2. Significant Accounting Policies
2.1 Statement of Compliance with Ind AS
The financial statements have been prepared in accordance with Ind AS
prescribed under Section 133 of the Companies Act, 2013 (“Act”) read
with Rule 3 of the Companies (Indian Accounting Standards) Rules,
2015 and the Companies (Indian Accounting Standards) (Amendment)
Rules, 2016.
All the Ind AS issued and notified by the Ministry of Corporate Affairs
under the Companies (Indian Accounting Standards) Rules, 2015 (as
amended) till the financial statements are approved for issue by the
Board of Directors has been considered in preparing these financial
statements.
2.2 Basis of Preparation of Financial Statements
These financial statements are prepared on the accrual basis of
accounting, under the historical cost convention except for the
following:
i) Certain financial assets and financial liabilities measured at fair
value; and
ii) Defined benefits plan - plan assets measured at fair value.
There is no change in the system of accounting as being consistently
followed from earlier years unless otherwise stated
All 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 operations and time between procurement of raw material and
realization in cash and cash equivalents, the Company has ascertained
its operating cycle as 12 months for the purpose of current and non¬
current classification of assets and liabilities
2.3 Use of Estimates
The preparation of the Financial Statements in conformity with Ind
AS requires management to make estimates and assumptions that
affect the reported balances of assets and liabilities and disclosures
relating to contingent liabilities as at the date of the financial statements
and reported amounts of income and expenditure during the period.
Management believes that the estimates made in the preparation of the
financial statements are prudent and reliable. Actual results might differ
from the estimates. Difference between the actual results and estimates
are recognized in the period in which results are known / materialized.
2.4 Property, plant and equipment (PPE) and Capital work-in-progress
(CWIP)
The Company has elected to continue with carrying value of all Property,
plant and equipment and Capital work-in-progress (CWIP).
The Property, plant and equipment were stated at their original cost (net
of accumulated depreciation and impairment) adjusted by revaluation of
certain assets.
The Property, plant and equipment (PPE) and Capital work-in-progress
(CWIP) are stated at cost net of GST credit and/or at revalued price less
accumulated depreciation and Accumulated Impairment.
Interest on borrowings used to finance the construction of qualifying
assets are capitalized as part of the cost of the asset until such time that
the asset is ready for its intended use.
Depreciation on Property, plant and equipment (PPE) is provided on
written down value method as prescribed under Part C of Schedule II to
the Companies Act, 2013.
Useful life of assets is considered on the basis of schedule-II of
Companies Act 2013.
Subsequent costs are included in the asset’s carrying amount only
when it is probable that future economic benefits associated with the
item will flow to the entity and the cost of the item can be measured
reliably.
All other repair and maintenance costs are recognized in the Statement
of Profit and Loss as incurred.
Each item of PPE individually costing Rs.5,000/- or less is depreciated
fully in the year of their put to use.
Depreciation/amortization on assets added, sold or discarded during
the year is provided on pro-rata basis.
2.5 Intangible Assets (Computer Software)
Intangible assets expected to provide future enduring economic benefits
are recorded at the consideration paid for acquisition of such assets
and are carried at cost of acquisition less accumulated amortization and
impairment, if any.
Intangible assets: Computer software is amortized over a period of 5
years.
2.6 Revenue Recognition and Expenses
(i) Effective April 1 2018 the company adopted Ind AS 115, revenue
from contracts with customer using the cumulative catch up
transition method, applied to contracts that were not completed
as of April 1, 2018. In accordance with the cumulative catch up
transition method, the comparatives have not been retrospectively
adjusted. Revenue is recognized upon transfer of control of
promised products or services to customers in an amount that
reflects the consideration we expect to receive in exchange for
those products or services.
Arrangements with customers for services and goods are either on a
fixed-price, fixed-timeframe or on a time-and-material basis.
Revenue on supply and service contracts are recognized as the related
performance obligation is completed.
Revenue from fixed-price, fixed-timeframe contracts, where the
performance obligations are satisfied over time and where there is
no uncertainty as to measurement or collectability of consideration,
is recognized as per the percentage-of-completion method. When
there is uncertainty as to measurement or ultimate collectability,
revenue recognition is postponed until such uncertainty is resolved.
Efforts or costs expended have been used to measure progress
towards completion as there is a direct relationship between input and
productivity.
Revenues in excess of invoicing are classified as contract assets (which
we refer to as unbilled revenue) while invoicing in excess of revenues
are classified as contract liabilities (which we refer to as unearned
revenues).
(ii) Insurance claims have been accounted for on cash basis looking in
to the uncertainty and its collection as per past practice.
(iii) Interest Income is accounted for on time proportionate basis.
2.7 Expenses
(i) All expenses are accounted for on accrual basis.
2.8 Inventory
a) Cost of inventory comprises of purchase price, cost of conversion
and other cost that have been incurred in bringing the inventories to
their respective present location and condition. Interest costs are not
included in value of inventory.
Inventories are valued as under:
Finished Goods are carried at lower of cost or net realizable value. Cost
of finished goods is determined following first in first out method.
