2. SIGNIFICANT ACCOUNTING POLICIES
This note provides a list of the significant accounting policies adopted in the preparation of these Indian Accounting Standards (Ind-AS)
financial statements. These policies have been consistently applied to all the years except where newly issued accounting standard is
initially adopted.
2.01) BASIS OF PREPARATION
The standalone financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind
AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) and presentation
requirements of Division II of schedule III to the Companies Act, 2013 (Ind AS compliant schedule III) as applicable to these
standalone financial statements.
The Company has prepared the standalone financial statements on the basis that it will continue to operate as going concern.
These policies have been consistently applied to all the years presented, unless otherwise stated.
The standalone financial statements have been prepared on a historical cost basis, except for the following assets and liabilities
(i) Certain financial assets and liabilities that is measured at fair value.
(ii) Assets held for sale-measured at fair value less cost to sell
(iii) Defined benefit plans-plan assets measured at fair value
(iv) Share based payments.
2.02) Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/non- current classification. An asset is
treated as current when it is:
- Expected to be realised or intended to be sold or consumed in normal operating cycle - Held primarily for purpose of
trading
- Expected to be realised within twelve months after the reporting period, or
- 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 current when:
- It is expected to be settled in normal operating cycle
- It is held primarily for purpose of trading
- It is due to be settled within twelve months after the reporting period, or
- 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.
The term of the liability that could, at the option of counterparty, result in its settlement by the issue of equity instruments do not
affect its classification.
Deferred tax assets and deferred tax liabilities are classified as non- current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realization in cash and cash equivalents.
The Company has identified twelve months as its operating cycle.
2.03) Revenue from contract with customers
Revenue from contracts with customers is recognized when control of the goods or services are transferred to the customer at
an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.
A receivable is recognized when the control of the product is transferred as the consideration is unconditional and payment
becomes due upon passage of time as per the terms of contract with customers. The Company collects GST on behalf of the
government and, therefore, it is not an economic benefit flowing to the Company. Hence, it is excluded from revenue
Revenue from sales of products.
Revenue from sale of products is recognized at the point in time when control of the goods is transferred to the customer,
generally on delivery of the goods and there are no unfulfilled obligations.
The Company considers, whether there are other promises in the contract in which there are separate performance obligations,
to which a portion of the transaction price needs to be allocated. In determining the transaction price for the sale of equipment,
the Company considers the effects of variable consideration, the existence of significant financing components, noncash
consideration, and consideration payable to the customer, if any.
Variable consideration
If the consideration in a contract includes a variable amount, the Company estimates the amount of consideration to which it will
be entitled in exchange for transferring the goods to the customer. The variable consideration is estimated at contract inception
and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognized will
not occur when the associated uncertainty with the variable consideration is subsequently resolved. Some contracts for the sale
of product provide customers with a right of return the goods within a specified period. The Company also provides retrospective
volume rebates to certain customers once the quantity of product purchased during the period exceeds the threshold specified
in the contract. The rights of return and volume rebates give rise to variable consideration. The Company uses the expected
value method to estimate the goods that will not be returned because this method best predicts the amount of variable consideration
to which the Company will be entitled. The requirements in Ind AS 115 on constraining estimates of variable consideration are
also applied in order to determine the amount of variable consideration that can be included in the transaction price. For goods
that are expected to be returned, instead of revenue, the Company recognizes a refund liability. A right of return asset (and
corresponding adjustment to cost of sales) is also recognized for the right to recover products from a customer.
Warranty obligations
The Company generally provides for warranties for general repair of defects that existed at the time of sale. These warranties
are assurance-type warranties under Ind AS 115, which are accounted for under Ind AS 37 (Provisions, Contingent Liabilities
and Contingent Assets).
Significant Financing Components
In respect of short-term advances from its customers, using the practical expedient in Ind AS 115, the Company is not required
to adjust the promised amount of consideration for the effects of a significant financing component because it expects, at
contract inception, that the period between the transfer of the promised good or service to the customer and when the customer
pays for that good or service will be within normal operating cycle.
