3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
i. Property, plant and equipment:
For transition to IND AS, the Company has elected to continue with the carrying value of property,
Plant and Equipment (‘PPE’) recognised as of 1st April 2016 (transition date) measured as per the
previous GAAP and use that carrying value as its deemed cost of the PPE as on the transition date.
Property, Plant and Equipment are stated at cost less accumulated depreciation and accumulated
impairment losses. Cost includes purchase price after deducting trade discount /rebate, import duty,
non-refundable taxes, cost of replacing the component parts, borrowing cost and other directly
attributable cost of bringing the asset to its working condition in the manner intended by the
management.
An item of PPE is derecognised on disposal or when no future economic benefits are expected from
use or disposal. Any gain or loss arising on de-recognition of an item of property, plant and equipment
is determined as the difference between the net disposal proceeds and the carrying amount of the asset
and is recognised in Statement of Profit and Loss when asset is de-recognised.
The depreciable amount of an asset is determined after deducting its residual value. Where the residual
value of an asset increases to an amount equal to or greater than the asset’s carrying amount, no
depreciation charge is recognised till the asset’s residual value decreases below the asset’s carrying
amount. Depreciation of an asset begins when it is available for use, i.e., when it is in the location and
condition necessary for it to be capable of operating in the intended manner. Depreciation of an asset
ceases at the earlier of the date that the asset is classified as held for sale in accordance with IND AS
105 and the date that the asset is derecognised.
Depreciation is charged so as to allocate the cost of assets less their residual values, if any, over their
estimated useful lives, using the written down value method except intangible assets. Depreciation on
intangible assets is provided on straight line basis. The following useful lives are considered for the
depreciation of property, plant and equipment:
If there is an indication that there has been a significant change in useful life or residual value of an
asset, the depreciation of that asset is revised accordingly to reflect the new expectations.
The residual values, useful lives and methods of depreciation of properties, plant and equipment are
reviewed at each financial year end and adjusted prospectively, if appropriate.
iilnvestment properties:
Property that is held for long-term rental yields or for capital appreciation or both, and that is not
occupied by the Company, is classified as investment property. Investment property is measured
initially at its cost, including related transaction costs and where applicable borrowing costs.
Subsequent expenditure is capitalised to the asset’s carrying amount only when it is probable that
future economic benefits associated with the expenditure will flow to the Company and the cost of the
item can be measured reliably. All other repairs and maintenance costs are expensed when incurred.
When part of an investment property is replaced, the carrying amount of the replaced part is
derecognised.
On disposal of an investment property, the difference between it carrying amount and net disposal
proceeds is charged or credited to the Statement of Profit and Loss.
iii.Intangible assets under development:
The amount disclosed as ‘Intangible asset under development’ represents assets purchased/acquired
and not available for use, as at the date of Statement of Financial Position.
An item of Intangible asset is derecognised on disposal or when no future economic benefits are
expected from its use or disposal. Any profit or loss arising from de-recognition of an intangible asset
measured as the difference between the net disposals proceeds and the carrying amount of the asset
and are recognised in the Statement of Profit and Loss when the asset is de-recognised.
iv. Impairment of Tangible (PPE) and Intangible Assets:
The Company assesses, at each reporting date, property, plant and equipment and intangible assets are
reviewed to determine whether there is any indication that those assets have suffered an impairment
loss. If there is an indication of possible impairment, the recoverable amount of any affected asset (or
group of related assets where it is not possible to estimate the recoverable amount of an individual
asset), is estimated and compared with its carrying amount. If the estimated recoverable amount is
lower, the carrying amount is reduced to its estimated recoverable amount, and an impairment loss is
recognised immediately in Statement of Profit and Loss.
Recoverable amount is the higher of fair value less cost to sell and value in use. 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 assessment of the time value of money and the risk specific to the asset. In
determining fair value less cost of disposal, recent market transactions are taken into account. If no
such transactions can be identified, an appropriate valuation model is used.
If an impairment loss subsequently reverses, the carrying amount of the asset (or group of related
assets) is increased to the revised estimate of its recoverable amount (selling price less costs to
complete and sell, in the case of inventories), but not in excess of the amount that would have been
determined had no impairment loss been recognised for the asset (or group of related assets) in prior
years. A reversal of an impairment loss is recognised immediately in Statement of Profit and Loss.
v. Inventories:
Inventories are valued at the lower of cost and net realisable value. However, materials held for use in
production of inventories are not written down below cost, if the finished products are expected to be
sold at or above cost.
Costs incurred in bringing each product to its present location and condition is accounted for as
follows:
• Rough Diamonds - Cost includes cost of purchase and other costs incurred in bringing the
inventories to their present location and condition. Rough diamonds are valued at Specific
Identification.
• Finished Goods and Work - in - progress:
Cost of all certified large cut and polished diamonds is determined on specific identification basis.
Other uncertified cut and polished diamonds of similar characteristics in a certain range are grouped as
a mixed lot and cost is determined on weighted average basis.
• In determining the cost of stores weighted average method is used.
• In respect of Jewellery division, Metal and Cut and Polished Diamond is valued at weighted
average basis.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated
costs of completion and the estimated cost necessary to make the sale.
Obsolete and slow-moving items are subjected to continuous technical monitoring and are valued at
lower of cost and estimated net realisable value.
vi. Leases:
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.
Finance leases that transfer substantially all the risks and benefits incidental to ownership of the leased
items (i.e. PPE), are generally capitalised at the inception of the lease at the fair value of the leased
assets or, if lower, at the present value of minimum lease payments. Lease payments are apportioned
between finance charges and a reduction in lease liability so as to achieve a constant rate of interest on
the remaining balance of the liability. Finance charges are recognised in finance cost in the Statement
of Profit and Loss.
Lease in which significant portion of the risks and rewards of ownership are not transferred to the
Company as lessee is classified as operating leases. Payments made under operating leases are charged
to Statement of Profit and Loss over the period of lease on straight line basis other than those cases
where the escalation are linked to expected general inflation in which case they are charged on
contractual terms.
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