1 Significant Accounting Policies
I Basis of Prepration
The Financial Statements comply with Indian Accounting
Standards (Ind AS) notified under the Companies (Indian
Accounting Standard) Rules, 2015 and Companies (Indian
Accounting Standards) Amendment Rules, 2016.
II Current/non-current classification
All assets and liabilities have been classified as current
and non-current as per Company's normal operating cycle
and other criteria set out in the division II of Schedule III of
the Companies Act, 2013, for a Company whose financial
statements are made in compliance with the Companies
(India Accounting Standards) Rules, 2015.
Deferred tax assets and liabilities are classified as non¬
current assets and liabilities.
Based on the nature of business and their realization in
cash and cash equivalents, 12 months has been considered
by the Company for the purpose of current / non-current
classification of assets and liabilities.
III Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable. Amounts disclosed as revenue are
inclusive of excise duty, net of returns, trade allowances,
rebates, value added taxes and Goods and Service tax.
The Company recognises revenue when the amount of
revenue can be reliably measured, it is probable that
future economic benefits will flow to the entity and
specific criteria have been met for each of the Company’s
activities as described below.
Sale of goods :
The Company recognizes revenue on sale of products
upon dispatch to the customer, which is when risks and
rewards of ownership are passed to the customer. Sales
are shown net of returns, discounts, excise duty and sales
tax.
Dividend and Interest income :
a) Dividend income on investment is accounted for in
the year in which the right to receive the payment is
established.
b) Interest income is recognized on the time proportion
basis taking into account amount outstanding and
interest rate applicable."
IV Income Tax
Current income tax assets and liabilities
are measured at the amount expected to be
recovered from or paid to the taxation authorities.
Current income tax relating to items recognised outside
profit or loss is recognised outside profit or loss
(either in other comprehensive income or in equity).
Deferred tax is provided using the balance sheet approach
on temporary differences at the reporting date between the
tax bases of assets and liabilities and their carrying amount
for financial reporting purposes at their reporting date.
Deferred tax assets and liabilities are measured at
the tax rates that are expected to apply in the year
when the asset is realised or the liability is settled,
based on tax rates (and tax laws) that have been
enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or
loss is recognised outside profit or loss (either in other
comprehensive income or in equity).
V Property, Plant and Equipment
Property, plant and equipment are stated at original
cost net of tax / duty credit availed, less accumulated
depreciation and accumulated impairment losses, if
any. When a major inspection is performed, its cost
is recognised in the carrying amount of the plant and
equipment as replacement if the recognition criterion is
satisfied.
Property, plant and equipment is eliminated from the
financial statements, either on disposal or on retirement
from active use. Losses and gains arising from the
retirement/disposal are recognised in the statement of
profit or loss in the year of occurrence.
The asset's residual value, useful lives and methods
of depreciation are reviews at each financial year and
adjusted prospectively, if appropriate.
On transition to Ind AS,the Company has availed the
optional exemption under Ind AS 101 and accordingly it
has used the carrying value as at the date of transition i.e.
1st April 2016 as the deemed cost of the property, plant &
equipment under Ind AS.
Depreciation is provided on the "straight line method"
based on the estimated useful life of assets which are
equal to those suggested in Part C of schedule II of the Act.
The management believes that depreciation rates
currently used fairly reflect its estimate of the useful lives
and residual value of tangible assets.
Depreciation on additions / deletions is provided on pro¬
rata basis from the date of acquisition/ up to the date of
deletion.
Changes in expected useful life or the expected pattern of
consumption of future economic benefits embodied in an
asset are considered to modify the amortisation period
or method, as appropriate, and are treated as changes in
accounting estimates.
An asset's carrying amount is written down immediately
to its recoverable amount if the asset’s carrying amount is
greater than its estimated recoverable amount.
VI Goodwill and Other Intangible assets
Intangible assets are recognised when it is probable that
the future economic benefits that are attributable to the
assets will flow to the Company and the cost of the asset
can be measured reliably.
Intangible assets comprising of "Computer Software"
are recorded at acquisition cost and are amortized over
the estimated useful life on straight line basis. Estimated
useful life of software is assessed to be 6 years.