Sale of service
The Company recognizes revenue from sales of services over period of time, because the customer simultaneously receives
and consumes the benefits provided by the Company. Revenue from services related activities is recognized as and when
services are rendered and on the basis of contractual terms with the parties.
Contract assets
Contract assets is right to consideration in exchange for goods or services transferred to the customer and performance obligation
satisfied. If the Company performs by transferring goods or services to a customer before the customer pays consideration or
before payment is due, a contract asset is recognised for the earned consideration that is conditional. Upon completion of the
attached condition and acceptance by the customer, the amounts recognized as contract assets is reclassified to trade receivables
upon invoicing. A receivable represents the Company’s right to an amount of consideration that is unconditional. Contract assets
are subject to impairment assessment. Refer to accounting policies on impairment of financial assets in section (Financial
instruments - initial recognition and subsequent measurement).
Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration
(or an amount of consideration is due) from the customer or has raised the invoice in advance. If a customer pays consideration
before the Company transfers goods or services to the customer, a contract liability is recognised when the payment is made or
the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Company performs under the
contract (i.e., transfers control of the related goods or services to the customer).
Trade receivables
A trade receivable is recognised if an amount of consideration that is unconditional (i.e., only the passage of time is required
before payment of the consideration is due). Refer to accounting policies of financial assets in section (Financial instruments).
2.04) Other Operating Revenues
Export incentives
Revenue from export benefits arising from duty drawback scheme, rodtep scheme, remission of duties and taxes on exported
product scheme are recognised on export of goods in accordance with their respective underlying scheme at fair value of
consideration received or receivable.
2.05) LEASES
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right
to control the use of an identified asset for a period of time in exchange for consideration.
Company as a lessee
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of
low-value assets. The Company recognises lease liabilities to make lease payments and right-of-use assets representing the
right to use the underlying assets. For these short-term and low value leases, the Company recognises the lease payments as
an operating expense on a straight-line basis over the term of the lease.
1) Right-of-use assets
The Company recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset
is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment
losses, and adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets includes the amount of
lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date
less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the
lease term and the estimated useful lives of the underlying assets. If ownership of the leased asset transfers to the
Company at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated
using the estimated useful life of the asset. The right-of-use assets are also subject to impairment. Refer to the accounting
policies in section ‘Impairment of non-financial assets’.
ii) Lease Liabilities
At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease
payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed
payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts
expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase
option reasonably certain to be exercised by the Company and payments of penalties for terminating the lease, if the
lease term reflects the Company exercising the option to terminate. Variable lease payments that do not depend on an
index or a rate are recognized as expenses (unless they are incurred to produce inventories) in the period in which the
event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease
commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement
date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments
made. In addition, the carrying amount of lease liabilities is re-measured if there is a modification, a change in the lease
term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used
to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the
lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
The Companies’ lease liabilities are included in other current and non-current financial liabilities.
Variable lease payments that depend on sales are recognized in profit or loss in the period in which the condition that
triggers those payments occurs.
iii) Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a
lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the
lease of low-value assets recognition exemption to leases that are considered to be low value. Lease payments on short¬
term leases and leases of low-value assets are recognized as expense on a straight-line basis over the lease term.
2.06) ACCOUNTING FOR TAXES ON INCOME
Tax expense comprises current and deferred tax. Current income-tax is measured at the amount expected to be paid to the tax
authorities in accordance with the Income-tax Act, 1961 enacted in India and tax laws prevailing in the respective tax jurisdictions
where the company operates. The tax rates and tax laws used to compute the amount are those that are enacted or substantively
enacted, at the reporting date.
Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating
during the current year and reversal of timing differences for the earlier years. Deferred tax is measured using the tax rates and
the tax laws enacted or substantively enacted at the reporting date.
