2-A. Material Accounting Policies
i) Statement of compliance and basis of preparation
The standalone financial statements of the Company have been prepared in accordance with the Indian
Accounting Standards ("Ind AS") notified under section 133 of the Companies Act 2013, read together with
the Companies (Indian Accounting Standards) Rules, 2015, as amended.
The standalone financial statements have been prepared on the historical cost basis except for certain
financial instruments and net defined benefit plan that are measured at fair values at the end of each
reporting period, as explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods
and services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date, regardless of whether that price is
directly observable or estimated using another valuation technique. In estimating the fair value of an asset
or a liability, the Company takes into account the characteristics of the asset or liability if market participants
would take those characteristics into account when pricing the asset or liability at the measurement date.
Fair value for measurement and disclosure purposes in these standalone financial statements is determined
on such a basis, except for measurements that have some similarities to fair value but are not fair value, such
as net realisable value in Ind AS 2 or value in use in Ind AS 36.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2, or 3
based on the degree to which the inputs to the fair value measurements are observable and the significance
of the inputs to the fair value measurement in its entirety, which are described as follows:
Ý Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that
the entity can access at the measurement date;
Ý Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the
asset or liability, either directly or indirectly; and
Ý Level 3 inputs are unobservable inputs for the asset or liability.
The principal accounting policies are set out below.
ii) Current versus non-current classification
Based on the time involved 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 for determining current
and non-current classification of assets and liabilities in the balance sheet.
iii) Revenue Recognition
a) Revenue from contracts with customer
Revenue from contract with customers is recognised when the Company satisfies performance
obligation by transferring promised goods and services to the customer. Performance obligations are
satisfied at point in time when the customer obtains controls of the asset, which generally coincides
with the delivery of goods to customers, based on contracts with the customers. Indicators that
control has been transferred include, the establishment of the Company's present right to receive
payment for the goods sold, transfer of legal title to the customer, transfer of physical possession to
the customer, transfer of significant risks and rewards of ownership in the goods to the customer,
and the acceptance of the products by the customer. Revenue towards satisfaction of a performance
obligation is measured at the amount of transaction price (net of variable consideration) allocated
to that performance obligation. The transaction price of goods sold and services rendered is net of
variable consideration on account of various discounts and schemes offered by the Company as part
of the contract.
Variable consideration (which includes discounts, sales return and deferred revenue) is estimated at
contract inception and constrained until it is highly probable that a significant revenue reversal in the
amount of cumulative revenue recognised will not occur when the associated uncertainty with the
variable consideration is subsequently resolved. It is reassessed at end of each reporting period.
For contracts that permit the customer to return an item, revenue is recognised to the extent that
it is highly probable that a significant reversal in the amount of cumulative revenue recognised will
not occur. Therefore the amount of revenue recognised is adjusted for expected returns which are
estimated based on historical data.
b) Customer loyalty programme
The Company has a loyalty points programme, reward Points, which allows customers to accumulate
points that can be redeemed for free products. The loyalty points give rise to a separate performance
obligation as they provide a material right to the customer.
A portion of the transaction price is allocated to the loyalty points awarded to customers based on
relative standalone selling price and recognised as a contract liability until the points are redeemed.
Revenue is recognised upon redemption of products by the customer.
When estimating the standalone selling price of the loyalty points, the Company considers the
likelihood that the customer will redeem the points. The Company updates its estimates of the points
that will be redeemed on an annual basis and any adjustments to the contract liability balance are
charged against revenue.
c) Export Incentives
Export benefits available under prevalent schemes are accrued in the year in which the goods are
exported and there is no uncertainty in receiving the same.
d) Dividend and interest income
Dividend income from investments is recognised when the shareholder's right to receive payment has
been established (provided that it is probable that the economic benefits will flow to the Company
and the amount of income can be measured reliably).
Interest income from a financial asset is recognised when it is probable that the economic benefits will
flow to the Company and the amount of income can be measured reliably. Interest income is accrued
on a time basis, by reference to the principal outstanding and at the effective interest rate applicable,
which is the rate that exactly discounts estimated future cash receipts through the expected life of the
financial asset to that asset's net carrying amount on initial recognition.
iv) Leases
At inception of a contract, the Company assesses whether a contract is, or contains, a lease. 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.
The Company recognises a right-of-use asset and a lease liability at the lease commencement date 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 lease payments associated with these leases are recognised as an expense in the
statement of profit and loss on a straight-line basis over the lease term.
Lease term is a non-cancellable period together with periods covered by an option to extend the lease if the
Company is reasonably certain to exercise that option; and periods covered by an option to terminate the
lease if the Company is reasonably certain not to exercise that option.
