3. Material Accounting Policies
3.1 Basis of Preparation
The Financial Statements have been prepared under the historical cost convention on accrual basis except for:
a) certain financial instruments which are measured in terms of relevant Ind AS at fair value/ amortized costs at the
end of each reporting period.
b) certain class of Property, Plant and Equipment, i.e, freehold land which on the date of transition have been fair
valued to be considered as deemed costs; and
c) Defined benefit plans- Plan Assets measured at fair value
Historical cost convention is generally based on the fair value of the consideration given in exchange for goods and
services.
All the 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 Ind AS-1 'Presentation of Financial Statements' and Schedule III to the Companies Act, 2013.
Having regard to the nature of business being carried out by the Company, the Company has determined its operating
cycle as twelve months for the purpose of current and non-current classification.
Functional /presentation currency and rounding-off of amounts
The items included in the financial statements (including notes thereon) are measured using the currency of the primary
economic environment in which the Company operates ("the functional currency") and are, therefore, presented in Indian
Rupees ("INR" or "Rupees" or "Rs." or" '"). All amounts disclosed in the financial statements, including notes thereon, have
been rounded off to the nearest two decimals of Lakhs unless otherwise stated.
3.2 Fair Value Measurement
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 under current market conditions.
The Company categorizes assets and liabilities measured at fair value into one of three levels depending on the ability to
observe inputs employed for such measurement:
a) Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
b) Level 2: Inputs other than quoted prices included within level 1 that are observable either directly or indirectly for
the asset or liability.
c) Level 3: Inputs for the asset or liability which are not based on observable market data (unobservable inputs).
The company has an established control framework with respect to the measurement of fair values. This includes a
finance team that has overall responsibility for overseeing all significant fair value measurements and regularly reviews
significant unobservable inputs, valuation adjustments and fair value hierarchy under which the valuation should be
classified.
3.3 Property Plant and Equipment (PPE)
Property, plant and equipment are stated at cost of acquisition or deemed cost on the date of transition i.e. PPE
which have been fair valued on transition to be considered as deemed cost or cost of construction and subsequent
improvements thereto less accumulated depreciation and impairment losses, if any. Cost of an asset comprises its
purchase price or its construction cost including duties and taxes (net of input tax credit availed), inward freight and
other expenses incidental to acquisition or installation and adjustment for exchange differences wherever applicable and
any cost directly attributable to bring the asset into the location and condition necessary for it to be capable of operating
in the manner intended by the management, after deducting discounts and rebates. In addition, Interest on Borrowings
utilised to finance the construction of qualifying assets are capitalised as part of cost of the asset until such time that the
asset is ready for its intended use.
Parts of an item of Property, Plant and Equipment having different useful lives and material value and subsequent
expenditure on Property, Plant and Equipment arising on account of capital improvement or other factors are accounted
for as separate components.
Property, Plant and Equipment includes spare, stand by equipments and servicing equipments which are expected to
be used for a period of more than twelve months and meet the recognition criteria of Plant,Property and Equipment.
The cost of replacing part of an item of property, plant and equipment is recognised 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 carrying amount of the replaced part of property, plant and equipment consequent to additions
made thereto is derecognised. The costs of servicing and repairs and maintenance of property, plant and equipment are
recognised in the statement of profit and loss when incurred. Assets to be disposed off are reported at the lower of the
carrying value or the fair value less cost to sell.
The Company's lease assets comprising of Building have been separately shown under PPE as Right-of-Use (ROU)
Assets.
Property, plant and equipment that are not ready for intended use on the balance sheet date are disclosed as "Capital
work-in-progress". Capital work in progress includes purchase price, duties and taxes (net of input tax credit availed) and
any directly attributable cost (including finance costs relating to borrowed funds utilised for construction or acquisition
of property, plant and equipment incurred till projects are under implementation) of bringing the assets to their working
condition and trial run expenses up to the date of installation. Such items are classified to the appropriate categories of
Property, Plant and Equipment when gets completed and are ready for intended use. Amount paid towards acquisition of
PPE outstanding as at each reporting date are recognized as capital advances under "Other Non-Current Assets."
Depreciation and Amortization, Estimated useful lives and residual value:
Depreciation on Property, Plant and equipment commences when the assets are ready for their intended use.
Depreciation on Property, Plant and Equipment is provided based on straight line method/written down value method as
per the useful life specified under Schedule II of the Companies Act, 2013 to allocate their cost, net of their residual value.
