accounting policy
hitherto in use. Management evaluates all recently issued or
revised IND AS on an on-going basis.
The material accounting policy information related to
preparation of the standalone financial statements have
been discussed in the respective notes.
2 SUMMARY OF MATERIAL ACCOUNTING POLICIES
All assets and liabilities are classified into current and
non-current based on the operating cycle of twelve months
or based on the criteria of realization/settlement within
twelve months period from the reporting/ balance sheet
date.
Assets: An asset is classified as current when it satisfies any
of the following criteria:
a. It is expected to be realized in, or is intended for sale
or consumption in, the Company's normal operating
cycle;
b. It is held primarily for the purpose of being traded;
c. It is expected to be realized within twelve months after
the reporting date; or
d. It is cash or cash equivalent unless it is restricted from
being exchanged or used to settle a liability for at least
twelve months after the reporting date."
Liabilities: A liability is classified as current when it satisfies
any of the following criteria:
a. It is expected to be settled in the Company's normal
operating cycle;
b. It is held primarily for the purpose of being traded;
c. It is due to be settled within twelve months after the
reporting date; or
d. The Company does not have an unconditional right
to defer settlement of the liability for at least twelve
months after the reporting date. Terms of a liability that
could, at the option of the counterparty, result in its
settlement by the issue of equity instruments do not
affect its classification.
Current assets/ liabilities include the current portion of
noncurrent assets/ liabilities respectively.
All other assets/ liabilities are classified as noncurrent.
Deferred tax assets and liabilities are always disclosed as
non-current.
2.01 Accounting Estimates
The preparation of the financial statements, in conformity
with the recognition and measurement principles of Ind
AS, requires the management to make estimates and
assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent liabilities as at
the date of financial statements and the results of operation
during the reported period. Although these estimates are
based upon management's best knowledge of current
events and actions, actual results could differ from these
estimates which are recognized in the period in which they
are determined.
"The estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to the accounting estimates are
recognized in the period in which the estimates are revised
if the revision effects only that period or in the period of
the revision and future periods if the revision effects both
current and future periods."
2.02 Fair value Measurement:
The Company measures financial instruments, such as,
derivatives at fair value at each balance sheet date.
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.
The fair value measurement is based on the presumption
that the transaction to sell the asset or transfer the liability
takes place either:
• In the principal market for the asset or liability, or
• In the absence of a principal market, in the most
advantageous market for the asset or liability.
The principal or the most advantageous market must be
accessible by the Company.
The fair value of an asset or a liability is measured using
the assumptions that market participants would use
when pricing the asset or liability, assuming that market
participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into
account a market participant's ability to generate economic
benefits by using the asset in its highest and best use or by
selling it to another market participant that would use the
asset in its highest and best use.
The Company uses valuation techniques that are appropriate
in the circumstances and for which sufficient data are
available to measure fair value, maximizing the use of
relevant observable inputs and minimizing the use of
unobservable inputs.
All assets and liabilities for which fair value is measured
or disclosed in the financial statements are categorized
within the fair value hierarchy, described as follows, based
on the lowest level input that is significant to the fair value
measurement as a whole:
• Level 1: Quoted (unadjusted) market prices in active
markets for identical assets or liabilities
• Level 2: Valuation techniques for which the lowest level
input that is significant to the fair value measurement
is directly or indirectly observable
• Level 3: Valuation techniques for which the lowest level
input that is significant to the fair value measurement
is unobservable
For assets and liabilities that are recognized in the financial
statements on a recurring basis, the Company determines
whether transfers have occurred between levels in the
hierarchy by re-assessing categorization (based on the lowest
level input that is significant to the fair value measurement
as a whole) at the end of each reporting period.
The Management of the Company determines the
appropriate valuation techniques and inputs for fair value
measurements. In estimating the fair value of an asset or a
liability, the Company uses market-observable data to the
extent it is available. Where level 1 inputs are not available,
the Company engages third party qualified valuers to
perform the valuation. Any change in the fair value of each
asset and liability is also compared with relevant external
sources to determine whether the change is reasonable.
For the purpose of fair value disclosures, the Company has
determined classes of assets and liabilities on the basis of the
nature, characteristics and risks of the asset or liability and
the level of the fair value hierarchy as explained above.