Deferred tax liabilities are recognized for all taxable timing differences. Deferred tax assets are recognized for deductible timing
differences only to the extent that there is reasonable certainty that sufficient future taxable income will be available against
which such deferred tax assets can be realized. In situations where the company has unabsorbed depreciation or carry forward
tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can
be realized against future taxable profits.
At each reporting date, the Company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax
asset to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable
income will be available against which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each reporting date. The Company writes-down the carrying amount
of deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient
future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the
extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be
available.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes relate to the same taxable entity and the same taxation
authority.
MAT credit is recognized as an asset only when and to the extent there is convincing evidence that the company will pay normal
income tax during the specified period. In the year in which the Minimum Alternative tax (MAT) credit becomes eligible to be
recognized as an asset in accordance with the recommendations contained in guidance Note issued by the Institute of Chartered
Accountants of India, the said asset is created by way of a credit to the profit and loss account and shown as MAT Credit
Entitlement. The Company reviews the same at each balance sheet date and writes down the carrying amount of MAT Credit
Entitlement to the extent there is no longer convincing evidence to the effect that Company will pay normal Income Tax during
the specified period.
2.07) IMPAIRMENT OF NON FINANCIAL ASSETS
A. At each Balance Sheet date, the carrying amount of assets is tested based on internal/external factors, for impairment so
as to determine:
(I) The provision for impairment loss, if any; and
(ii) The reversal of impairment loss recognized in previous periods, if any,
B. Impairment loss is recognized when the carrying amount of an asset exceeds its recoverable amount. Recoverable
amount is determined:
(I) In the case of an individual asset, higher of the net selling price and the value in use.
(ii) In the case of a cash generating unit (a group of assets that generates identified, independent cash flows), at the
higher of the cash generating unit’s net selling price and the value in use.
(Value in use is determined as the present value of estimated future cash flows discounted to their present value at
the weighted average cost of Capital, from the continuing use of an asset and from its disposal at the end of its
useful life).
Post impairment, depreciation is provided on the revised carrying value of the asset over its remaining useful life.
2.08) CASH AND CASH EQUIVALENTS
Cash and cash equivalents balances include cash in hand, fixed deposits, margin money deposits, earmarked balances with
banks, other bank balances such as dividend accounts, which have restrictions on repatriation, highly liquid investments with
original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of change in value.
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposit held
at call with financial institutions, other short - term, highly liquid investments with original maturities of three months or less that
are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank
overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet
2.09) INVENTORIES
a) Basis of valuation:
I) Inventories other than scrap materials are valued at lower of cost or net realisable value after providing cost of
obsolescence, if any. The comparison of cost and net realisable value is made on an item-by-item basis.
b) Method of Valuation:
i) Cost of raw materials has been determined by using moving weighted average cost method and comprises all costs
of purchase, duties, taxes (other than those subsequently recoverable from tax authorities) and all other costs
incurred in bringing the inventories to their present location and condition.
ii) Cost of finished goods and work-in-progress includes direct labour and an appropriate share of fixed and variable
production overheads. Fixed production overheads are allocated on the basis of normal capacity of production
facilities. Cost is determined on moving weighted average basis
iii) Cost of traded goods has been determined by using moving weighted average cost method and comprises all costs
of purchase, duties, taxes (other than those subsequently recoverable from tax authorities) and all other costs
incurred in bringing the inventories to their present location and condition.
iv) Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion
and estimated costs necessary to make the sale. The net realisable value of work-in-progress is determined with
reference to the selling prices of related finished products. Raw materials and other supplies held for use in the
production of finished products are not written down below cost except in cases where material prices have declined
and it is estimated that the cost of the finished products will exceed their net realisable value.
v) Appropriate adjustments are made to the carrying value of damaged, slow moving and obsolete inventories based
on management’s current best estimate.