Subsequent additions to the cost of Property, Plant and Equipment are depreciated over the remaining life of mother
asset.
Leasehold Building classified as ROU assets are amortised on straight line basis over the estimated useful lives (or lease
term if shorter).
No depreciation is charged on Freehold land.
Useful life of Property, Plant and Equipment are reviewed and assessed by the Company at the end of the year based on
technical evaluation of relevant class of assets. Based on the above the estimated useful life of assets are as follows:
The management believes that these estimated useful lives are realistic and reflect a fair approximation of the period
over which the assets are likely to be used.
The residual value of an item of Property, Plant and Equipment has been kept at 5 percent or less of the cost of the
respective assets.
Depreciation methods, useful lives and residual values are reviewed, and adjusted as appropriate, at each reporting date.
3.4 Leases
The Company's lease asset classes primarily consist of leases for Buildings. The Company assesses whether a contract
is or contains a lease, at the 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:
1. the contract involves the use of an identified asset,
2. the Company has substantially all of the economic benefits from use of the asset through the period of the lease
and,
3. the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognises 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 leases of low value assets. For these short term and leases of low value assets, the Company
recognises the lease payments as an operating expense on a straight line basis over the term of the lease.
Certain lease arrangements include the options to extend or terminate the lease before the end of the lease term. ROU
assets and lease liabilities include these options considered for arriving at ROU and lease liabilities when it is reasonably
certain that they will be exercised.
The right-of-use assets are initially recognised 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, if any.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease
term and useful life of the underlying asset.
The lease liability is initially measured 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. 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. The lease liability is subsequently
remeasured by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to
reflect the lease payments made.
A lease liability is remeasured upon the occurrence of certain events such as a change in the lease term or a change in
an index or rate used to determine lease payments. The remeasurement normally also adjusts the leased assets.
Lease liability and ROU asset (under PPE) have been separately disclosed in the Balance Sheet and lease payments have
been classified as part of financing cash flows.
3.5 Derecognition of Tangible and ROU assets
An item of Property, plant and equipment (including ROU assets) is de-recognised upon disposal or when no future
economic benefits are expected to arise from its use or disposal. 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 recognised in the Statement of Profit and Loss.
3.6 Impairment of Tangible and ROU assets
Tangible and ROU assets are reviewed at each balance sheet date for impairment. In case events and circumstances
indicate any impairment, recoverable amount of assets is determined. An impairment loss is recognised in the statement
of profit and loss, whenever the carrying amount of assets either belonging to Cash Generating Unit (CGU) or otherwise
exceeds recoverable amount. The recoverable amount is the higher of assets' fair value less cost to disposal and its value
in use. In assessing value in use, the estimated future cash flows from the use of the assets are discounted using pre-tax
discount rate to their present value at appropriate rate.
Impairment losses recognized earlier may no longer exist or may have come down. Based on such assessment at each
reporting period the impairment loss is reversed and recognized in the Statement of Profit and Loss. In such cases the
carrying amount of the asset is increased to the lower of its recoverable amount and the carrying amount that have been
determined, net of depreciation, had no impairment loss been recognized for the asset in prior years.
3.7 Financial Instruments
Financial assets and financial liabilities are recognized in the Balance sheet when the Company becomes a party to the
contractual provisions of financial instruments. The Company determines the classification of its financial assets and
financial liabilities at initial recognition based on its nature and characteristics.
A. Financial assets
I. Initial recognition and measurement
The financial assets include investments, trade receivables, loans and advances, cash and cash equivalents, derivative
financial instruments, bank balances other than cash and cash equivalents, and other financial assets.
Financial assets are initially measured at fair value. Transaction costs directly attributable to the acquisition or issue of
financial assets (other than financial assets at fair value through profit or loss) are added to or are deducted from the
fair value of the financial assets as appropriate on initial recognition. However, trade receivables that do not contain a
significant financing component are measured at transaction price.
II. Subsequent measurement
For the purpose of subsequent measurement, financial assets are classified in the following categories:
(i) at amortized cost,
(ii) at fair value through other comprehensive income (FVTOCI), and
(iii) at fair value through profit or loss (FVTPL)
(a) Financial assets at amortized cost
A 'financial asset' is measured at the amortized cost if the following two conditions are met:
(i) The asset is held within a business model whose objective is to hold the asset for collecting contractual cash flows,
and
(ii) 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.