2.03 Provisions, contingent liabilities and contingent assets
Provisions
Provisions are recognized when the Company has a present
obligation (legal or constructive) as a result of a past event
and it is probable that the outflow of resources embodying
economic benefits will be required to settled the obligation
in respect of which reliable estimate can be made of the
amount of the obligation. When the Company expects some
or all of a provision to be reimbursed, the expense relating to
provision presented in the statement of profit & loss is net of
any reimbursement.
If the effect of the time value of money is material, provisions
are disclosed using a current pre-tax rate that reflects, when
appropriate, the risk specific to the liability. When discounting
is used, the increase in the provision due to the passage of
time is recognized as finance cost.
Contingent liability is disclosed in the notes in case of:
There is a possible obligation arising from past events, the
existence of which will be confirmed only by the occurrence
or non- occurrence of one or more uncertain future events
not wholly within the control of the Company.
A present obligation arising from past event, when it is not
probable that as outflow of resources will be required to
settle the obligation
A present obligation arises from the past event, when no
reliable estimate is possible
A present obligation arises from the past event, unless the
probability of outflow are remote.
Commitments include the amount of purchase order (net of
advances) issued to parties for completion of assets.
Provisions, contingent liabilities, contingent assets and
commitments are reviewed at each balance sheet date
Onerous Contracts
A provision for onerous contracts is measured at the present
value of the lower expected cost of terminating the contract
and the expected cost of continuing with the contract.
Before a provision is established, the Company recognizes
the impairment on the assets with the contract.
Contingent assets
Contingent assets are not recognized in the Standalone
financial statements.
2.04 Useful lives of depreciable assets
Management reviews the useful lives of depreciable assets at
each reporting. As at March 31,2025 management assessed
that the useful lives represent the expected utility of the
assets to the company. Further, there is no significant change
in the useful lives as compared to previous year.
2.05 Functional and presentation currency
These financial statements are presented in Indian rupees,
which is also the functional currency of the Company. All
the financial information presented in Indian rupees has
been rounded to the nearest Lakhs as per the requirement
of Schedule III to the Act, unless stated otherwise.
Foreign Currencies :
In preparing the financial statements of the company
transactions in currencies other than the entity's functional
currency ( foreign currencies) are recognized at the rates of
exchange prevailing at the date of transactions.At the end
of each reporting period ,monetary items denominated in
foreign curriencies are retranslated at the rates prevailing at
that date. Non -Monetray items carried at fair value that are
denominated in foreign currencies are retranslated at the
rates prevailing at the date when fair value was determined.
Non-monetary items that are measured in terms of historical
cost in a foreign currency are not retranslated.
For the purpose of presenting these financial statements ,
the assets and liabilities of the company's foreign operations
are translated into currency units using exchange rates
prevailing at the end of each reporting period.
2.06 Property Plant & Equipment
Recognition and measurement
Property, Plant and Equipment are stated at cost of
acquisition or construction less accumulated depreciation
and impairment loss, if any. Cost includes expenditures
that are directly attributable to the acquisition of the
asset i.e., freight, duties and taxes applicable and other
expenses related to acquisition and installation. The cost
of self-constructed assets includes the cost of materials
and other costs directly attributable to bringing the asset
to a working condition for its intended use. Borrowing
costs that are directly attributable to the construction or
production of a qualifying asset are capitalized as part of
the cost of that asset.
When parts of an item of property, plant and equipment
have different useful lives, they are accounted for as separate
items (major components) of property, plant and equipment.
Gains and losses upon 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 in the
statement of profit and loss.
The cost of replacing part of an item of property, plant and
equipment is 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 repairs and maintenance are
recognized in the statement of profit and loss as incurred.
Items of property, plant and equipment acquired through
exchange of non-monetary assets are measured at fair
value, unless the exchange transaction lacks commercial
substance or the fair value of either the asset received or
asset given up is not reliably measurable, in which case the
asset exchanged is recorded at the carrying amount of the
asset given up.Property ,Plant and Equipment which are not
ready for intended use as on the date of balance sheet are
disclosed as ""Capital Work -in-Progress"". intangible assets
with finite useful lives that are acquired separately are carried
at cost less accumulated amortization and accumulated
impairment losses.