2.10) FINANCIAL INSTRUMENT
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument
of another entity.
i) Financial Assets
The Company classifies its financial assets in the following measurement categories:
- those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss)
- those measured at amortised cost
The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow
characteristics and the Company’s business model for managing them.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive
income. For investments in equity instruments that are not held for trading, this will depend on whether the group has
made an irrevocable election at the time of initial recognition to account for the equity investment at FVOCI.
Initial recognition and measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other
comprehensive income (OCI), and fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow
characteristics and the Company’s business model for managing them. With the exception of trade receivables that do
not contain a significant financing component, the Company initially measures a financial asset at its fair value plus, in the
case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a
significant financing component are measured at the transaction price determined under Ind AS 115. Refer to the accounting
policies in section “Revenue from contracts with customers”.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give
rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This
assessment is referred to as the SPPI test and is performed at an instrument level. Financial assets with cash flows that
are not SPPI are classified and measured at fair value through profit or loss, irrespective of the business model.
The Company’s business model for managing financial assets refers to how it manages its financial assets in order to
generate cash flows. The business model determines whether cash flows will result from collecting contractual cash
flows, selling the financial assets, or both.
Financial assets classified and measured at amortised cost are held within a business model with the objective to hold
financial assets in order to collect contractual cash flows while financial assets classified and measured at fair value
through OCI are held within a business model with the objective of both holding to collect contractual cash flows and
selling.
Subsequent measurement
For purposes of subsequent measurement financial assets are classified in following categories:
- Financial assets at amortised cost (debt instruments)
- Financial assets at fair value through other comprehensive income (FVTOCI) with recycling of cumulative gains and
losses (debt instruments)
- Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition
(equity instruments)
- Financial assets at fair value through profit or loss
Financial assets at amortised cost (debt instruments)
A ‘financial asset’ is measured at the amortised cost if both the following conditions are met:
a) Business Model Test: The objective is to hold the financial asset to collect the contractual cash flows (rather than to sell
the instrument prior to its contractual maturity to realise its fair value changes) and
b) Cash flow characteristics test: The contractual terms of the financial asset give rise on specific dates to cash flows that
are solely payments of principal and interest on principal amount outstanding.
This category is most relevant to the Company. 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 EIR. EIR is the rate that exactly discounts
the estimated future cash receipts over the expected life of the financial instrument or a shorter period, where appropriate,
to the gross carrying amount of the financial asset. When 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. The EIR amortisation is included in other income in profit or loss. The losses arising from impairment
are recognised in the profit or loss. This category generally applies to trade and other receivables.
Financial assets at fair value through OCI (FVTOCI) (debt instruments)
A ‘financial asset’ is classified as at the FVTOCI if both of the following criteria are met:
a) Business Model Test: The objective of financial instrument is achieved by both collecting contractual cash flows and
selling the financial assets; and
b) Cash flow characteristics test: The contractual terms of the Debt instrument give rise on specific dates to cash flows
that are solely payments of principal and interest on principal amount outstanding.
Debt instrument included within the FVTOCI category are measured initially as well as at each reporting date at fair value.
Fair value movements are recognised in the other comprehensive income (OCI), except for the recognition of interest
income, impairment gains or losses and foreign exchange gains or losses which are recognised in statement of profit and
loss and computed in the same manner as for financial assets measured at amortised cost. The remaining fair value
changes are recognised in OCI. Upon derecognition, the cumulative fair value changes recognised in OCI is reclassified
from the equity to profit or loss.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are carried in the balance sheet at fair value with net changes in fair
value recognised in the statement of profit and loss. This category includes derivative instruments and listed equity
investments which the Company had not irrevocably elected to classify at fair value through OCI. Dividends on listed
equity investments are recognised in the statement of profit and loss when the right of payment has been established.