Amortized cost is determined using the Effective Interest Rate ("EIR") method. Discount or premium on acquisition and
fees or costs forms an integral part of the EIR.
The effective interest rate is the rate that discounts estimated future cash payments or receipts through the expected life
of the Financial instruments or, where appropriate, a shorter period.
(b) Financial assets at fair value through other comprehensive income (FVTOCI)
Financial assets are measured at fair value through other comprehensive income if these financial assets are held both
for collection of contractual cash flows and for selling the financial assets, and contractual terms of the financial assets
give rise to cash flows representing solely payments of principal and interest.
For the purpose of para (a) and (b) above, principal is the fair value of the financial asset at initial recognition and interest
consists of consideration for the time value of money and associated credit risk.
(c) Financial assets at fair value through profit or loss (FVTPL)
Financial assets that are not classified in any of the categories above are classified at fair value through profit or loss.
(d) Equity investments
Equity investments in the scope of Ind AS 109 are measured at fair value except for investments in subsidiaries and
associates, which are carried at cost.
The Company makes an election to present changes in fair value either through other comprehensive income or through
profit or loss on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If Company decides to classify an equity instrument at FVTOCI, then all fair value changes on the instrument, excluding
dividends, are recognized in other comprehensive income. However, dividends on equity instruments on fair value through
other comprehensive income (FVTOCI) is recognised in profit or loss.
In addition, profit or loss arising on sale is also taken to other comprehensive income. The amount accumulated in this
respect is transferred within the Equity on derecognition.
III. De-recognition
The Company derecognizes a financial asset or a group of financial assets when the contractual rights to the cash flows
from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of
the asset to the third party.
On derecognition of a financial asset (except for equity instruments designated as FVTOCI), the difference between the
assets' carrying amount and the sum of the consideration received and receivable are recognized in statement of profit
and loss.
On derecognition of assets measured at FVTOCI (except equity instruments) the cumulative gain or loss previously
recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment.
IV. Cash and cash equivalents
All highly liquid financial instruments, which are readily convertible into determinable amounts of cash and which are
subject to an insignificant risk of change in value and are having original maturities of three months or less from the date
of purchase, are considered as cash equivalents. Cash and cash equivalents includes balances with banks which are
unrestricted for withdrawal and usage.
B. Financial liabilities
I. Initial recognition and measurement
The financial liabilities include trade and other payables, loans and borrowings, including book overdrafts, etc.
Financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition
or issue of financial liabilities (other than financial liabilities at fair value through profit or loss) are added to or deducted
from the fair value of the financial liabilities, as appropriate, on initial recognition.
II. Subsequent measurement
For subsequent measurement, financial liabilities are classified into two categories:
(i) Financial liabilities at amortised cost, and
(ii) Derivative instruments at fair value through profit or loss (FVTPL).
Financial liabilities at amortized cost
After initial recognition, financial liabilities are subsequently measured at amortized cost using the EIR method. When the
financial liabilities are derecognized, gains and losses are recognized in profit or loss. Discount or premium on acquisition
and fees or costs forms an integral part of the EIR.
The effective interest rate is the rate that discounts estimated future cash payments or receipts through the expected life
of the Financial instruments or, where appropriate, a shorter period.
III. De-recognition
Financial liabilities are derecognized if the Company's obligations specified in the contract expire or are discharged or
cancelled. The difference between the carrying amount of the financial liability derecognized and the consideration paid
and payable is recognized in Statement of Profit and Loss.
C. Offsetting of financial instruments
Financial assets and financial liabilities, including derivative financial instruments, are offset, and the net amount is
reported in the Balance sheet if there is currently an enforceable legal right to offset the recognized amounts and there is
an intention to settle on a net basis or to realize the assets and settle the liabilities simultaneously.
D. Derivative and Hedge Accounting
Initial Recognition and Subsequent measurement
The company enters into derivative financial instruments such as foreign exchange forward and swap contracts to
mitigate the risk of changes in foreign exchange rates in respect of financial instruments and forecasted cash flows
denominated in certain foreign currencies. The company uses hedging instruments which provide principles on the use
of such financial derivatives consistent with the risk management strategy of the company. The hedge instruments are
designated and documented as hedges and effectiveness of hedge instruments to reduce the risk associated with the
exposure being hedged is assessed and measured at inception and on an ongoing basis.