Intangible assets acquired separately:
Intangible assets with finite useful lives that are acquired
separately are carried at cost less accumulated amortization
and accumulated impairment losses. Amortization is
recognized on a straight line basis over their estimated useful
lives. The estimated useful life and amortization 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. Intangible assets with indefinite useful
lives that are acquired separately are carried at cost less
accumulated impairment losses.
Depreciation
Depreciation on Property, Plant and Equipment (PPE) and
Intangible assets is calculated on the basis of useful lives as
prescribed under Schedule II to the Companies Act, 2013.
Impairment of tangible and intangible assets other than
goodwill
At the end of each reporting period, the company reviews
the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those 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(if
any). When it is not possible to estimate the recoverable
amount of an individual asset, the company estimates the
recoverable amount of the cash-generating unit to which
the asset belongs .When a reasonable and consistent
basis of allocation can be identified, corporate assets
are also allocated to individual cash-generating units, or
otherwise they are allocated to the smallest company of
cash-generating units for which a reasonable and consistent
allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible
assets not yet available for use are tested for impairment at
least annually, and whenever there is an indication that the
asset may be impaired.
Recoverable amount is the higher of fair value less costs
of disposal and value in use. In assessing value in use, the
estimated future cashflows are discounted to their present
value using a pre tax discount rate that reflects current
market assessments of the time value of the money and the
risks specific to the asset for which the estimates of future
cash flows have not been adjusted.
If the recoverable amount of an asset (or cash -generating
unit) is estimated to be less than its carrying amount , the
carrying amount of the asset (or cash-generating unit) is
reduced to its recoverable amount. An impairment loss is
recognized immediately in profit or loss.
When an impairment loss subsequently reverses, the
carrying amount of the asset ( or a cash-generating unit) 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 recognized for the asset (
or cash-generating unit) in prior years. A reversal of an
impairment loss is recognized immediately in profit or loss
statement.
2.07 Leases
The Company evaluates if an arrangement qualifies to be a
lease as per the requirements of Ind AS 116. Identification
of a lease requires significant judgement. A contract is,
or contains, a lease if the contract conveys the right to
control the use of an identified asset for a period of time in
exchange for consideration. The determination of whether
an arrangement is (or contains) a lease is based on the
substance of the arrangement at the inception of the lease.
The arrangement is, or contains, a lease if fulfilment of the
arrangement is dependent on the use of a specific asset or
assets and the arrangement conveys a right to use the asset
or assets, even if that right is not explicitly specified in an
arrangement.
Company as a lessee
The Company assesses whether a contract contains a
lease, at inception of a contract. A contract is, or contains,
a lease if the contract conveys the right to control the use
of an identified asset for a period of time in exchange for
consideration. To assess whether a contract conveys the
right to control the use of an identified asset, the Company
assesses whether: (i) the contract involves the use of an
identified asset (ii) the Company has substantially all of the
economic benefits from use of the asset through the period
of the lease and (iii) the Company has the right to direct the
use of the asset. The Company uses significant judgement
in assessing the lease term (including anticipated renewals)
and the applicable discount rate. The determination of
whether an arrangement is (or contains) a lease is based on
the substance of the arrangement at the inception of the
lease. The arrangement is, or contains, a lease if fulfilment of
the arrangement is dependent on the use of a specific asset
or assets and the arrangement conveys a right to use the
asset or assets, even if that right is not explicitly specified in
an arrangement.
At the date of commencement of the lease, the Company
recognizes a right-of-use asset ("ROU") and a corresponding
lease liability for all lease arrangements in which it is a lessee,
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 Company recognizes the lease
payments as an operating expense on a straight-line basis
over the term of the lease.
The right-of-use assets are initially recognized at cost, which
comprises the initial amount of the lease liability adjusted for
any lease payments made at or prior to the commencement
date of the lease plus any initial direct costs less any lease
incentives. They are subsequently measured at cost less
accumulated depreciation and impairment losses.
