1. Property, Plant and Equipment
Recognition and Measurement
Items of property, plant and equipment, other than freehold land that qualifies as an asset is
measured on initial recognition at cost. Following initial recognition, items of property, plant and
equipment are carried at its cost less accumulated depreciation and accumulated impairment
losses. Freehold land is carried at cost and is not depreciated.
The cost of an item of property, plant and equipment comprises of its purchase price including taxes
(other than those subsequently recoverable from tax authorities), duties, freight and other directly
attributable costs of bringing the asset to its working condition. Any trade discounts and rebates
are deducted in arriving at the purchase price. Cost includes cost of replacing a part of plant and
equipment if the recognition criteria are met. Expenses directly attributable to new manufacturing
facility during its construction period are capitalized. Expenditure related to plans, designs and
drawings of buildings or plant and machinery is capitalized under relevant heads of Property, Plant
& Equipment if the recognition criteria are met.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow
to the Company and the cost of the item can be measured reliably. The carrying amount of any
component accounted for as a separate asset is derecognized when replaced. All other repairs and
maintenance are charged to the Statement of Profit and Loss during the reporting period in which
they are incurred.
Depreciation
Depreciation on property, plant & equipment other than factory buildings is provided on the
written down value method as prescribed under the Companies Act, 2013.
The useful lives, residual values of each part of an item of property, plant and equipment and the
depreciation methods are reviewed at the end of each financial year. If any of these expectations
differ from previous estimates, such change is accounted for as a change in an accounting estimate.
The carrying amount of an item of property, plant and equipment is derecognized on disposal or
when no future economic benefits are expected from its use or disposal. The gain or loss arising
from the derecognition of an item of property, plant and equipment is measured as the difference
between the net disposal proceeds and the carrying amount of the item and is recognized in the
Statement of Profit and Loss when the item is derecognized.
2. Intangible Assets
Recognition and Measurement
Intangible assets acquired separately are measured on initial recognition at cost. Following
initial recognition, intangible assets are carried at cost less accumulated amortization and
accumulated impairment loss, if any. Internally generated intangibles, excluding eligible
development costs are not capitalized and the related expenditure is reflected in profit and loss in
the period in which the expenditure is incurred.
Amortization
Intangible assets with finite lives are amortized on a straight line basis over the estimated useful
economic life. The amortization expense on intangible assets with finite lives is recognized in the
Statement of Profit & Loss. The estimated useful lives for intangible assets are 3 years.
The amortization period and method for an intangible asset with finite useful life is reviewed at least
at the end of each financial year. If any of these expectations differ from previous estimates, such
change is accounted for as a change in an accounting estimate.
Derecognition
The carrying amount of an intangible asset is derecognized on disposal or when no future
economic benefits are expected from its use or disposal. The gain or loss arising from the
derecognition of an intangible asset is measured as the difference between the net disposal proceeds
and the carrying amount of the intangible asset and is recognized in the Statement of Profit and Loss
when the asset is derecognized.
However, there is no intangible asset for the year.
3. Right to use Asset
The Company’s lease asset classes primarily consist of leases for land, premises and vehicles. 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.
At the date of commencement of the lease, the Company recognizes 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 low value leases. 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.
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 when it is reasonably certain
that they will be exercised.
The right-of-use assets are initially recognized 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.
However, there is no Leasehold asset with the Company.
The Company as a lessor:
Leases for which the Company is a lessor is classified as a finance or operating lease. Whenever the
terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the
contract is classified as a finance lease. All other leases are classified as operating leases.
When the Company is an intermediate lessor, it accounts for its interests in the head lease and the
sublease separately. The sublease is classified as a finance lease or operating lease by reference to
the right - of - use asset arising from the head lease.
For operating leases, rental income is recognized on a straight-line basis over the term of the
relevant lease.
However, there is no Right to Use asset or leased asset with the company.
4. Investment Property
Recognition and measurement
Investment properties are properties held to earn rentals and / or for capital appreciation.