Any derivative that is either not designated as a hedge, or is so designated but is ineffective as per Ind AS 109 "Financial
Instruments", is categorized as a financial asset/ financial liability, at fair value through profit or loss. Transaction costs
attributable are also recognized in Statement of profit and loss.
Changes in the fair value of the derivative hedging instrument designated as a fair value hedge are recognized in the
Statement of profit and loss. Changes in the fair value of the derivative hedging instrument designated as a cash flow
hedge are recognized in other comprehensive income and presented within equity as cash flow hedging reserve to the
extent that the hedge is effective.
Hedging instrument which no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised,
then hedge accounting is discontinued prospectively. Any gain or loss recognised in other comprehensive income and
accumulated in equity remains therein till that time and thereafter to the extent hedge accounting being discontinued is
recognised in Statement of profit and loss. When a forecasted transaction is no longer expected to occur, the cumulative
gain or loss accumulated in equity is transferred to the Statement of profit and loss.
3.8 Impairment of assets
A. Non financial assets
An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset's fair value, less costs of disposal, and its value in use.
To assess impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows
(cash-generating units).
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset.
If, at the balance sheet date, there is an indication that a previously assessed impairment loss no longer exists, the
recoverable amount is reassessed and the impairment loss previously recognised is reversed so that the asset is
recognised at its recoverable amount but not exceeding the value which would have been reported in this respect if the
impairment loss had not been recognised.
B. Financial assets
A financial asset is assessed for impairment at each balance sheet date. A financial asset is considered to be impaired
if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of
that asset. The company recognises loss allowances using the Expected Credit Loss ("ECL") model for financial assets
measured at amortised cost.
The company recognises lifetime expected credit losses for trade receivables. Loss allowance equal to the lifetime
expected credit losses are recognised if the credit risk on that financial asset has increased significantly since initial
recognition. If the credit risk on a financial instrument has not increased significantly since initial recognition, the company
measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses.
3.9 Biological Assets
Clonal plants are measured at fair value less cost to sell with changes in fair value recognised in Statement of Profit and
Loss.
3.10 Inventories
The inventories are valued at lower of cost or net realisable value after providing for obsolescence, if any. Cost of
inventories is ascertained on 'weighted average' basis.
Cost in respect of raw materials and stores and spares includes expenses incidental to procurement of the same.
Cost in respect of finished goods and wrapper represents material, labour and other manufacturing cost and appropriate
portion of overheads but does not include interest, selling and distribution overheads.
Cost of traded goods include cost of purchase and other cost incurred in bringing the inventory to their present location
and condition.
Cost in respect of process stock represents, cost incurred up to the stage of completion.
Net Realizable Value is the estimated selling price in the ordinary course of business less estimated cost of completion
and the estimated cost necessary to make the sale.
3.11 Asset Held for Sale
Non-current assets or disposal groups comprising of assets and liabilities are classified as 'held for sale' when all of the
following criteria's are met: (i) decision has been made to sell. (ii) the assets are available for immediate sale in its present
condition. (iii) the assets are being actively marketed and (iv) sale has been agreed or is expected to be concluded within
12 months of the Balance Sheet date.
Subsequently, such non-current assets and disposal groups classified as held for sale are measured at the lower of its
carrying value and fair value less costs to sell. Non-current assets held for sale are not depreciated or amortised.
Non-current asset classified as held for sale are presented separately from the other assets in the balance sheet. The
liabilities of a Non-current asset classified as held for sale are presented separately from other liabilities in the balance
sheet.
3.12 Foreign Currency Transactions
Transactions in foreign currencies are translated into the functional currency at the exchange rates prevailing on the
date of the transactions. Foreign currency monetary assets and liabilities at the year-end are translated at the year-end
exchange rates. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency, are
reported using the exchange rate as at the date of transaction.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of
monetary assets and liabilities are generally recognized in the Statement of Profit and Loss in the year in which they arise
except for exchange differences on foreign currency borrowings relating to qualifying assets when they are regarded as
an adjustment to interest costs on those foreign currency borrowings.
3.13 Equity Share Capital
An equity instrument is a contract that evidences residual interest in the assets of the company after deducting all of its
liabilities. Par value of the equity shares is recorded as share capital and the amount received in excess of par value is
classified as Securities Premium.
Incremental costs directly attributable to the issuance of new equity shares and buy-back of equity shares are shown as
a deduction from the Equity net of any tax effects.
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