Right-of-use assets are depreciated from the commencement
date on a straight-line basis over the lease term and useful
life of the underlying asset. The lease liability is initially
measured at amortized cost at the present value of the
future lease payments. The lease payments are discounted
using the interest rate implicit in the lease or, if not readily
determinable, using the incremental borrowing rates in
the country of domicile of these leases. Lease liabilities are
remeasured with a corresponding adjustment to the related
right of use asset if the Company changes its assessment if
whether it will exercise an extension or a termination option.
Lease liability and ROU asset have been separately presented
in the Balance Sheet and lease payments have been classified
as financing cash flows.
2.08 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.
A. Financial Assets
i. Initial Recognition
In the case of financial assets, not recorded at fair
value through profit or loss (FVPL), financial assets
are recognized initially at fair value plus transaction
costs that are directly 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.
ii. Subsequent Measurement
For purposes of subsequent measurement, financial
assets are classified in the following categories:
a. Financial Assets at Amortized Cost
Financial assets are subsequently measured at
amortized cost if these financial assets are held
within a business model with an objective to
hold these assets 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.
Interest income from these financial assets is
included in finance income using the effective
interest rate ("EIR") method. Impairment gains or
losses arising on these assets are recognized in
the Statement of Profit and Loss.
b. Financial Assets Measured at Fair Value
Financial assets are measured at fair value through
OCI if these financial assets are held within a
business model with an objective to hold these
assets in order to collect contractual cash flows or
to sell these 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 the Statement of Profit and Loss.
Investment in Equity Instruments are designated
as Financial Assets measured at fair value
through OCI and Investments in Mutual Funds
are designated as Financial Assets measured at
fair value through statement of Profit & Loss on
date of transition.
c. Impairment of Financial Assets
In accordance with Ind AS 109, expected credit loss
(ECL) model for measurement and recognition
of impairment loss on the 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. As Company
trade receivables are realized within normal
credit period adopted by the company, hence
the financial assets are not impaired.
d. De-recognition of Financial Assets
The Company de-recognizes a financial asset only
when the contractual rights to the cash flows
from the asset expire, or it transfers the financial
asset and substantially all risks and rewards
of ownership of the asset to another entity.
If the Company neither transfers nor retains
substantially all the risks and rewards of
ownership and continues to control the
transferred asset, the Company recognizes its
retained interest in the assets and an associated
liability for amounts it may have to pay.
If the Company retains substantially all the risks
and rewards of ownership of a transferred financial
asset, the Company continues to recognize the
financial asset and also recognizes a collateralized
borrowing for the proceeds received.
e. Other Financial Assets
In respect of its other financial assets, the
Company assesses if the credit risk on those
financial assets has increased significantly since
initial recognition. If the credit risk has not
increased significantly since initial recognition,
the Company measures the loss allowance at
an amount equal to 12-month expected credit
losses, else at an amount equal to the lifetime
expected credit losses.
B. Financial Liabilities
Financial liabilities and equity instruments issued by
the Company are classified according to the substance
of the contractual arrangements entered into and
the definitions of a financial liability and an equity
instrument.
i. Initial Recognition
Financial liabilities are classified, at initial recognition,
as financial liabilities at FVPL, loans and borrowings
and payables 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. Fees of recurring nature
are directly recognized in the statement of profit and
loss as finance cost.
ii. Subsequent Measurement
The measurement of financial liabilities depends on
their classification, as described below:
a. Financial liabilities at FVPL
Financial liabilities at FVPL include financial
liabilities held for trading and financial liabilities
designated upon initial recognition as at FVPL.
Financial liabilities are classified as held for
trading if they are incurred for the purpose of
repurchasing in the near term. Gains or losses on
liabilities held for trading are recognized in the
Statement of Profit and Loss.
iii. De-recognition of Financial Liabilities
Financial liabilities are de-recognized when the
obligation specified in the contract is discharged,
cancelled or expired. 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 de-recognition
of the original liability and recognition of a new liability.
The difference in the respective carrying amounts is
recognized in the Statement of Profit and Loss."
Impairment of non-financial assets
Intangible assets and property, plant and equipment
are evaluated for recoverability whenever events or
changes in circumstances indicate that their carrying
amounts may not be recoverable. For the purpose
of impairment testing, the recoverable amount (i.e.
the higher of the fair value less cost to sell and the
value-in-use) is determined on an individual asset
basis unless the asset does not generate cash flows
that are largely independent of those from other assets.
