4. SIGNIFICANT ACCOUNTING POLICIES
(a) Revenue Recognition
Revenue is measured at fair value of consideration received or receivable.
(i) Sale of Products
The Company recognizes revenues on the sale of products, net of discounts.
(ii) Other Operating Revenue
Other Income is recognised as and when the same is accrued.
(b) Property, Plant and Equipment
Property, plant and equipment are stated at cost of acquisition or construction less accumulated
depreciation less accumulated impairment, if any.
Freehold land is measured at cost and is not depreciated.
Cost includes purchase price, taxes and duties, labour cost and direct overheads for self-constructed
assets and other direct costs incurred up to the date the asset is ready for its intended use.
Interest cost incurred for constructed assets is capitalized up to the date the asset is ready for its intended
use, based on borrowings incurred specifically for financing the asset or the weighted average rate of all
other borrowings, if no specific borrowings have been incurred for the asset.
Depreciation is provided on the Straight Line Method (SLM) over the estimated useful lives of the
assets considering the nature, estimated usage, operating conditions, past history of replacement,
anticipated technological changes, manufacturer’s warranties and maintenance support.
Assets held under finance leases are depreciated over their expected useful lives on the same basis as
owned assets or, where shorter, the term of the relevant lease.
Depreciation is not recorded on capital work-in-progress until construction and installation are complete
and the asset is ready for its intended use.
Capital work in progress Assets in the course of construction are capitalized in capital work in progress
account. At the point when an asset is capable of operating in the manner intended by management, the
cost of construction is transferred to the appropriate category of property, plant and equipment. Costs
associated with the commissioning of an asset are capitalized when the asset is available for use but
incapable of operating at normal levels until the period of commissioning has been completed.
(c) Intangible Assets
Intangible assets acquired are measured on initial recognition at cost. Following initial recognition,
intangible assets are carried at cost less any accumulated amortization and accumulated impairment
losses. The useful lives of intangible assets are assessed as either finite or indefinite. The Company
currently does not have any intangible assets with indefinite useful life. Intangible assets are amortized
over the useful economic life and assessed for impairment whenever there is an indication that the
intangible asset may be impaired. The amortization period and the amortization method for an
intangible asset are reviewed at least at the end of each reporting period. Changes in the expected useful
life or the expected pattern of consumption of future economic benefits embodied in the asset are
considered to modify the amortization period or method, as appropriate, and are treated as changes in
accounting estimates. The amortization expense on intangible assets is recognized in the statement of
profit and loss unless such expenditure forms part of carrying value of another asset. Gains or losses
arising from de-recognition of an intangible asset are measured as the difference between the net
disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and
loss when the asset is derecognized.
(d) Financial Instruments
i) Classification, Initial Recognition and Measurement
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 assets other than equity instruments are
classified into categories: financial assets at fair value through profit or loss and at amortized cost.
Financial assets that are equity instruments are classified as fair value through profit or loss or fair value
through other comprehensive income. Financial liabilities are classified into financial liabilities at fair
value through profit or loss and other financial liabilities.
Financial instruments are recognized on the balance sheet when the Company becomes a party to the
contractual provisions of the instrument.
Initially, a financial instrument is recognized at its fair value. Transaction costs directly attributable to
the acquisition or issue of financial instruments are recognized in determining the carrying amount, if it
is not classified as at fair value through profit or loss. Subsequently, financial instruments are measured
according to the category in which they are classified.
Financial assets at amortized cost: Financial assets having contractual terms that give rise on specified
dates to cash flows that are solely payments of principal and interest on the principal outstanding and
that are held within a business model whose objective is to hold such assets in order to collect such
contractual cash flows are classified in this category. Subsequently, these are measured at amortized
cost using the effective interest method less any impairment losses.
Equity investments at fair value through other comprehensive income: These include financial
assets that are equity instruments and are irrevocably designated as such upon initial recognition.
Subsequently, these are measured at fair value and changes therein are recognized directly in other
comprehensive income, net of applicable income taxes.
Dividends from these equity investments are recognized in the Statement of Profit and Loss when the
right to receive payment has been established.
When the equity investment is derecognized, the cumulative gain or loss in equity is transferred to
retained earnings.
Financial assets at fair value through profit or loss: Financial assets are measured at fair value
through profit or loss unless it is measured at amortized cost or at fair value through other
comprehensive income on initial recognition. The transaction costs directly attributable to the
acquisition of financial assets at fair value through profit or loss are immediately recognized in profit or
loss.
Equity instruments: An equity instrument is any contract that evidences residual interests in the assets
of the Company after deducting all of its liabilities.
Equity instruments issued by the Company are recorded at the proceeds received, net of direct Financial
Liabilities at fair value through profit or loss. Derivatives, including embedded derivatives separated
from the host contract, unless they are designated as hedging instruments, for which hedge accounting is
applied, are classified into this category. These are measured at fair value with changes in fair value
recognized in the Statement of Profit and Loss.
Financial guarantee contracts: These are initially measured at their fair values and, are subsequently
measured at the higher of the amount of loss allowance determined or the amount initially recognized
less, the cumulative amount of income recognized.
Other financial liabilities: These are measured at amortized cost using the effective interest method.
ii) Determination of Fair Value:
The fair value of a financial instrument on initial recognition is normally the transaction price (fair value
of the consideration given or received). Subsequent to initial recognition, the Company determines the
fair value of financial instruments that are quoted in active markets using the quoted bid prices
(financial assets held) or quoted ask prices (financial liabilities held) and using valuation techniques for
other instruments. Valuation techniques include discounted cash flow method and other valuation
models.
iii) De-recognition of Financial Assets and Financial Liabilities:
The Company derecognizes a financial asset only when the contractual rights to the cash flows from the
asset expires or it transfers the financial asset and substantially all the risks and rewards of ownership of
the asset to another entity. If the Company neither transfers nor retains substantially all the risks and
rewards of ownership and continues to control the transferred asset, the Company recognizes its
retained interest in the asset and an associated liability for amounts it may have to pay. If the Company
retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company
continues to recognize the financial asset and also recognizes a collateralized borrowing for the
proceeds received.
Financial liabilities are derecognized when these are extinguished, that is when the obligation is
discharged, cancelled or has expired.
iv) Impairment of Financial Assets:
The Company recognizes a loss allowance for expected credit losses on a financial asset that is at
amortized cost. Loss allowance in respect of financial assets is measured at an amount equal to life time
expected credit losses and is calculated as the difference between their carrying amount and the present
value of the expected future cash flows discounted at the original effective interest rate.
(e) Cash and Cash Equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term
deposits with an original maturity of three months or less, which are subject to an insignificant risk of
changes in value. For the purpose of the statement of cash flows, cash and cash equivalents consist of
cash and short-term deposits, as defined above.
(f) Borrowing Costs
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 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. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to
the borrowing costs.
(g) Inventories
Inventories of Raw Materials, Consumable Stores & Spares, Stock in trade of Trading Purchases and
Stock-in-Process are valued at cost on FIFO basis, Scrap at realizable value & Finished Goods are
valued at cost or Net Realizable Value(NRV), whichever is less.
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