OPERATING CYCLE
Based on the nature of products/ activities of the Company and the normal time between acquisition of assets and their realization m cash or cash equivalents, the Company has determined its operating cycle as 12 months tor the purpose of classification of its assets and liabilities as current and non-current.
3 SIGNIFICANT ACCOUNTING POLICIES
3.1 USE OF ESTIMATES
The preparation of the financial statements in conformity with Ind AS requires management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting polices and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Application of accounting policies that require critical accounting estimates involving complex and subjective judgments and the use of assumptions in these financial statements. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the financial statements.
3.2 PROPERTY PLANT & EQUIPMENT
a) Property, plant and equipment are stated at cost net of taxes less accumulated depreciation and/or impairment loss; if any. All costs such as freight, non recoverable duties & taxes and other incidental expenses until the property, plant and equipment are ready for use, as intended by the management and borrowing cost attributable to the quailfing property, plant and equipments are capitalized. Assets costing less than Rs.5,000/- are fully depreciated in the year of purchase in merging unit.
b) Subsequent expenditures relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably.
c) Capital work in progress represents expenditure incurred in respect of capital projects which are carried at cost. Cost includes land, related acquisition expenses, development and construction costs, borrowing costs and other direct expenditure.
d) The cost and related accumulated depreciation are eliminated from the financial statements upon sale or retirement of the asset and the resultant gains or losses are recognized in the Statement of Profit and Loss Assets to be disposed off are reported at the lower of the carrying value or the fair value less cost to sell.
e) Depreciation on property, plant and equipment is charged in accordance with estimate of useful life of the assets on written down value method, at rates specified in Schedule II to the Companies Act, 2013.
f) In respect of assets added/disposed off during the year, depreciation is charged on pro-rata basis with reference to the month of addition/disposal.
g) Depreciation methods, useful lives and residual values are reviewed periodically, including at each financial year end.
3.3 FINANCIAL INSTRUMENTS Initial recognition
The Company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are recognized at fair value on initial recognition, except for trade receivables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities, that are not at fair value through profit or loss, are added to the fair value on initial recognition. Regular way purchase and sale of financial assets are accounted for at trade date.
Subsequent measurement
Financial assets carried at amortised cost
A financial asset is subsequently measured at amortised cost if it is held within a business model whose objective is to hold the asset 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.
Derecognition of financial instruments
The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition in accordance with Ind AS 109 "Financial Instruments" issued by the Ministry of Corporate Affairs, Government of India. A financial liability (or a part of a financial liability) is derecognized from the Company's Balance Sheet when the obligation specified in the contract is discharged or cancelled or expires.
3.4 IMPAIRMENT Financial assets
The Company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are not fan valued through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all other financial assets expected credit losses are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL.The amount of expected credit losses (or reversal) that is required to adjust the loss allowance a. the reporting date to the amount that is lequued to be recognised is recognized as an impairment gain or loss in profit or loss.
Non-financial assets
Property, plant and equipment are evaluated for recoverability whenever events or changes in circumstances indicate that their canning amounts may not be recoverable. For the puipose of impairment testing the recoverable amount (i.e. the higher of the fair value less cos, 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 generating unit (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 oss 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.
3.5 PROVISIONS
A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that is reasonably estimable, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.
Contingent liabilities are not recognised but are disclosed by way of notes to the financial statements after careful evaluation by the management of the facts and legal aspects of each matter involved. Contingent assets are neither recognised nor disclosed in the financial statements.
Contingent liabilities are assessed continually to determine whether an outflow of resources embodying the economic benefit has become probable. If it becomes probable that an outflow of future economic benefits will be required for an item previously dealt with as contingent liability, a provision is recognised in the financial statements of the period in which the change in probability occurs.
3.6 BORROWING COST
Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalized as
part of the cost of such assets to the extent they relate to the period till such assets are ready to be put to use,
while other borrowing costs are recognized as expenses in the year in which they are incurred. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use.
3.7 INVENTORIES
Inventories other than scrap and goods in transit have been valued at lower of cost and net realisable value The cost is ascertained as below:-
i) Finished goods are valued at lower of cost or net realizable value on first in first out (FIFO) basis.
ii) Scrap is valued at the net realisable value.
Where, net realisable value represents the cstimatedirtffiptt^for inventories less all estimated costs of completion and costs necessary to make the sale.
3.8 EMPLOYEE BENEFITS
(i). Short-term employee benefits
The undiscounted amount of short-term employee benefits expected to be paid in exchange of services rendered
y employees is recognised during the period when the employee renders the services. These benefits include salaries, bonus and performance incentives.
3.9 FOREIGN CURRENCY TRANSACTIONS
In preparing the financial statements of the Company, transactions in currencies other than the pany 8 functional currency i.e. foreign currencies are recognised at the rates of exchange prevailing at the s of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences on monetary items are recognised in the statement of profit or loss in the period in which iney 3nsc.
Foreign currency derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently re-measured to their fair value at the end of each reporting period. The resu.ting gain
3.10 TAXATION
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. 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 m other years and items that are never taxable or deductible. The Company’s current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in die financial statements and the corresponding tax bases used in the computation of taxable profit Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised 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 utilised.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the
extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. ‘ ’
Defemed 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 the reporting period, to recover or settle the carrying
amount of its assets and liabilities.
Current and deferred tax for the year
Current and deferred tax are recognised in the Statement of Profit and Loss, except when they relate to
items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensivelingme^rdirectlv in equity respectively.
/sIA
3.11 REVENUE RECOGNITION
a) Sales are recognised on dispatch of goods.
b) Interest income is recognized using effective interest method.
c) Commision are Recognised on dispatch of goods.
3.12 OPERATING SEGMENT
Operating segments are reported in the manner consistent with the internal reporting provided to the chief
?u1S1°n mak6r (C0DM>- The Manag‘ng Director of SRU Steel Limited has been identified as CODM and he is responsible for allocating the resources, assess the financial performance and position of the Company and makes strategic decisions.
The Company has identified one reportable segment "Trading of stainless steels" based on the information reviewed by the CODM. Refer note 38 for the Segment information presented.
3.13 CASH FLOW STATEMENT
The Cash Flow Statement is prepared by the indirect method set out in Indian Accounting Standard-7 on Cash ow Statements and presents cash flows by operating, investing and financing activities of the Company. The
Company considers all highly liquid financial instruments,which are readily convertible into cash to be cash equivalents.
3.14 EARNINGS PER SHARE
Bas'c earnings per share are calculated by dividing the net profit for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.The weighted average number of equity shares outstanding during the period and for all periods presented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares that have changed the number of equity shares outstanding without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.
3.15 FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measuredat fair value. Transaction costs that are directly attributableto the acquisition or issue of financial assets and financial liabilities (other than financial assets and financia liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.
Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.
3.16 FINANCIAL ASSETS
All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value depending on the classification of the financial assets.
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