2. Summary of material accounting policies
2.1 Basis of preparation
These financial statements are prepared in accordance with Indian Accounting Standards (Ind AS)
under the historical cost convention on the accmal basis, the provisions of the Companies Act ,
2013 ('Act') (to the extent notified) and guidelines issued by the Securities and Exchange Board of
India (SEBI). The Ind AS are prescribed under Section 133 of the Act read with Rule 3 of the
Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting
Standards) Amendment Rules, 2016.
Effective from 01st April, 2017, the Company has adopted all the Ind AS standards and the
adoption was carried out in accordance with Ind AS 101 First time adoption of Indian Accounting
Standards. The transition was earned out from Indian Accounting Principles generally accepted in
India as prescribed under Section 133 of the Companies Act, 2013 read with Rule 7 of the
Companies (Accounts) Rules, 2014 (IGAAP), which was the previous GAAP.
All assets and liabilities have been classified as current or non-current as per the Company’s
normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013.
Based on the nature of products and the time between the acquisition of assets for processing and
their realization in cash and cash equivalents, the Company has ascertained its operating cycle as
12 months for the purpose of current - non-current classification of assets and liabilities.
2.2 Property', Plant & Equipments and Intangible Assets
Property, Plant & Equipments are stated at acquisition cost, net of accumulated depreciation and
accumulated impairment losses, if any. Subsequent expenditures related to an item of fixed asset
are added to its book value only if they increase the future benefits from the existing asset beyond
its previously assessed standard of performance.
Items of fixed assets that have been retired from active use and are held for disposal are stated at
the lower of then net book value and net realizable value and are shown separately in the financial
statements. Any expected loss is recognized immediately in the Statement of Profit and Loss.
Losses arising from the retirement of, and gains or losses arising from disposal of fixed assets
which are carried at cost are recognized in the Statement of Profit and Loss.
Depreciation is provided on the Straight Line Method over the useful life of the assets as
prescribed under Schedule II Part C of the Companies Act, 2013. Depreciation on assets sold
during the year is provided upto the date of sale of fixed assets.
Intangible Assets
Cost of development in case of self generated asset is recognized on the basis of actual cost
incurred and directly attributable expenses incurred thereon.
2.5 Borrowing Costs
General and specific borrowing costs directly attributable to the acquisition, construction or
production of qualifying assets, which are assets that necessarily take a substantial period of time
to get ready for their intended use or sale, are added to the cost of those assets, until such time as
the assets are substantially ready for their intended use or sale. All other borrowing costs are
recognized in Statement of Profit and Loss in the period in which they are incurred.
2.4 Impairment
Assessment is done at each Balance Sheet date as to whether there is any indication that an asset
may be impaired. For the purpose of assessing impairment, the smallest identifiable group of assets
that generates cash inflows from continuing use that are largely independent of the cash inflows
from other assets or groups of assets, is considered as a cash generating unit. If any such indication
exists, an estimate of the recoverable amount of the asset/cash generating unit is made. Assets
whose carrying value exceeds then recoverable amount are written down to the recoverable
amount. Recoverable amount is higher of an asset’s or cash generating unit’s net selling price and
its value in use. Value in use is the present value of estimated future cash flows expected to arise
from the continuing use of an asset and from its disposal at the end of its use fill life. Assessment is
also done at each Balance Sheet date as to 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.
2.5 Revenue Recognition
As per the requirements of the Companies (Amendment) Act, 1988, all expenses and income are
generally accounted for on accrual basis.
2.6 Current and deferred tax
Tax expense for the period, comprising current tax and deferred tax, are included in the
determination of the net profit or loss for the period. Current tax is measured at the amount
expected to be paid to the tax authorities in accordance with the taxation laws prevailing. Deferred
tax is recognized for all timing differences, subject to the consideration of prudence in respect of
deferred tax assets.
Deferred tax assets in respect of timing differences on account of unabsorbed business loss and
unabsorbed depreciation as per Income tax laws, are recognized and carried forward only to the
extent that there is a virtual certainty supported by convincing evidence that sufficient future
taxable income will be available against which such deferred tax assets can be realized.
Deferred tax assets in respect of timing differences, other than unabsorbed business loss and
unabsorbed depreciation as per Income tax laws, are recognized and carried forward only to the
extent that there is a reasonable certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized.
Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been
enacted or substantively enacted by the Balance Sheet date. At each Balance Sheet date, the
Company reassesses unrecognized deferred tax assets, if any.
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to
set off the recognized amoimts and there is an intention to settle the asset and the liability on a net
basis. Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable
right to set off assets against liabilities.
Minimum Alternative Tax 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.
Such asset is reviewed at each Balance Sheet date and the carrying amount of the MAT credit asset
is written down to the extent there is no longer a convincing evidence to the effect that the
Company will pay normal income tax during the specified period.
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