In such cases, the recoverable amount is determined
for the Cash Generated Units (CGU) to which the asset
belongs. If such assets are considered to be impaired,
the impairment to be recognized in the statement of
profit and loss is measured by the amount by which
the carrying value of the assets exceeds the estimated
recoverable amount of the asset. An impairment loss
is reversed in the statement of profit and loss if there
has been a change in the estimates used to determine
the recoverable amount. The carrying amount of the
asset is increased to its revised recoverable amount,
provided that this amount does not exceed the
carrying amount that would have been determined
(net of any accumulated amortization or depreciation)
had no impairment loss been recognized for the asset
in prior years.
2.09 Cash and Cash Equivalents
Cash and Bank balances comprise of cash balance in
hand,Cheques in hand,balance in current accounts with
banks and Bank Fixed Deposits with maturity of 3 months
or less than 3 months. Balances earmarked for a purpose (like
dividend) are shown separately.
Cash flow Statement
Cash flows are reported using the indirect method, where by
profit before tax is adjusted for the effects of transactions of
a non-cash nature, any deferrals or accruals of past or future
operating cash receipts or payment and items of income or
expenses associated with investing or financing cash flows.
The cash flows from operating, investing and financing
activities of the company are segregated .
2.10 Employee Benefits
Short term employee benefits
Short-term employee benefits are expensed as the related
service is provided. A liability is recognized for the amount
expected to be paid if the Company has a present legal or
constructive obligation to pay this amount as a result of past
service provided by the employee and the obligation can be
estimated reliably.
Defined Contribution Plan
The Company's contributions to defined contribution plans
are charged to the statement of profit and loss as and when
the services are received from the employees.
For defined benefit retirement benefit plans , the cost of
providing benefits is determined using the projected unit
credit method, with actuarial valuations being carried out
at the end of each annual reporting period. Remeasurement
comprising actuarial gains and losses, the effect of the
changes to the asset ceiling (if applicable) and the return on
plan assets (excluding interest) , is reflected immediately in
the statement of financial position with a charge or credit
recognized in other comprehensive income in the period in
which they occur.
Defined Contribution Benefits
The Company has an obligation towards gratuity, a defined
benefit plan covering eligible employees. The plan provides
for lump sum payment on retirement, death while in
employment or on separation."
2.11 Borrowing Cost:
Borrowing costs are charged to the Statement of Profit
and Loss except in cases where the borrowings are directly
attributable to the acquisition. Construction or production
of qualifying assets which are assets that necessarily take a
substantial period of time to get ready for their intended use
or sale , are added to the cost of those assets ,until such time
as the assets are substantially ready for their intended use or
sale.
2.12 Government Grants:
Ind AS 20 gives an option to present the grants related to
assets, including nonmonetary grants at fair value in the
balance sheet either by setting up the grant as deferred
income or by deducting the grant in arriving at the carrying
amount of the asset. Accordingly Sales Tax Deferment
amount payable to Department has been considered as
Government Grant and considered the interest expenses
and amortization benefit in Profit and Loss Account and
Balance Sheet.
2.13 Estimates and assumptions
The preparation of company's financial statements
requires management to make judgements , estimates and
assumptions that effect the reported amounts of revenues,
expenses , assets and liabilities ,and the accompanying
disclosures, and the disclosure of contingent liabilities.
Uncertainty about these assumptions and estimates could
result in outcomes that require a material adjustment to
the carrying amount of assets or liabilities affected in future
periods.
2.14 Revenue recognition
Revenue from contracts with customers is recognized to
the extent that it is probable that the economic benefits
will flow to the Company and the revenue can be reliably
measured, regardless of when the payment is being made.
When a performance obligation is satisfied, the revenue is
measured at the transaction price which is consideration
received or receivable, net of returns and allowances, trade
discounts and volume rebates after taking into account
contractually defined terms of payment and excluding
taxes or duties collected on behalf of the government.
The Company derives revenues primarily from manufacture
of Microcrystalline Cellulose and Contracts in the nature of
Operation and Management.
|