Goodwill is initially measured at cost, being the excess
of the aggregate of the consideration transferred over
the fair value of net identifiable assets acquired and
liabilities assumed. If the fair value of the net assets
acquired is in excess of the aggregate consideration
transferred, the Company re-assesses whether it has
correctly identified all of the assets acquired and all of the
liabilities assumed and reviews the procedures used to
measure the amounts to be recognised at the acquisition
date. If the reassessment still results in an excess of
the fair value of net assets acquired over the aggregate
consideration transferred, then the gain is recognised in
other comprehensive income and accumulated in equity
as capital reserve. However, if there is no clear evidence of
bargain purchase, the entity recognizes the gain directly
in equity as capital reserve, without routing the same
through other comprehensive income.
After initial recognition, goodwill is measured at cost less
any accumulated amoortisation or impairment losses.
For the purpose of impairment testing, goodwill acquired
in a business combination is, from the acquisition date,
allocated to each of the Company's cash-generating
units that are expected to benefit from the combination,
irrespective of whether other assets or liabilities of the
acquiree are assigned to those units. Goodwill on merger
is amortized over the estimated useful life on straight line
basis. Estimated useful life of goodwill is assessed to be 10
years.
A cash generating unit to which goodwill has been
allocated is tested for impairment annually, or more
frequently when there is an indication that the unit
may be impaired. If the recoverable amount of the cash
generating unit is less than its carrying amount, the
impairment loss is allocated first to reduce the carrying
amount of any goodwill allocated to the unit and then to
the other assets of the unit pro rata based on the carrying
amount of each asset in the unit. Any impairment loss for
goodwill is recognised in profit or loss. An impairment
loss recognised for goodwill is not reversed in subsequent
periods.
Where goodwill has been allocated to a cash- generating
unit and part of the operation within that unit is disposed
of, the goodwill associated with the disposed operation
is included in the carrying amount of the operation
when determining the gain or loss on disposal. Goodwill
disposed in these circumstances is measured based on the
relative values of the disposed operation and the portion
of the cash-generating unit retained.
If the initial accounting for a business combination is
incomplete by the end of the reporting period in which
the combination occurs, the Company reports provisional
amounts for the items for which the accounting is
incomplete. Those provisional amounts are adjusted
through goodwill during the measurement period, or
additional assets or liabilities are recognised, to reflect
new information obtained about facts and circumstances
that existed at the acquisition date that, if known, would
have affected the amounts recognized at that date.
These adjustments are called as measurement period
adjustments. The measurement period does not exceed
one year from the acquisition date.
VII 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 capitalised as part of the cost
of the asset. All other borrowing costs are expensed
in the period in which they occur. Borrowing costs
consist of interest and other costs that an entity
incurs in connection with the borrowing of funds.
The Company has been granted restructuring of loan
facility by its banks State Bank of India (Lead Bank).
Lead Bank has discretion to recoup concession given
to company at a future date depending on the financial
position of the company.The management has decided to
account such cost as an when event arises.
VIII Impairment of non financial assets :
As at each balance sheet date, the Company assesses
whether there is an indication that an asset may be
impaired and also whether there is an indication of
reversal of impairment loss recognised in the previous
periods. If any indication exists, or when annual
impairment testing for an asset is required, if any,
the Company determines the recoverable amount
and impairment loss is recognised when the carrying
amount of an asset exceeds its recoverable amount.
Recoverable amount is determined as the higher of
the fair value less cost to sell and the 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 assessments of
the time value of money and the risks specific to the asset.
In determining fair value less costs of disposal, recent
market transactions are taken into account. If no such
transactions can be identified, an appropriate valuation
model is used. These calculations are corroborated by
valuation multiples, quoted share prices for publicly
traded companies or other available fair value indicators.
Impairment losses of continuing operations, including
impairment on inventories, are recognised in the
statement of profit and loss."
IX Lease:
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's lease asset classes primarily comprise
of lease for land and building. The Company assesses
whether a contract contains a lease, at 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:
(i) the contract involves the use of an identified asset
(ii) the Company has substantially all of the economic
benefits from use of the asset through the period of the
lease and (iii) the Company has the right to direct the use
of the asset.
The Company applies a single recognition and
measurement approach for all leases, except for short¬
term leases and leases of low-value assets. For these short¬
term and low value leases, the Company recognizes the
lease payments as an operating expense on a straight-line
basis over the term of the lease. The Company recognises
lease liabilities to make lease payments and right-of-use
assets representing the right to use the underlying assets
as below:
i) Right-of-use assets : The Company recognises
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 remeasurement 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 (i.e. 30 and 60 years) 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
nonfinancial assets'.
ii) Lease Liabilities : At the commencement date of
the lease, the Company recognises 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 recognised
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 remeasured 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.