Financial assets designated at fair value through OCI (equity instruments)
Upon initial recognition, the Company can elect to classify irrevocably its equity investments as equity instruments designated
at fair value through OCI when they meet the definition of equity under Ind AS 32 Financial Instruments: Presentation and
are not held for trading. The classification is determined on an instrument-by-instrument basis. Equity instruments which
are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS103
applies are classified as at FVTPL.
Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income
in the statement of profit and loss when the right of payment has been established, except when the Company benefits
from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI.
Equity instruments designated at fair value through OCI are not subject to impairment assessment.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a Company of similar financial assets) is
primarily derecognised (i.e. removed from the Company’s statement of financial position) when:
- The rights to receive cash flows from the asset have expired, or
- the Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the
received cash flows in full without material delay to a third party under a “pass through” arrangement and either;
(a) the Company has transferred substantially all the risks and rewards of the asset, or
(b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred
control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through
arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither
transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the
Company continues to recognise the transferred asset to the extent of the Company’s continuing involvement. In that
case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured
on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the
original carrying amount of the asset and the maximum amount of consideration that the Company could be required to
repay.
Impairment of financial assets
In accordance with IND AS 109, the Company applies expected credit losses(ECL) model for measurement and recognition
of impairment loss on the following financial asset and credit risk exposure - Financial assets measured at amortised cost;
- Financial assets measured at fair value through other comprehensive income(FVTOCI);
- Trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are
within the scope of Ind AS 115
- Loan commitments which are not measured as at FVTPL
- Financial guarantee contracts which are not measured as at FVTPL
ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash
flows that the Company expects to receive, discounted at an approximation of the original effective interest rate. The
expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral
to the contractual terms.
ECLs are recognised in two stages. For recognition of impairment loss on financial assets other than mentioned below
and risk exposure, the Company determines that whether there has been a significant increase in the credit risk since
initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. For
those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss
allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the
default (a lifetime ECL).
If, in a subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in
credit risk since initial recognition, then the entity reverts to recognising impairment loss allowance based on 12-month
ECL
The Company follows “simplified approach” for recognition of impairment loss allowance on:
- Trade receivables or contract revenue receivables;
- All lease receivables resulting from the transactions within the scope of Ind AS 116 -Leases
Under the simplified approach, the Company does not track changes in credit risk. Rather, it recognized impairment loss
allowance based on lifetime ECLs at each reporting date, right from its initial recognition. The Company uses a provision
matrix to determine impairment loss allowance on the portfolio of trade receivables. The provision matrix is based on its
historically observed default rates over the expected life of trade receivable and is adjusted for forward looking estimates.
At every reporting date, the historical observed default rates are updated and changes in the forward looking estimates
are analyzed.
ECL impairment loss allowance (or reversal) recognised during the period is recognised as income/ expense in the
statement of profit and loss. The balance sheet presentation for various financial instruments is described below:
(a) Financial assets measured as at amortised cost, contractual revenue receivables and lease receivables: ECL is
presented as an allowance, i.e., as an integral part of the measurement of those assets in the balance sheet. The
allowance reduces the net carrying amount. Until the asset meets write-off criteria, the Company does not reduce impairment
allowance from the gross carrying amount.
(b) Loan commitments and financial guarantee contracts: ECL is presented as a provision in the balance sheet, i.e. as a
liability.
(c) Debt instruments measured at FVTOCI: For debt instruments measured at FVTOCI, the expected credit losses do not
reduce the carrying amount in the balance sheet, which remains at fair value. Instead, an amount equal to the allowance
that would arise if the asset was measured at amortised cost is recognises in other comprehensive income as the
accumulated impairment amount.
ii) Financial Liabilities:
Initial recognition and measurement
Financial liabilities are classified at initial recognition as financial liabilities at fair value through profit or loss, loans and
borrowings, and payables, net of directly attributable transaction costs. All financial liabilities are recognised initially at fair
value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Company
financial liabilities include loans and borrowings, trade payables, trade deposits, retention money, liabilities towards services,
sales incentive and other payables.