Investment properties are stated at cost less accumulated depreciation and accumulated
impairment loss, if any. Freehold land is carried at cost and is not depreciated.
Cost includes purchase price, taxes and duties and other direct costs incurred for bringing the asset
to the condition of its intended use. Subsequent costs are included in the asset’s carrying amount
or recognized as a separate asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the Company and the cost of the item can be measured
reliably. All other repair and maintenance costs are recognized in statement of profit and loss as
incurred.
Depreciation
Depreciation on leasehold land is provided on a straight-line basis over the shorter of the lease term
and useful life of the underlying asset.
Depreciation on building is provided on written down value method, pro rata to the period of use,
over their useful life. The estimated useful lives based on technical evaluation by the Management is
40 years. The residual value is estimated by management to be at 5% of cost.
Derecognition
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 recognized
in the Statement of Profit and Loss in the period of derecognition.
However, there is no investment property with the company.
5. Non-current assets held for sale
Non-current assets held for sale are presented separately in the Balance Sheet when the following
criteria are met:
> the Company is committed to selling the assets;
> the assets are available for sale immediately;
> an active plan of sale has commenced;
> sale is expected to be completed within 12 months; and
> it is highly probable that they will be recovered primarily through sales rather than through
continuing use.
Assets held for sale are measured at the lower of their carrying amount and fair value less cost to
sell. Assets held for sale are no longer amortized or depreciated.
6. Capital Work in Progress and Capital Advances
Cost of assets not ready for intended use, as on balance sheet date, is shown as capital work in
progress. Advances given towards acquisition of Property Plant and Equipment outstanding at each
balance sheet date are disclosed as capital work in progress in note: - 1.0
7. Impairment of non-financial assets
At each balance sheet date, an assessment is done to determine whether there is any indication of
impairment in the carrying amount of the Company’s non-financial assets. An impairment loss is
recognized whenever the carrying value of an asset or a cash-generating unit exceeds its recoverable
amount. Recoverable amount of an asset or a cash-generating unit is the higher of its fair value
less costs of disposal and its value in use. An impairment loss, if any, is recognized in the
Statement of Profit and Loss in the period in which the impairment takes place. The impairment
loss is allocated first to reduce the carrying amount of any goodwill (if any) allocated to the cash
generating unit and then to the other assets of the unit, pro rata based on the carrying amount of
each asset in the unit.
An assessment is also done at each Balance Sheet date whether there is any indication that an
impairment loss recognized for an asset in prior accounting periods may no longer exist or may have
decreased. If any such indication exists, the asset’s recoverable amount is estimated. The carrying
amount of the fixed asset is increased to the revised estimate of its recoverable amount so that the
increased carrying amount does not exceed the carrying amount that would have been determined
had no impairment loss been recognized for the asset in prior years. A reversal of impairment loss is
recognized in the Statement of Profit and Loss for the year.
After recognition of impairment loss or reversal of impairment loss as applicable, the depreciation
charge for the asset is adjusted in future periods to allocate the asset’s revised carrying amount, less
its residual value (if any), on straight line basis over its remaining useful life.
The company has not identified any non-financial asset for impairment during the year.
8. Financial Instruments
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. Financial instruments also
include derivative contracts such as forward contracts, futures and currency options.
Financial Assets
Initial recognition and measurement
All financial assets are recognized initially at fair value plus transaction costs that are
attributable to the acquisition of the financial asset, except in the case of financial assets
not recorded at fair value through profit or loss. Transaction costs of financial assets
carried at fair value through profit or loss are expensed through the Statement of Profit
and Loss.
However, trade receivables that do not contain a significant financing component are
measured at transaction price.
Subsequent measurement
For purposes of subsequent measurement, the Company classifies its financial assets in
the following measurement categories:
i. The Company’s business model for managing the financial asset and
ii. The contractual cash flow characteristics of the financial asset.