The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability
adjusted for any lease payments made at or before the commencement date, plus any initial direct
costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the
underlying asset or the site on which it is located, less any lease incentives received. The right-of-use asset is
subsequently depreciated using the straight-line method from the commencement date to the end of the
lease term, unless the lease transfers ownership of the underlying asset to the Company by the end of the
lease term or the cost of the right-of-use asset reflects that the Company will exercise a purchase option. In
that case the right-of-use asset will be depreciated over the useful life of the underlying asset. The right-of-
use asset should be depreciated over shorter of asset's useful life or lease term. In addition, the right-of-use
asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the
lease liability.
The lease liability is initially measured at the present value of the lease payments to be paid over the lease
term at the commencement date, discounted using the interest rate implicit in the lease or, if that rate
cannot be readily determined, the Company's incremental borrowing rate. Generally, the Company uses its
incremental borrowing rate as the discount rate. Subsequently, the lease liability is measured at amortised
cost using the effective interest method.
v) Foreign currencies
The Company's standalone financial statements are presented in INR, which is functional currency of the
Company. The Company determines the functional currency and items included in the standalone financial
statements are measured using that functional currency. However, for practical reasons, the Company uses
an average rate if the average approximates the actual rate at the date of transaction.
Transactions and balances
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency
spot rates of exchange at the reporting date.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using
the exchange rates at the dates of the initial transactions.
vi) Employee Benefits
Retirement benefit costs and termination benefits
Payments to defined contribution retirement benefit plans are recognised as an expense when employees
have rendered service entitling them to the contributions.
For defined benefit retirement plans, the cost of providing benefits is determined using the projected
unit credit method, with actuarial valuations being carried out at the end of each annual reporting period.
Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if
applicable) and the return on plan assets (excluding net interest), is reflected immediately in the balance
sheet with a charge or credit recognised in other comprehensive income in the period in which they occur.
Remeasurement recognised in other comprehensive income is reflected immediately in retained earnings
and is not reclassified to statement of profit and loss. Past service cost is recognised in statement of profit
and loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the
beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorised
as follows:
Ý service cost (including current service cost, past service cost, as well as gains and losses on curtailments
and settlements);
Ý past service cost
Ý net interest expense or income; and
Ý remeasurement
The Company presents the first two components of defined benefit costs in statement of profit and loss in the
line item 'Employee benefits expense'. Curtailment gains and losses are accounted for as past service costs.
The retirement benefit obligation recognised in the balance sheet represents the actual deficit or surplus
in the Company's defined benefit plans. Any surplus resulting from this calculation is limited to the present
value of any economic benefits available in the form of refunds from the plans or reductions in future
contributions to the plans.
A liability for a termination benefit is recognised at the earlier of when the Company can no longer withdraw
the offer of the termination benefit and when the Company recognises any related restructuring costs.
Short-term and other long-term employee benefits
A liability is recognised for benefits accruing to employees in respect of wages and salaries in the period the
related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange
for that service.
Liabilities recognised in respect of short-term employee benefits are measured at the undiscounted amount
of the benefits expected to be paid in exchange for the related service.
Liabilities recognised in respect of long-term employee benefits are measured at the present value of the
estimated future cash outflows expected to be made by the Company in respect of services provided by
employees up to the reporting date.
vii) Taxation
Income tax expense represents the sum of the current tax payable and deferred tax.
Current tax
The current tax payable is based on taxable profit for the year. Taxable profit differs from 'profit before tax'
as reported in the statement of profit and loss because of items of income or expense that are taxable
or deductible in other years and items that are never taxable or deductible. The Company's current tax is
calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities
in the standalone financial statements and the corresponding tax bases used in the computation of taxable
profit. Deferred tax is also recognised in respect of carried forward tax losses and tax credits. Deferred tax
liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally
recognised for all deductible temporary differences to the extent that it is probable that taxable profits will
be available against which those deductible temporary differences can be utilised. Such deferred tax assets
and liabilities are not recognised if the temporary difference arises from the initial recognition of assets and
liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to
the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of
the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in
which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from
the manner in which the Company expects, at the end of the reporting period, to recover or settle the
carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation
authority and the relevant entity intends to settle its current tax assets and liabilities on a net basis.
Current and deferred tax for the year
Current and deferred tax are recognised in statement of profit and loss, except when they relate to items that
are recognised in other comprehensive income or directly in equity, in which case, the current and deferred
tax are also recognised in other comprehensive income or directly in equity respectively.
viii) Property, plant and equipment
An item of Property, Plant and Equipment is recognised as an asset if and only if 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. Costs comprise of all costs incurred to bring the assets to their location and working
condition up to the date the assets are put to their intended use. Property, plant and equipment are stated
at cost less accumulated depreciation and accumulated impairment losses.