Subsequent measurement
For purposes of subsequent measurement, financial liabilities are classified in two categories:
(I) Financial liabilities at fair value through profit or loss
(ii) Financial liabilities at amortised cost (loans and borrowings)
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities
designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for
trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative
financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationship
as defined by Ind AS 109. The separated embedded derivate are also classified as held for trading unless they are
designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in the statement of profit and loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated as such at the
initial date of recognition, and only if the criteria in IND AS 109 are satisfied. For liabilities designated as FVTPL, fair value
gains/ losses attributable to changes in own credit risk are recognised in OCI. These gains/ loss are not subsequently
transferred to profit and loss. However, the Company may transfer the cumulative gain or loss within equity. All other
changes in fair value of such liability are recognised in the statement of profit or loss. the Company has not designated
any financial liability as at fair value through profit and loss.
Financial liabilities at amortized cost (Loans and borrowings)
After initial recognition, interest-bearing borrowings are subsequently measured at amortised cost using the Effective
interest rate method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as
through the Effective interest rate amortisation process. 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 Effective interest rate. The Effective interest
rate amortisation is included as finance costs in the statement of profit and loss.
Trade Payables
These amounts represent liabilities for goods and services provided to the Company prior to the end of financial year
which are unpaid. The amounts are unsecured and are usually payable basis varying trade term. Trade and other payables
are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are
recognised initially at fair value and subsequently measured at amortised cost using Effective interest rate method.
Financial Guarantee Contracts:
Financial guarantee contracts issued by the Company are those contracts that requires payment to be made to reimburse
the holders for a loss it incurs because the specified debtors fail to make a payment when due in accordance with the term
of debt instrument.
Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction cost that are
directly attributed to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of
loss allowance determined as per impairment requirement of IND AS 109 and the amount recognised less, when appropriate,
the cumulative amount of income recognised in accordance with principles of IND AS 115.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an
existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the
statement of profit and loss.
Offsetting of financial instruments
Financials assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a
currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to
realise the assets and settle the liabilities simultaneously.
Reclassification of financial assets/ financial liabilities
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no
reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets
which are debt instruments, a reclassification is made only if there is a change in the business model for managing those
assets. Changes to the business model are expected to be infrequent. The Company’s senior management determines
change in the business model as a result of external or internal changes which are significant to the Company’s operations.
Such changes are evident to external parties. A change in the business model occurs when the Company either begins or
ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the
reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period
following the change in business model. The Company does not restate any previously recognised gains, losses (including
impairment gains or losses) or interest.
2.11) PROPERTY, PLANT AND EQUIPMENT (PPE)
Fixed assets are stated at original cost net of tax/duty credit availed, if any, less accumulated depreciation and cumulative
impairment and those which have been revaluated are stated at the values determined by the values less accumulated depreciation
and cumulative impairment. Cost of acquisition is inclusive of freight and other incidental expenses and interest on loan taken
for the acquisition of qualifying assets up to the date of commissioning of assets.
Subsequent expenditure related to PPE is capitalized only when it is probable that future economic benefits associated with
these will flow to the company and cost of the item can be measured reliably. All other expenses on existing fixed assets,
including day to day repair and maintenance expenditure and cost of replacing parts, are charged to the statement of profit and
loss for the period during which such expenses are incurred.
Gain or losses arising from de-recognition of fixed assets are measured as the difference between the net disposable proceeds
and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
The exchange differences arising on reporting of long term foreign currency monetary items at rates different from those at
which they were initially recorded during the period, or reported in previous financial statements, in so far as they relate to the
acquisition of a depreciable capital asset, have been added to or deducted from the cost of the asset and shall be depreciated
over the balance useful life of the asset.
Die Tooling, developed in-house, includes cost of material and other direct/ incidental expense on in-house development.
Tangible Assets not ready for the intended use on the date of the balance Sheet are disclosed as “capital work in progress”.