Traded Goods/ Music Album are carried at lower of cost or net realizable
value. Cost of traded goods is determined following first in first out
method.
2.9 Fair value measurement
The Company measures financial instruments 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 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, maximising the use of relevant observable inputs and minimising
the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in
the financial statements are categorised 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 recognised in the financial statements
on a recurring basis, the Company determines whether transfers have
occurred between levels in the hierarchy by re-assessing categorisation
(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 determines the policies and procedures for both
recurring fair value measurement, such as derivative instruments and
unquoted financial assets measured at fair value, and for non-recurring
measurement, such as assets held for distribution in discontinued
operations.
External valuers are involved for valuation of significant assets, such
as properties. Involvement of external valuers is decided by the
management after discussion with and approval by the Company’s
management. Selection criteria include market knowledge, reputation,
independence and whether professional standards are maintained. The
management decides, after discussions with the Company’s external
valuers, which valuation techniques and inputs to use for each case.
At each reporting date, the management analyses the movements in
the values of assets and liabilities which are required to be remeasured
or re-assessed as per the Company’s accounting policies. For this
analysis, the management verifies the major inputs applied in the latest
valuation by agreeing the information in the valuation computation to
contracts and other relevant documents.
The management, in conjunction with the Company’s external valuers,
also compares the change in the fair value of each asset and liability
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.
2.10 Financial instruments
Financial assets and financial liabilities are recognised in the Balance
sheet when the Company becomes a party to the contractual provisions
of the instrument. Financial assets and financial liabilities are initially
measured at fair value.
Financial assets
Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case
of financial assets not recorded at fair value through profit or loss,
transaction costs that are attributable to the acquisition of the financial
asset. The financial assets include equity and debt securities, trade and
other receivables, loans and advances, cash and bank balances and
derivative financial instruments.
Subsequent measurement
For the purpose of subsequent measurement, financial assets are
classified in the following categories:
1) At amortised cost,
2) At fair value through other comprehensive income (FVTOCI), and
3) At fair value through profit or loss (FVTPL).
Debt instruments at amortised cost
A ‘debt instrument’ is measured at the amortised cost if both the
following conditions are met:
1) The asset is held within a business model whose objective is to
hold the asset for collecting contractual cash flows, and
2) Contractual terms of the asset give rise on specified dates to cash
flows that are solely payments of principal and interest on the
principal amount outstanding.
After initial measurement, such financial assets are subsequently
measured at amortised cost using the effective interest rate (EIR)
method. Amortised 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.
Equity investments
All equity investments in the scope of Ind AS 109 are measured at fair
value except in case of investment in subsidiary carried at deemed cost
and associate carried at cost.
Equity instruments included within the FVTPL category, if any, are
measured at fair value with all changes recognized in profit or loss.
The Company may make an irrevocable election to present in OCI
subsequent changes in the fair value.
The Company makes such election on an instrument-by-instrument
basis. The classification is made on initial recognition and is irrevocable.
When the fair value has been determined based on level 3 inputs, the
difference between the fair value at initial recognition and the transaction
price is deferred and after initial recognition
Deferred difference is recognised as gain or loss to the extent it arises
from change in input to valuation technique. If the Company decides to
classify an equity instrument at FVTOCI, then all fair value changes on
the instrument, excluding dividends, are recognized in OCI.
There is no recycling of the amounts from OCI to profit or loss, even on
sale of investment. However, the Company may transfer the cumulative
gain or loss within equity.
De-recognition
The Company derecognizes a financial asset only when the contractual
rights to the cash flows from the asset expires or it transfers the financial
asset and substantially all the risks and rewards of ownership of the
asset.
2.11 Employees Benefits
(i) Short term employee benefits
Employee benefits payable wholly within twelve months of
receiving employee services are classified as short-term
employee benefits. These benefits include salaries and wages,
bonus and ex-gratia. The undiscounted amount of short-term
employee benefits to be paid in exchange for employee services
are recognized as an expense as the related service is rendered
by employees.
(ii) Post employment benefits
a) Defined contribution plans;
A defined contribution plan is a post-employment benefit plan
under which an entity pays specified contributions to a separate
entity and has no obligation to pay any further amounts. The
company makes specified monthly contributions towards
provident fund. The Company’s contribution is recognized
as an expense in the statement of profit and loss during the
period in which employee renders the related service.
b) Defined benefit plan:
The Company’s gratuity benefit scheme is a defined benefit
plan. The Company’s net obligation in respect of a defined
benefit plan is calculated by estimating the amount of future
benefit that employees have earned in return for their service
in the current and prior periods; that benefit is discounted to
determine its present value, and the fair value of any plan
assets is deducted.
The present value of the obligation under such defined benefit
plan is determined based on actuarial valuation using the
Projected Unit Credit Method, which recognizes each period
of service as giving rise to additional unit of employee benefit
entitlement and measures each unit separately to build up the
final obligation.
The obligation is measured at the present value of the
estimated future cash flows. The discount rates used for
determining the present value of the obligation under defined
benefit plan, are based on the market yields on Government
securities as at the balance sheet date.