(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 recognised as
expense on a straight-line basis over the lease term.
"Lease liability" and "Right of Use" asset have been
separately presented in the Balance Sheet and lease
payments have been classified as financing cash flows
Company as a lessor
Leases for which the Company is a lessor is classified
as finance or operating lease. Leases in which the
Company does not transfer substantially all the risks
and rewards incidental to ownership of an asset are
classified as operating leases. Rental income arising
is accounted for on a straight-line basis over the lease
terms. Initial direct costs incurred in negotiating
and arranging an operating lease are added to the
carrying amount of the leased asset and recognised
over the lease term on the same basis as rental
income. Contingent rents are recognised as revenue
in the period in which they are earned.
X Inventories:
Raw materials, stores and packing materials are valued at
lower of cost or net realizable value. Cost is assigned on
FIFO basis. Semi - finished goods are valued at raw material
cost plus proportionate manufacturing overheads.
Finished goods are valued at lower of the cost or net
realizable value. Unrealized profit, if any, in inter
unit transaction is eliminated to the extent possible.
Net realisable value is the estimated selling price in the
ordinary course of business, less estimated costs of
completion and the estimated costs necessary to make
the sale.
XI Foreign Currency :
"The Company's financial statements are presented in
INR, which is also the Company’s functional currency.
Transactions in foreign currency are recorded at the rate of
exchange prevailingon the date ofthe transaction. Exchange
differences arising on settlement of these transactions
are recognized in the Statement of Profit and Loss.
Monetary items (other than those related to acquisition
of fixed assets) denominated in foreign currency are
revalued using the exchange rate prevailing at date of
the Balance Sheet and resulting exchange difference
is recognized in the Statement of Profit and Loss.
Non-monetary assets and non-monetary liabilities
denominated in a foreign currency and measured at fair
value are translated at the exchange rate prevalent at the
date when the fair value was determined. Non-monetary
assets and non-monetary liabilities denominated in a
foreign currency and measured at historical cost are
translated at the exchange rate prevalent at the date of
the transaction."
XII Employee Benefits:
a) Short Term Employee Benefits:
All employee benefits payable wholly within twelve
months of rendering the service are classified as
short-term employee benefits. Benefits such as
salaries and wages, leave salary etc. and the expected
cost of ex-gratia are recognized in the period in which
the employee renders the related service.
b) Post-Employment Benefits:
i) Defined contribution plans:
A defined contribution plan is a post¬
employment benefit plan under which the
company pays specified contributions to the
separate entity. The Company makes specified
monthly contributions towards employee
provident fund. The Company's contribution
paid / payable under the schemes is recognized
as an expense in the statement of profit and
loss during the period in which the employee
renders the related service and contributions to
the respective funds are due. There are no other
obligations other than the contribution payable
to the respective funds.
ii) Defined benefit plan:
"The Company has defined benefit plans
comprising of gratuity. Company’s obligation
towards gratuity liability is funded and is managed
by Life Insurance Corporation of India (LIC). The
present value of the defined benefit obligations
is determined based on actuarial valuation
using the projected unit credit method. The
rate used to discount defined benefit obligation
is determined by reference to market yields at
the Balance Sheet date on Indian Government
Bonds for the estimated term of obligations.
Remeasurements, comprising of actuarial
gains and losses, the effect of the asset ceiling
(excluding amounts included in net interest on
the net defined benefit liability) and the return
on plan assets (excluding amounts included in
net interest on the net defined benefit liability),
are recognised immediately in the balance sheet
with a corresponding debit or credit to retained
earnings through OCI in the period in which they
occur. Remeasurements are not reclassified to
profit or loss in subsequent periods."
c) Leave encashment:
Liability on account of Leave Encashment up to year
end has been provided/ paid during the year. None
of the employee is allowed to carry forward leave to
subsequent period.
XIII Earning per share:
"Basic earning per share is computed by dividing
the profit/(loss) for the period attributable to equity
shareholders by the weighted average number
of equity shares outstanding during the year.
Diluted earning per share is computed by dividing profit/
(loss) for the period attributable to equity shareholders
as adjusted for dividend, interest and other charges to
expense or income relating to the dilutive potential equity
shares by the weighted average number of equity shares
considered for deriving basic earning per share and the
weighted average number of equity shares which could
have been issued on the conversion at all dilutive potential
equity shares."
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