DEPRECIATION / AMORTIZATION ON TANGIBLE FIXED ASSETS
Depreciation is the systematic allocation of the depreciable amount of an asset over useful life. The depreciable amount of an
asset is the cost of an asset or other amount substituted for cost, less its residual value.
A. OWNED ASSETS
(i) Pursuant to applicability of Schedule II, of Companies Act 2013, with effect from 1st April 2014, Management has reassessed
the useful life of tangible assets based on the internal and external technical evaluation. The Depreciation on fixed assets
is provided on straight line method in accordance with applicable Schedule of the Companies Act, 2013.
(ii) Depreciation for addition to/ deductions from, owned assets is calculated on pro-rata basis from the date of such addition
or, as the case may be, up to the date on which such asset has been sold, discarded, demolished or destroyed.
(iii) Residual values of assets have been considered at 5% of the original cost of the assets.
(iv) Difference of Exchange Rate fluctuation on imported plant and machineries procured out of long term foreign currency
loans is amortized over the residual life of relevant plant and machineries.
(v) The depreciation calculation is based on the balance useful lives of assets and shift working. Depreciation on assets used
on double shift basis have been increased by 50% for that period and Depreciation on assets used in triple shift basis
have been increased by 100% for that period, except for assets in respect of which no extra shift depreciation is permitted
(indicated by NESD in Part C of the schedule).
(vi) The estimated useful lives for the categories of property, plant and equipment are:
B. INTANGIBLE ASSETS AND AMORTIZATION
Intangible assets are stated at original cost net of tax/duty credit availed, if any, less accumulated amortization and cumulative
impairment. Intangible assets are recognized when it is probable that the future economic benefits are attributable to the asset
will flow to the enterprise and the cost of asset can be measured reliably. Intangible assets are amortized over their estimated
useful life. The estimated useful life of an identifiable intangible asset is based on number of factors including the effects of
obsolescence etc.
Intangible Assets not ready for the intended use on the date of balance sheet are disclosed as “intangible assets under
development”
2.12) Investment properties
Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment
properties are stated at cost less accumulated depreciation and accumulated impairment loss, if any. The cost includes the cost
of replacing parts and borrowing costs for long-term construction projects if the recognition criteria are met. When significant
parts of the investment property are required to be replaced at intervals, the Company depreciates them separately based on
their specific useful lives. All other repair and maintenance costs are recognised in profit or loss as incurred. The Company
depreciates building on a straight line basis over a period of 30 years from the date of original purchase.
Though the Company measures investment property using cost based measurement, the fair value of investment property is
disclosed in notes. Fair values are determined based on an annual evaluation performed by an accredited external independent
valuer applying a valuation model recommended by the international valuation standards committee.
Investment properties are derecognised either when they have been disposed of or when they are permanently withdrawn from
use and no future economic benefit is expected from their disposal. The difference between the net disposal proceeds and the
carrying amount of the asset is recognised in profit or loss in the period of derecognition.
Transfers are made to (or from) investment properties only when there is a change in use. Transfer between investment property
and owner occupied property do not change the carrying amount of the property transferred and they do not change the cost of
that property for measurement or disclosure purpose.
2.13) BORROWINGS
Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently measured at
amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognized in
profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan
facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be
drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that
some or all of the facility will be drawn down, the fee is capitalized as a prepayment for liquidity services and amortized over the
period of the facility to which it relates. Borrowings are removed from the balance sheet when the obligation specified in the
contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been
extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities
assumed, is recognized in profit or loss as other income or finance costs.
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability
for at least 12 months after the reporting period.
2.14) BORROWING COST
Borrowing cost includes interest and other costs incurred in connection with the borrowing of funds and charged to Statement of
Profit & Loss on the basis of effective interest rate (EIR) method. Borrowing cost also includes exchange differences to the
extent regarded as an adjustment to the borrowing cost.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial
period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other
borrowing costs are recognized as expense in the period in which they occur.
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