A. Statement of Compliance with Ind AS
These financial statements have been prepared in accordance with Indian
Accounting Standards (Ind AS) notified under Section 133 of the Companies Act,
2013 read with Companies ((Indian Accounting standard) Rules, 2015 as amended.
B. Basis of Preparation
The financial statements are prepared in accordance with the historical cost
convention, except for certain items that are measured at fair values, as explained in
the accounting policies.
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, regardless of whether that price is directly observable or estimated using
another valuation technique. In estimating the fair value of an asset or a liability, the
Company takes into account the characteristics of the asset or liability if market
participants would take those characteristics into account when pricing the asset or
liability at the measurement date.
All assets and liabilities for which fair value is measured or disclosed in the financial
statements are categorized within the following fair value hierarchy 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.
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 the amounts included in the financial statements are reported in Indian Rupees
('Rupees' or 'Rs.'), except per share data and unless stated otherwise and rounded off
to nearest Rupees.
C. Basis of classification of Current and Non-Current
The Company presents assets and liabilities in the balance sheet based on current/non-
current classification.
An asset is classified as current when it is:
a) Expected to be realized or intended to be sold or consumed in normal
operating cycle
b) Held primarily for the purpose of trading
c) Expected to be realized within twelve months after the reporting period, or
d) Cash or cash equivalent unless restricted from being exchanged or used to
settle a liability for at least twelve months after the reporting period
All other assets are classified as non-current.
A liability is classified as current when:
a) It is expected to be settled in normal operating cycle
b) It is held primarily for the purpose of trading
c) It is due to be settled within twelve months after the reporting period, or
d) There is no unconditional right to defer the settlement of the liability for at
least twelve months after the reporting period
All other liabilities are classified as non-current.
D. Operating Cycle
All assets and liabilities have been classified as current or non-current as per the
Company's normal operating cycle and other criteria set out in the Schedule III to the
Companies Act, 2013 and Ind AS 1 - Presentation of Financial Statements.
Based on the nature of products / activities of the Company and the normal time
between acquisition of assets and their realization in cash or cash equivalents, the
Company has determined its operating cycle as 12 months for the purpose of
classification of its assets and liabilities as current and non-current.
E. Use of Estimates
The preparation of financial statements in conformity with Ind AS requires
management to make judgments, estimates and assumptions that affect the
application of the accounting policies and the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the year.
Actual results could differ from those estimates. The estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimate is revised if the revision affects only
that period; they are recognized in the period of the revision and future periods if the
revision affects both current and future periods.
F. Property, Plant and Equipment - Tangible Assets
Property, plant and equipment are stated at cost of acquisition or construction less
accumulated depreciation and impairment, if any.
Cost is inclusive of inward freight, duties and taxes and incidental expenses related
to acquisition. In respect of major projects involving construction, related pre¬
operational expenses form part of the value of assets capitalized. Expenses
capitalized also include applicable borrowing costs for qualifying assets, if any. All
up-gradation/enhancements are charged off as revenue expenditure unless they
bring similar significant additional benefits.
An item of property, plant and equipment is derecognized upon disposal or when no
future economic benefits are expected to arise from the continued use of asset. Any
gain or loss arising on the disposal or retirement of an item of property, plant and
equipment is determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognized in the Statement of Profit and Loss.
Depreciation of these assets commences when the assets are ready for their intended
use which is generally on commissioning. Items of property, plant and equipment
are depreciated in a manner that amortizes the cost (or other amount substituted for
cost) of the assets after commissioning, less its residual value, over their useful lives
as specified in Schedule II of the Companies Act, 2013 on a straight-line basis. Land is
not depreciated.
The estimated useful lives of property, plant and equipment of the Company are as
follows:
Assets held under finance leases are depreciated over their expected useful lives on
the same basis as owned assets or, were shorter, the term of the relevant lease.
Property, plant and equipment's residual values and useful lives are reviewed at
each Balance Sheet date and changes, if any, are treated as changes in accounting
estimate.