When the calculation results in a benefit to the Company, the
recognized asset is limited to the net total of any unrecognized
actuarial losses and past service costs and the present value
of any future refunds from the plan or reductions in future
contributions to the plan.
Actuarial gains and losses are recognized in the other
comprehensive income
c) Estimation of Defined benefit obligations
The cost of the defined benefit gratuity plan and the present
value of the gratuity obligation are determined using actuarial
valuations. An actuarial valuation involves making various
assumptions that may differ from actual developments in
the future. These include the determination of the discount
rate, future salary increases and mortality rates. Due to the
complexities involved in the valuation and its long-term nature,
a defined benefit obligation is highly sensitive to changes in
these assumptions. All assumptions are reviewed at each
financial year end. The parameter most subject to change
is the discount rate. In determining the appropriate discount
rate for plans, the actuary considers the interest rates of
government bonds. The mortality rate is based on publicly
available mortality tables. Those mortality tables tend to
change only at interval in response to demographic changes.
Future salary increases and gratuity increases are based on
expected future inflation rates.
(iii) Long term employment benefits
The Company’s net obligation in respect of long-term employment
benefits is the amount of future benefit that employees have earned in
return for their service in the current and prior periods. The obligation is
calculated using the projected unit credit method and is discounted to
its present value and the fair value of any related assets is deducted.
The discount rates used for determining the present value of the
obligation under defined benefit plan, are based on the market yields on
Government securities as at the balance sheet date.
(iv) Compensated absences
The employees can carry-forward a portion of the unutilized accrued
compensated absences and utilize it in future service periods or
receive cash compensation on termination of employment. Since the
compensated absences do not fall due wholly within twelve months
after the end of the period in which the employees render the related
service and are also not expected to be utilized wholly within twelve
months after the end of such period, the benefit is classified as a long¬
term employee benefit. The Company records an obligation for such
compensated absences in the period in which the employee renders
the services that increase this entitlement. The obligation is measured
on the basis of independent actuarial valuation using the projected unit
credit method.
Short term employee benefits are recognized as an expense at the
undiscounted amount in the Statement of Profit & Loss for the year in
which the related service is rendered.
2.12 Borrowing Costs
Borrowing costs attributable to the qualifying assets are capitalized
up to the period such assets are ready for the intended use and
commenced commercial production. All other borrowing cost is
charged to the Statement of Profit & Loss in the period in which they
are incurred.
2.13 Foreign Currency Transactions and Translations
a) Transactions denominated in foreign currencies are recorded
at the exchange rates prevailing on the date of transaction.
Monetary items denominated in foreign currency at the year end
are translated at year end rates.
b) Non-monetary items which are carried at historical cost
denominated in a foreign currency are reported using the
exchange rate at the date of the transaction.
c) In respect of monetary items which are covered by forward
exchange contracts, the difference between the year end and the
rate on the date of contract is recognized as exchange difference
and the premium on such forward contracts is recognized over
the life of the forward contract.
d) The exchange differences arising on settlement/translation are
recognized in the Statement of Profit and Loss.
2.14 Taxes on Income
(a) Current Tax
Tax on income for the current period is determined on the basis of
taxable income computed in accordance with the provisions of the
Income Tax Act, 1961.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws,
which give future economic benefit in the form of adjustment to
future income tax liability is considered as an asset to the extent
there is convincing evidence that the company will pay normal
income tax.
(b) Deferred Tax
Deferred tax is recognised on temporary differences between the
carrying amounts of assets and liabilities in the financial statement
and the corresponding tax bases used in the computation of
taxable profit.
Deferred tax assets are recognised for all deductible temporary
differences to the extent that it is probable that taxable profit will be
available against which the deductible temporary difference can be
utilised. Such deferred tax assets and liabilities are not recognised
if the temporary difference arises from the initial recognition of an
asset or liability in a transaction (other than a business combination)
affects neither accounting profit nor taxable profit (tax loss).
Deferred tax assets are recognised for the carry forward of unused
tax losses and unused tax credit to the extent that it is probable
that future taxable profit will be available against which the unused
tax losses and unused tax credits can be utilised. Deferred tax
liabilities and assets are measured at the tax rates that are
expected to apply in the period in which the liability is settled or
the asset realised, based on tax rates (and tax laws) that have
been enacted or substantively enacted by the end of the reporting
period. 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 end of reporting period, to
recover or settle the carrying amount of its assets and liabilities.
Deferred tax liabilities are generally recognised on all taxable
temporary differences.
2.15 Impairment of Non-Financial Assets
(i) No financial assets are tested for impairment whenever events or
changes in circumstances indicate that the carrying amount may
not be recoverable.
(ii) An impairment loss is recognised for the amount by which the
assets’ carrying amount exceeds its recoverable amount, costs of
disposal and value in use.
(iii) For the purpose of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash
flows which are largely independent of the cash inflows from other
assets or group of assets (cash generating units).
(iv) Non financial assets other than goodwill that suffered impairment
are reviewed for possible reversal of the impairment at the end of
each reporting period.
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