2 MATERIAL ACCOUNTING POLICIES
This note provides a list of the material accounting policies adopted in the preparation of these Indian Accounting
Standards (Ind-AS) standalone financial statements.These policies have been consistently applied to all the years except
where newly issued accounting standard is initially adopted.
2.1 Property, plant and equipment
(i) Recognition and measurement
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical cost
less accumulated depreciation and accumulated impairment losses, if any.
(ii) Depreciation methods, Estimated Useful Lives and Residual Value
Depreciation is calculated on cost of items of property, plant and equipment less their estimated residual values over
their estimated useful lives using the written-down value method, and is generally recognised in the statement of
profit and loss. Freehold land is not depreciated.
The estimated useful lives of items of Property, plant and equipment for the current and comparative periods are as
follows:
Leasehold improvements (included under the block of assets as specified above) are depreciated over the shorter of
their useful life or lease term, unless the entity expects to use the assets beyond lease term.
Depreciation method, useful lives and residual values are reviewed at each financial year-end and adjusted if
appropriate. Based on technical evaluation 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.
The residual values are considered by the Management as per the limits specified in Part A of Schedule II of the
Companies Act, 2013.
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 of).
2.2 Intangible Assets
(i) Recognition and measurement
Computer Software
Intangible assets acquired are reported at cost less accumulated amortisation and accumulated impairment losses,
if any.
Computer Software for internal use, which is primarily acquired from third-party vendors is capitalised. Cost
associated with maintaining software programmes are recognised as an expense as incurred. Cost of computer
software includes license fees and cost of implementation/system integration services, where applicable.
(ii) Amortisation methods and periods
Amortisation is charged on a written down basis over their estimated useful lives. The estimated useful life and
amortisation method are reviewed at the end of each annual reporting period, with the effect of any changes in
estimate being accounted for on a prospective basis.
Computer softwares are amortised over the useful life of 5 years.
2.3 Revenue Recognition
Revenue from sale of products is recognised at the point in time when control of the goods is transferred to the
customer,being when the products are delivered to the customer, the customer has the full discretion over the channel and
price to sell the products and there is no unfulfilled obligation that could affect the customer's acceptance of the products.
Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have
been transferred to the customer and rather the customer accepted the products on accordance with the sales contract,
the acceptance provision have lapsed or the Company has objective evidence that all criteria for acceptance have been
satisfied.
The Company recognises revenue from the sale of products measured at the transaction price allocated to the
performance onligation which is the price specified in the contract, net of returns and allowances, trade discounts, volume
rebates and excluding taxes or duties collected.Such provisions give rise to variable consideration and are estimated at
contract inception and updated thereafter. Revenue from value added services, namely freight and shipping insurance, is
recognised as and when services are rendered, as per the terms agreed with the customers.
a. A refund liability is recognised for expected volume discounts payable for sales made till the end of the reporting
period.
b. If a customer pays consideration before the Company transfers goods or services to the customer, an advance from
customers (contract liability) is recognised when the payment is made or the payment is due (whichever is earlier).
Contract liabilities are recognised as revenue when the Company performs under the contract.
c. The Company does not have any contracts where the period between the transfer of the promised goods or services
to the customer and payment by the customer exceeds one year. As a consequence, the company does not adjust
any of the transaction prices for the time value of money since the Company does not have any significant financing
element included in the sales made.
2.4 Financial assets
(i) Classification
The Company classifies its Financial assets in the following measurement categories:
• those to be measured subsequently at fair value (either through other comprehensive income, or through profit
or loss), and
• those to be measured at amortised cost.
The classification depends on the entity's business model for managing the Financial assets and the contractual
terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive
income. For investments in equity instruments that are not held for trading, this will depend on whether the Company
has made an irrevocable election at the time of initial recognition to account for the equity investment at FVOCI.
The Company reclassifies debt investments when and only its business model for managing those assets changes.
(ii) Recognition
Regular way purchases and sales of Financial assets are recognised on trade-date, being the date on which the
Company commits to purchase or sale the financial asset.
(iii) Measurement
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not
at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial
asset. Transaction costs of Financial assets carried at fair value through profit or loss are expensed in profit or loss.
Debt instruments
Subsequent measurement of debt instruments depends on the Company’s business model for managing the asset
and the cash flow characteristics of the asset. There are three measurement categories into which the Company
classifies its debt instruments:
• Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent
solely payments of principal and interest are measured at amortised cost. A gain or loss on a debt investment
that is subsequently measured at amortised cost is recognised in profit or loss when the asset is derecognised
or impaired. Interest income from these Financial assets is included in finance income using the effective
interest rate method.
• Fair value through other comprehensive income (FVOCI): 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 (FVOCI). Movements in
the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest
and losses which are recognised in profit and loss. When the financial asset is derecognised, the cumulative
gain or loss previously recognised in OCI is reclassified from equity to profit or loss. Interest income from these
Financial assets is included in Other income using the effective interest rate method.