Based on the above criteria, the Company classifies its financial assets into the following
categories:
i. Financial assets measured at amortized cost
ii. Financial assets measured at fair value through other comprehensive income
(FVTOCI)
iii. Financial assets measured at fair value through profit & loss (FVTPL)
Financial Assets measured at Amortized cost
This category applies to cash and bank balances, trade receivables, loans and other financial assets
of the Company. Such financial assets are measured at amortized cost if both the following
conditions are met: The asset is held within a business model whose objective is to hold assets for
collecting contractual cash flows, and Contractual terms of the asset give rise on specified dates to
cash flows that are solely payments of principal and interest (SPPI) on the principal amount
outstanding.
Currently all financial assets are accounted for at amortized cost.
Financial Assets measured at FVTOCI
Assets that are held for collection of contractual cash flows and for selling the financial assets,
where the assets' cash flows represent solely payments of principal and interest, are measured at
fair value through other comprehensive income (FVTOCI). Movements in the carrying amount are
taken through OCI, except for the recognition of impairment gains or losses, interest revenue and
foreign exchange gains and losses which are recognized in Statement of Profit and Loss. When the
financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is
reclassified from equity to Statement of Profit and Loss. Interest income from these financial
assets is included in other income using the effective interest rate method.
Currently no financial assets are accounted for at FVTOCI.
Financial Assets measured at FVTPL
Assets that do not meet the criteria for amortized cost or FVTOCI are measured at fair value
through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair
value through Profit or Loss is recognized in the Statement of Profit and Loss in the period in which
it arises. Interest income from these financial assets is included in other income.
Equity Instruments
All equity investments within the scope of Ind-AS 109 are measured at fair value. Equity instruments
which are held for trading are classified as at FVTPL. For all other equity instruments, the Company
decides to classify the same either as at FVTOCI or FVTPL. The Company makes such election on an
instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on
the instrument, excluding dividends,are recognized in the Other Comprehensive Income (OCI).
There is no recycling of the amounts from OCI to profit and loss, even on sale of investment.
However, the Company may transfer the cumulative gain or loss within equity.
Currently no financial assets are accounted for at FVTPL.
Derecognition
A financial asset is derecognized only when:
i. The rights to receive cash flows from the financial asset have expired contract is discharged, cancelled or
expires.
ii. Where the entity has transferred an asset, the Company evaluates whether it has transferred
substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset
is derecognized. Where the entity has not transferred substantially all risks and rewards of ownership of
the financial asset, the financial asset is not derecognized.
iii. Where the entity has neither transferred a financial asset nor retains substantially all risks and rewards
of ownership of the financial asset, the financial asset is derecognized if the Company has not retained
control of the financial asset. Where the Company retains control of the financial asset, the asset is
continued to be recognized to the extent of continuing involvement in the financial asset.
However, during the year company has not de recognized any financial assets.
Sensitivity analysis
For the fair values of forward contracts of foreign currencies, reasonably possible changes at the reporting
date to one of the significant observable inputs, holding other inputs constant, would have the following
effects in other comprehensive income (OCI)
9. Inventory
Inventories comprise of raw materials, packing materials, work-in-progress, finished goods and
stores and spares. Inventories are valued at lower of cost and net realizable value. Costs are
ascertained on First in First Out (FIFO) basis. Costs includes cost of purchase and other costs
incurred in bringing each product to its present location and condition. In the case of manufactured
inventories, cost includes cost of raw materials, packing materials and an appropriate share of fixed
and variable production overheads. Fixed production overheads are allocated on the basis of normal
operating capacity. Variable production overheads are allocated based on actual use of production
facilities.
Net realizable value represents the estimated selling price for inventories in normal course of business,
less all estimated costs of completion and costs necessary to make the sale.
Provision is made for cost of obsolescence and other anticipated losses whenever considered
necessary.
10. Cash and Cash Equivalents
Cash and cash equivalents in the balance sheet includes cash at bank and on hand, book debit
balances in cash credit and current accounts, deposits held at call with financial institutions, other
short term highly liquid investments, with original maturities less than three months which are
readily convertible into cash and which are subject to insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents, cash and short - term
deposits as defined above is net of outstanding bank overdrafts as they are considered an integral
part of the Company’s cash management.
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