G. Impairment of Assets
Impairment loss, if any, is provided to the extent, the carrying amount of assets or
cash generating units exceed their recoverable amount.
Recoverable amount is higher of an asset's net selling price and its value in use.
Value in use is the present value of estimated future cash flows expected to arise
from the continuing use of an asset or cash generating unit and from its disposal at
the end of its useful life.
Impairment losses recognized in prior years are reversed when there is an indication
that the impairment losses recognized no longer exist or have decreased. Such
reversals are recognized as an increase in carrying amounts of assets to the extent
that it does not exceed the carrying amounts that would have been determined (net
of amortization or depreciation) had no impairment loss been recognized in previous
years.
H. Inventories
Inventories are stated at lower of cost and net realizable value. The cost is calculated
on First in First Out method. Cost comprises expenditure incurred in the normal
course of business in bringing such inventories to its present location and condition
and includes, where applicable, appropriate overheads based on normal level of
activity. Net realizable value is the estimated selling price less estimated costs for
completion and sale.
I. Financial Assets
Recognition: Financial assets include Investments, Trade receivables, Advances,
Security Deposits, Cash and cash equivalents. Such assets are initially recognized at
transaction price when the Company becomes party to contractual obligations. The
transaction price includes transaction costs unless the asset is being fair valued
through the Statement of Profit and Loss.
Classification: Management determines the classification of an asset at initial
recognition depending on the purpose for which the assets were acquired. The
subsequent measurement of financial assets depends on such classification.
Financial assets are classified as those measured at:
a) Amortized Cost, where the financial assets are held solely for collection of
cash flows arising from payments of principal and/ or interest.
b) Fair value through other comprehensive income (FVTOCI), where the
financial assets are held not only for collection of cash flows arising from
payments of principal and interest but also from the sale of such assets. Such
assets are subsequently measured at fair value, with unrealized gains and
losses arising from changes in the fair value being recognized in other
comprehensive income.
c) Fair value through profit or loss (FVTPL), where the assets are managed in
accordance with an approved investment strategy that triggers purchase and
sale decisions based on the fair value of such assets. Such assets are
subsequently measured at fair value, with unrealized gains and losses arising
from changes in the fair value being recognized in the Statement of Profit and
Loss in the period in which they arise. Trade receivables, Advances, Security
Deposits, Cash and cash equivalents etc. are classified for measurement at
amortized cost while investments may fall under any of the aforesaid classes.
However, in respect of particular investments in equity instruments that
would otherwise be measured at fair value through profit or loss, an
irrevocable election at initial recognition may be made to present subsequent
changes in fair value through other comprehensive income.
Impairment: The Company assesses at each reporting date whether a financial asset
(or a group of financial assets) such as investments, trade receivables, advances and
security deposits held at amortized cost and financial assets that are measured at fair
value through other comprehensive income are tested for impairment based on
evidence or information that is available without undue cost or effort. Expected
credit losses are assessed and loss allowances recognized if the credit quality of the
financial asset has deteriorated significantly since initial recognition.
Reclassification: When and only when the business model is changed, the Company
shall reclassify all affected financial assets prospectively from the reclassification date
as subsequently measured at amortized cost, fair value through other comprehensive
income, fair value through profit or loss without restating the previously recognized
gains, losses or interest and in terms of the reclassification principles laid down in the
Ind AS relating to Financial Instruments.
De-recognition: Financial assets are de-recognized when the right to receive cash
flows from the assets has expired, or has been transferred, and the Company has
transferred substantially all of the risks and rewards of ownership.
Concomitantly, if the asset is one that is measured at:
a) Amortized cost, the gain or loss is recognized in the Statement of Profit and
Loss;
b) Fair value through other comprehensive income, the cumulative fair value
adjustments previously taken to reserves are reclassified to the Statement of
Profit and Loss unless the asset represents an equity investment in which case
the cumulative fair value adjustments previously taken to reserves is
reclassified within equity.
Income Recognition: Interest income is recognized in the Statement of Profit and
Loss using the effective interest method. Dividend income is recognized in the
Statement of Profit and Loss when the right to receive dividend is established.