• Fair value through profit or loss: Assets that do not meet the criteria for amortised cost or FVOCI 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 recognised in profit or loss and presented net 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
The Company subsequently measures all equity investments at fair value. Where the Company’s management
has elected to present fair value gains and losses on equity investments in other comprehensive income, there
is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the
investment. Dividends from such investments are recognised in profit or loss as Other income when the Company’s
right to receive payments is established.
Changes in the fair value of Financial assets at fair value through profit or loss are recognised in Other income in the
statement of profit and loss. Impairment losses (and reversal of impairment losses) on equity investments measured
at FVOCI are not reported separately from other changes in fair value.
(iv) Derecognition
A financial asset is derecognised only when
• The Company has transferred the rights to receive cash flows from the financial asset or
• retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual
obligation to pay the cash flows to one or more recipients.
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 derecognised. Where the entity
has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not
derecognised.
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 derecognised 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 recognised to the extent
of continuing involvement in the financial asset.
(v) Impairment of Financial assets
The Company recognises loss allowances for expected credit losses on:
- Financial assets measured at amortised cost; and
- Financial assets measured at FVOCI- debt investments.
At each reporting date, the Company assesses whether Financial assets carried at amortised cost and debt securities
at FVOCI are credit- impaired. A financial asset is 'credit- impaired’ when one or more events that have a detrimental
impact on the estimated future cash flows of the financial asset have occurred.
The Company recognises loss allowances using the expected credit loss (ECL) model for the Financial assets which
are measured at amortised cost. The Company does not have any Financial assets which are carried at fair value
through profit or loss or at FVOCI. Loss allowance for Trade receivables with no significant financing component is
measured at an amount equal to lifetime ECL. For all Other financial assets (i.e. cash and bank balances and Other
financial assets) , expected credit losses are measured at an amount equal to the 12 month ECL, unless there has
been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL.
The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date
to the amount that is required to be recognised, is recognised as an impairment gain or loss in the statement of profit
and loss.
2.5 Inventories
The cost of indivisual items of inventory is determined using the First-in-First out (FIFO) method. Volume rebates or
discounts are taken into account when estimating the cost of inventory if it is probable that they have been earned and will
take effect.
2.6 Leases
Company as a lessee
The Company’s lease asset classes primarily comprise of lease for land and building. The Company applies a single
recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The
Company recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the
underlying assets.
(i) Right-of-use assets (ROU)
The Company classifies ROU assets separate from the Property plant and equipment in Balance Sheet and lease
liability in "Financial Liability".
(ii) Lease Liabilities
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease
commencement date because the interest rate implicit in the lease is not readily determinable.
(iii) Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its shortterm leases (i.e., those leases that
have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It
also applies the lease of low-value assets recognition exemption to leases that are considered to be low value.
Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line
basis over the lease term.
2.7 Borrowings and Other financial liabilities
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at
amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised
in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of
loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility
will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it
is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services
and amortised over the period of the facility to which it relates.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or
expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to
another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised
in profit or loss.
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the
liability for at least 12 months after the reporting period.Where there is a breach of material provision of a long-term loan
arrangement on or before the end of the reporting period with the effect that the liability becomes payble on demand on
the reporting date, the enity does not classify the liability as current, if the lender agreed, after the reporting period and
before the approval of the financial statemets for issue, not to demand payment as a consequence of the breach.
2.8 Financial guarantee contracts:
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse
the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms
of a debt instrument.
Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are
directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount
of loss allowance determined as per impairment requirements of Ind AS 109 - 'Financial Instruments’ and the amount
recognised less cumulative amortization over the period of guarantee.
2.8 Other Accounting Policies
This note provides a list of the material accounting policies adopted in the preparation of these Indian Accounting
Standards (Ind-AS) standalone financial statements.These policies have been consistently applied to all the years except
where newly issued accounting standard is initially adopted.
(a) Property, plant and equipment
(i) Recognition and measurement
Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised 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 derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the
reporting period in which they are incurred.
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.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount.These are included
in profit or loss within Other Income.
(ii) Transition to Ind AS
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its Property, plant
and equipment recognised as at 1st April, 2019 measured as per the previous GAAP and use that carrying value
as the deemed cost of the Property, plant and equipment.
(b) Capital Work in Progress
(i) Recognition and measurement
Expenditure incurred on construction of assets which are not ready for their intended use are carried at cost less
impairment (if any), under Capital work-in-progress. The cost includes the purchase cost of materials, including
import duties and non-refundable taxes, interest on borrowings used to finance the construction of the asset
and any directly attributable costs of bringing an asset ready for their intended use.