Land and buildings held for use in the production or supply of goods or services, or for administrative
purposes, are stated in the balance sheet at cost less accumulated depreciation and accumulated
impairment losses.
The cost of property, plant and equipment as at 01 April, 2016, the Company's date of transition to Ind AS,
was determined with reference to its carrying value recognised as per the previous GAAP (deemed cost), as
at the date of transition to Ind AS.
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated
with the expenditure will flow to the Company and cost of item can be measured reliably.
Depreciation
Freehold land is not depreciated.
Depreciation is recognised so as to write off the cost of assets (other than freehold land, CWIP and intangible
assets under development) less their residual values over their useful lives, using the straight-line method.
The estimated useful lives, residual values and depreciation method are reviewed at the end of each
reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
An item of property, plant and equipment is derecognised upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or
retirement of an item of property, plant and equipment is determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognised in the statement of profit and loss.
Estimated useful lives of the Property, plant and equipment are as per Companies Act, 2013.
Capital work in progress is stated at cost less accumulated impairment loss, if any.
ix) Investment Property
Investment property is measured initially at cost, including transaction costs. Subsequent to initial recognition,
investment property is stated at cost less accumulated depreciation and accumulated impairment loss, if
any. Subsequent expenditure is capitalised to the asset's carrying amount only when it is probable that
future economic benefits associated with the expenditure will flow to the Company and the cost of the item
can be measured reliably. All other repairs and maintenance costs are expensed when incurred.
The fair value of investment property is determined by an accredited registered independent property
valuer which is based either on the market approach (by reference to sales of comparable properties). The
cost approach is not appropriate for the fair value model under Ind AS 40. The fair value measurement for all
of the investment property has been categorised as a Level 2 fair value based on the inputs to the valuation
technique used.
An investment property is derecognised upon disposal or when the investment property is permanently
withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss
arising on derecognition of the property (calculated as the difference between the net disposal proceeds
and the carrying amount of the asset) is included in the statement of profit and loss in the period in which
the property is derecognised.
Transfers are made to or from investment property only when there is a change in use. .
x) Intangible assets
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated
amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over
their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of
each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.
Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated
impairment losses.
Internally-generated intangible assets - research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
An internally-generated intangible asset arising from development (or from the development phase of an
internal project) is recognised if, and only if, all of the following have been demonstrated:
Ý the technical feasibility of completing the intangible asset so that it will be available for use or sale;
Ý the intention to complete the intangible asset and use or sell it;
Ý the ability to use or sell the intangible asset;
Ý how the intangible asset will generate probable future economic benefits;
Ý the availability of adequate technical, financial and other resources to complete the development and
to use or sell the intangible asset; and
Ý the ability to measure reliably the expenditure attributable to the intangible asset during
its development.
The amount initially recognised for internally-generated intangible assets is the sum of the expenditure
incurred from the date when the intangible asset first meets the recognition criteria listed above. Where
no internally-generated intangible asset can be recognised, development expenditure is recognised in
statement of profit and loss in the period in which it is incurred.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less
accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that
are acquired separately.
Derecognition of intangible assets
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from
use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference
between the net disposal proceeds and the carrying amount of the asset, are recognised in the statement
of profit and loss when the asset is derecognised.
Useful lives of intangible assets
Estimated useful lives of the intangible assets are as follows:
xi) Impairment of non-financial assets
At the end of each reporting period, the Company reviews the carrying amounts of its Property, plant and
equipment, investment property and intangible assets to determine whether there is any indication that
those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the
asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does
not generate cash flows that are independent from other assets, the Company estimates the recoverable
amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis
of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or
otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and
consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for
impairment at least annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in
use, the estimated future cash flows are discounted to their present value using a post-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset for which
the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An
impairment loss is recognised immediately in the statement of profit and loss.
When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating
unit) 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
recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised
immediately in the statement of profit and loss to the extent that it eliminates the impairment loss which
has been recognised for the asset in prior years.
xii) Inventories
Traded goods are valued at lower of cost or net realizable value. The costs of these items of inventory
comprises of cost of purchase and other incidental costs incurred to bring the inventories to their present
location and condition. Cost of traded goods are determined on "Weighted Average" basis. Net realisable
value represents the estimated selling price in the ordinary course of business less all estimated costs of
completion and estimated costs necessary to make the sale.
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