J. Financial Liabilities
Borrowings, trade payables and other financial liabilities are initially recognized at
the value of the respective contractual obligations. They are subsequently measured
at amortized cost. Any discount or premium on redemption/ settlement is
recognized in the Statement of Profit and Loss as finance cost over the life of the
liability using the effective interest method and adjusted to the liability figure
disclosed in the Balance Sheet.
Financial liabilities are de-recognized when the liability is extinguished, that is, when
the contractual obligation is discharged, cancelled and on expiry.
K. Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand
and short-term deposits with an original maturity of three months or less, which are
subject to an insignificant risk of changes in value.
L. Cash Flow Statement
Cash Flows are reported using indirect method, whereby profit before tax is adjusted for
the effects of transactions of non-cash nature and any deferrals or accruals of past or
future cash receipts or payments.
M. Offsetting Financial Instruments
Financial assets and liabilities are offset and the net amount is included in the
Balance Sheet where there is a legally enforceable right to offset the recognized
amounts and there is an intention to settle on a net basis or realize the asset and settle
the liability simultaneously.
N. Equity Instruments
Equity instruments are recognized at the value of the proceeds, net of direct costs of
the capital issue.
O. Revenue
i. Sale of goods
Revenue is recognized when an entity transfers the control of goods to
customers at an amount that the entity expects to receive in exchange for
those goods. Volume discounts and incentives to customers are accounted for
as reduction of revenue based on the allocation of the discounts/ incentives
amount to each of the underlying performance obligation. when the level of
discount varies with increases in levels of revenue transactions, the company
recognizes the liability based on its estimate of the customer's future
purchases If it is probable that the criteria for the discount will not be met, or
if the amount thereof cannot be estimated reliably, then discount is not
recognized until the payment is probable and the amount can be estimated
reliably. The company recognizes changes in the estimated amount of
obligations for discounts in the period in which the change occurs.
ii. Interest income
Interest income from debt instruments is recognized using the effective
interest rate method. The effective interest rate is the rate that exactly
discounts estimated future cash receipts through the expected life of the
financial asset to the gross carrying amount of a financial asset. While
calculating the effective interest rate, the Company estimates the expected
cash flows by considering all the contractual terms of the financial instrument
but does not consider the expected credit losses.
iii. Dividend Income
Dividends from investments are recognized in profit or loss when the right to
receive payment is established.
iv. Other Revenues:
These are recognized on accrual basis, except where there are uncertainties in
realisation/ determination of income and in such case, income is recognized
on realisation/ certainty.
P. Employee Benefits
Short-term benefits:
A liability is recognized for benefits accruing to employees in respect of
wages and salaries in the period the related service is rendered at the
undiscounted amount of the benefits expected to be paid in exchange for that
service. Liabilities recognized in respect of short-term employee benefits are
measured at the undiscounted amount of the benefits expected to be paid in
exchange for the related service.
Q. Taxes on Income
Income tax expense represents the sum of the tax currently payable and deferred
taxation.
a) Current Tax
Current tax in the Statement of Profit and Loss is provided as the amount of
tax payable in respect of taxable income for the period using tax rates and tax
laws enacted during the period, together with any adjustment to tax payable
in respect of previous years. Taxable profit differs from 'profit before tax' as
reported in the statement of profit and loss because of items of income or
expense that are taxable or deductible in other years and items that are never
taxable or deductible.
b) Deferred tax
Deferred tax is recognized on temporary differences between the carrying
amounts of assets and liabilities in the financial statements and the
corresponding tax bases used in the computation of taxable profit. Deferred
tax liabilities are generally recognized for all taxable temporary differences.
Deferred tax assets are generally recognized for all deductible temporary
differences to the extent that it is probable that taxable profits will be
available against which those deductible temporary differences can be
utilized.
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
realized, based on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period.
Deferred tax is recognized in the statement of profit and loss, except when
they relate to items that are recognized in other comprehensive income or
directly in equity, in which case, the deferred tax is also recognized in other
comprehensive income or directly in equity respectively.
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