(c) Intangible Assets and Intangible Assets under development
(i) Recognition and measurement
Development costs that are directly attributable to the design and testing of identifiable and unique software
products controlled by the Company are recognised as intangible assets where the following criteria are met:
• it is technically feasible to complete the software so that it will be available for use
• management intends to complete the software and use or sell it
• there is an ability to use or sell the software
• it can be demonstrated how the software will generate probable future economic benefits
• adequate technical, financial and other resources to complete the development and to use or sell the
software are available, and
• the expenditure attributable to the software during its development can be reliably measured.
Capitalised development costs are recorded as intangible assets and amortised from the point at which the
asset is available for use.
Expenditure incurred on development of an intangible assets which are not ready for their intended use are
carried at cost less impairment (if any), under Intangible Assets under development.
(ii) Transition to Ind AS
On transition to Ind AS, the Company has elected to continue with the carrying value of all intangible assets
measured at per the previous GAAP and use that carrying value as the deemed cost of intangible assets.
(d) Impairment of other assets
Non-financial assets are tested for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s
carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less
costs of disposal and value in use. For the purposes of assessing impairment, assets are Companyed at the lowest
levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from
Other assets or Company’s of assets (cash-generating units). 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) Borrowing Costs
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of
a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its
intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for
their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for capitalisation.
Other borrowing costs are expensed in the period in which they are incurred.
(f) Leases
As a lessee
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the
net present value of the following lease payments:
• fixed payments (including in-substance fixed payments), less any lease incentives receivable
• variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the
commencement date
• amounts expected to be payable by the Company under residual value guarantees
• the exercise price of a purchase option if the Company is reasonably certain to exercise that option, and
• payments of penalties for terminating the lease, if the lease term reflects the Company exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of
the liability. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be
readily determined, which is generally the case for leases in the Company, the lessee’s incremental borrowing rate is
used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of
similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Company:
• where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted
to reflect changes in financing conditions since third party financing was received
• uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by
Tarsons Products Limited, which does not have recent third party financing
• makes adjustments specific to the lease, e.g. term, country, currency and security.
If a readily observable amortising loan rate is available to the individual lessee (through recent financing or market
data) which has a similar payment profile to the lease, then the Company entities use that rate as a starting point to
determine the incremental borrowing rate.
Lease payments are allocated between principal and Finance cost. The Finance cost is charged to profit or loss over
the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each
period.
Right-of-use assets are measured at cost comprising the following:
• the amount of the initial measurement of lease liability
• any lease payments made at or before the commencement date less any lease incentives received
• any initial direct costs
• restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a
straight-line basis. If the Company is reasonably certain to exercise a purchase option, the right-of-use asset is
depreciated over the underlying asset’s useful life.
Payments associated with short-term leases of equipment and all leases of low-value assets are recognised on a
straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or
less. Low-value assets comprise IT equipment and small items of office furniture.
(g) Employee Benefits
(i) Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within
12 months after the end of the period in which the employees render the related service are recognised in
respect of employees’ services up to the end of the reporting period and are measured at the amounts expected
to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in
the balance sheet.
(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 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
The Company provides for gratuity, a defined benefit retirement plan ("the Gratuity Plan") covering eligible
employees. The Gratuity Plan provides a lump-sum payment to vested employees at retirement, death,
incapacitation or termination of employment, of an amount based on the respective employee’s salary and the
tenure of employment with the Company.
The liability or asset recognised in the balance sheet in respect of gratuity plan is the present value of the
defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit
obligation is calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation denominated in INR is determined by discounting the
estimated future cash outflows by reference to market yields at the end of the reporting period on government
bonds that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit
obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement
of profit and loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions
are recognised in the period in which they occur, directly in other comprehensive income. They are included in
retained earnings in the statement of changes in equity and in the balance sheet.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments
are recognised immediately in statement of profit and loss as past service cost.
(iv) Compensated absences
Accumulated leave, which is expected to be utilized within the next 12 months, is treated as short-term employee
Benefit. The Company measures the expected cost of such absence as the additonal amount that it expects to
pay as a result of the unused entitlement that has accumulated at the reporting date.
(h) Income Tax
The Income tax expense or credit for the period is the tax payable on the current period’s taxable income based on
the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary
differences and to unused tax losses, if any.
(i) Current Tax
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at
the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect
to situations in which applicable tax regulation is subject to interpretation and considers whether it is probable
that a taxation authority will accept an uncertain tax treatment. The Company measures its tax balances either
based on the most likely amount or the expected value, depending on which method provides a better prediction
of the resolution of the uncertainty.
(ii) Deferred Tax
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax
liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not
accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting profit nor taxable profit (tax loss).
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted
by the end of the reporting period and are expected to apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for all deductible temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets
and liabilities and where the deferred tax balances relate to the same taxation authority. Current tax assets and
tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a
net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in
other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive
income or directly in equity, respectively.
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