2. Significant accounting policies
a. Property, plant and equipment
i. Recognition and measurement
Items of property, plant and equipment are measured at cost, which includes capitalised borrowing
costs, less accumulated depreciation and accumulated impairment losses, if any.
Cost of an item of property, plant and equipment comprises its purchase price, including import
duties and non-refundable purchase taxes, after deducting trade discounts and rebates, any
directly attributable cost of bringing the item to its working condition for its intended use and
estimated costs of dismantling and removing the item and restoring the site on which it is located.
The cost of a self-constructed item of property, plant and equipment comprises the cost of
materials and direct labor, any other costs directly attributable to bringing the item to working
condition for its intended use, and estimated costs of dismantling and removing the item and
restoring the site on which it is located.
If significant parts of an item of property, plant and equipment have different useful lives, then
they are accounted for as separate items (major components) of property, plant and equipment.
Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss.
ii. Subsequent expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits
associated with the expenditure will flow to the Company.
iii. Depreciation
Depreciation is calculated on cost of items of property, plant and equipment less their estimated
residual values over their estimated useful lives using the straight-line method and is recognised
in the statement of profit and loss.
Depreciation method, useful lives and residual values are reviewed at each financial year-end and
adjusted if appropriate. Based on internal assessment and consequent advice, the management
believes that its estimates of useful lives as given above best represent the period over which
management expects to use these assets.
Depreciation on additions (disposals) is provided on a pro-rata basis i.e. from (up to) the date on
which asset is ready for use (disposed off),
iv. Investment Property
Investment Property are properties held to earn rentals and for capital appreciation. Investment
Properties are measured initially at cost including transaction costs. Subsequent to initial
recognition, investment properties are measured in accordance with Ind AS-16's requirements
for cost model. An investment property is de-recognised upon disposal or when the investment
property is permanently withdrawn from use and no future economic benefits are expected
from the disposals. Any gain or loss arising on de-recognition of the property (calculated as the
difference between the disposal proceeds and the carrying amount of the assets) is included in
the statement of the profit or loss in the period in which property is de-recognised.
b. Intangible assets
i. Acquired intangible
Intangible assets comprise purchased technical know-how are initially measured at cost. Such
intangible assets are subsequently measured at cost less accumulated amortisation and any
accumulated impairment losses.
ii. Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits
embodied in the specific asset to which it relates. All other expenditure, including expenditure on
internally generated goodwill and brands, is recognised in profit or loss as incurred.
iii. Amortisation
Amortisation is calculated to write off the cost of intangible assets less their estimated residual
values overtheir estimated useful lives using the straight-line method and is included in depreciation
and amortisation in Statement of Profit and Loss.
Intangible assets are amortised over a period of 10 years for technical know-how and 3 years for others.
Amortisation method, useful lives and residual values are reviewed at the end of each financial
year and adjusted if appropriate.
c. Inventories
Inventories are valued at the lower of cost and net realisable value. Cost includes purchase price,
duties, transport & handling costs and other costs directly attributable to the acquisition and
bringing the inventories to their present location and condition.
The basis of determination of cost remains as follows:
a) Raw material, packing material: Moving weighted average cost.
b) Spares & stores: Moving weighted average cost.
c) Work-in-progress: Cost of input plus overhead up to the stage of completion.
d) Finished Goods: Cost of input plus appropriate overhead.
e) Scrap: at net realisable value.
d. Impairment
Impairment of non-financial assets
a) An asset is deemed impairable when recoverable value is less than its carrying cost and the
difference between the two represents provisioning exigency.
b) Recoverable value is the higher of the 'Value in Use' and fair value as reduced by cost of disposal.
c) Test of impairment of PPE, investment in subsidiaries / associates / joint venture and goodwill
are undertaken under Cash Generating Unit (CGU) concept. For Intangible Assets and Investment
Properties it is undertaken in asset specific context.
d) Test of impairment of assets are generally undertaken based on indication of impairment, if any,
from external and internal sources of information outlined in para 12 of Ind AS-36.
Non-financial assets other than goodwill that suffered an impairment are reviewed for possible
reversal of the impairment at the end of each reporting period.
e. Employee benefits
i. Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed
as the related service is provided. A liability is recognised for the amount expected to be paid e.g.,
under short-term cash bonus, if the Company has a present legal or constructive obligation to pay
this amount as a result of past service provided by the employee, and the amount of obligation
can be estimated reliably.
ii. Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed
contributions into a separate entity and will have no legal or constructive obligation to pay further
amounts. The Company makes specified monthly contributions towards Government administered
provident fund and Employee State Insurance scheme. Obligations for contributions to defined
contribution plans are recognised as an employee benefit expense in profit or loss in the periods
during which the related services are rendered by employees.
Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in
future payments is available.
iii. Defined benefit plans
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan.
The Company's net obligation in respect of defined benefit plans is calculated by estimating the
amount of future benefit that employees have earned in the current and prior periods, discounting
that amount and deducting the fair value of any plan assets.
The calculation of defined benefit obligation is performed annually by a qualified actuary using the
projected unit credit method.
Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses,
are recognised in OCI. The Company determines the net interest expense (income) on the net
defined benefit liability (asset) for the period by applying the discount rate used to measure the
defined benefit obligation at the beginning of the annual period to the then-net defined benefit
liability (asset), taking into account any changes in the net defined benefit liability (asset) during
the period as a result of contributions and benefit payments. Net interest expense and other
expenses related to defined benefit plans are recognised in profit or loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in
benefit that relates to past service ('past service cost' or 'past service gain') or the gain or loss on
curtailment is recognised immediately in profit or loss. The Company recognises gains and losses
on the settlement of a defined benefit plan when the settlement occurs.
iv. Other long-term employee benefits
The Company's net obligation in respect of long-term employee benefits other than post¬
employment benefits is the amount of future benefit that employees have earned in return for
their service in the current and prior periods; that benefit is discounted to determine its present
value. The obligation is measured on the basis of an annual independent actuarial valuation using
the projected unit credit method. Remeasurements gains or losses are recognised in profit or loss
in the period in which they arise.
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