Note 1 : Significant accounting policies
This note provides a list of the significant accounting policies adopted in the preparation of these financial statements. These
policies have been consistently applied to all the years presented, unless otherwise stated.
1 Basis of preparation and presentation
(i) Statement of compliance with Ind AS
The company’s financial statements have been prepared in accordance with the provisions of the Companies Act, 2013 and
the Indian Accounting Standards (“Ind AS”) notified under the Companies (Indian Accounting Standards) Rules, 2015
issued by Ministry of Corporate Affairs in respect of sections 133. In addition, the guidance notes/announcements issued by
the Institute of Chartered Accountants of India (ICAI) are also applied except where compliance with other statutory
promulgations require a different treatment. The financials for the year ended March 31, 2018 of the company were the first
financial statements prepared in compliance with Ind AS. The date of transition to Ind AS is April 1, 2016.
(ii) Basis of accounting
The Company maintains accounts on accrual basis following the historical cost convention, except for
- certain financial instruments that are measured at fair value in accordance with Ind AS.
(iii) Use of Estimates
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the
actual results. Management also needs to exercise judgement in applying the accounting policies.
This note provides an overview of the areas that involved a high degree of judgement or complexity, and of items
which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than
those originally assessed.
(iv) Critical estimates and judgements
The areas involving critical estimates or judgements are:
- Estimation of current tax expense and payable
- Recognition of revenue
Ind AS 101 treats the information received after the date of transition to Ind AS as non-adjusting events. The entity shall not
reflect that new information in its opening Ind AS Balance Sheet (unless the estimates need adjustment for any differences in
accounting policies or there is objective evidence that the estimates were in error).
2 Summary of significant Accounting Policies
a Property, plant and equipment and intangible assets
AE items of property, plant and equipment and intangible assets are stated at cost (i.e. cost of acquisition or
construction) less accumulated depreciation/accumulated impairment. Such cost includes purchase price, including
import duties and other non-refundable taxes or levies and any directly attributable cost of bringing the asset to its
working condition for its intended use.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in
profit or loss within other gains/(losses).
Transition to Ind AS
Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and
equipment and intangible assets as recognised in the financial statements as at the date of transition to Ind AS,
measured as per the previous GAAP and use that as its deemed cost as at the date of transition after making necessary
adjustments for de-commissioning liabilities.
Hence, on transition to Ind AS, the company has elected to continue with the carrying value of all of its property, plant
and equipment and intangible assets recognised as at 1 April 2016 measured as per the previous GAAP and use that
carrying value as the deemed cost of the property, plant and equipment and intangible assets.
Depreciation and Amortisation:
Depreciation on Property, Plant and Equipment and Intangible Assets is provided using the Straight Line Method based
on the estimated useful lives of the assets and is charged to the Statement of Profit and Loss as per the requirement of
Schedule II of the Companies Act, 2013.
Impairment
At Balance Sheet date, an assessment is done to determine whether there is any indication of impairment in the
carrying amount of the Company’s assets. If any such indication exists, the asset’s recoverable amount is estimated. An
impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount.
An assessment is also done at each Balance Sheet date whether there is any indication that an impairment loss
recognised for an asset in prior accounting periods may no longer exist or may have decreased, if any such indication
exists the asset’s recoverable amount is estimated. The carrying amount of the fixed asset is increased to the revised
estimate of its recoverable amount but 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 in prior years. A reversal of
impairment loss is recognised in the Statement of Profit and Loss for the year.
After recognition of impairment loss or reversal of impairment loss as applicable, the depreciation charge for the fixed
asset is adjusted in future periods to allocate the asset’s revised carrying amount, less its residual value (if any), on
Straight Line basis over its remaining useful life.
b Revenue Recognition
Revenue from sale of goods is recognised on transfer of all significant risks and rewards of ownership to the buyer. The
amount recognised as sale is exclusive of sales tax/GST/VAT and is net of returns.
Income is accounted for on accrual basis,
c Inventory
Inventories are carried at the lower of cost and net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of
completion and the estimated costs necessary to make the sale.
d Investments and other 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 measured at amortised cost.
The classification depends on the company’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 debt instruments, this will depend on the business model in which the investment is held.
For investments in equity instruments, 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 fair value through other comprehensive income.
(ii) 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 arc 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 and is not part of a hedging relationship 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 Fot 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 revenue and foreign exchange
gains 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 and recognised in other gains/ (losses).
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 and is not part of a hedging relationship is recognised in profit or loss and presented net in the statement
of profit and loss within other gains/(losses) in the period in which it arises. Interest income from these financial assets
is included in other income.
Equity instruments
A company can subsequently measure all equity investments at fair value through Profit or Loss or through Other
Comprehensive Income. As the company’s one of the object is to trade in shares and securities, the company
subsequently measures all equity investments at fair value through profit and loss. 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 gain/ (losses) in
the statement of profit and loss.
Security deposits
Under the previous GAAP, interest free lease security deposits (that are refundable in cash on completion of the lease
term) are recorded at their transaction value. Under Ind AS, all financial assets are required to be recognised at fair
value. Accordingly, the Company fair values these security deposits under ind AS. Difference between the fair value
and transaction value of the security deposit will be recognised as prepaid rent. Prepaid rent is recognised as an expense
over the period of lease with corresponding recognition of interest income on the outstanding amount.
(iii) Impairment of financial assets
The company assesses on a forward looking basis the expected credit losses associated with its assets carried at
amortised cost and FVOCI debt instruments. The impairment methodology applied depends on whether there has been
a significant increase in credit risk.
(iv) Derecognition of financial assets
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 company 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 company has
not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not
derecognised.
e Transactions in Foreign Currency
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally
recognised in profit or loss.
Foreign exchange differences regarded as an adjustment to borrowing costs are presented in the statement of profit and
loss, within finance costs. All other foreign exchange gains and losses are presented in the statement of profit and loss
on a net basis within other gains/(losses).
f Trade receivables
Judgements are required in assessing the recoverability of overdue trade receivables and determining whether a provision
against those receivables is required. Factors considered include the credit rating of the counterparty, the amount and timing
of anticipated future payments and any possible actions that can be taken to mitigate the risk of non-payment.
g 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 for each jurisdiction (in accordance with the Income Tax Act, 1961) adjusted by changes in
deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates
that have been enacted or substantively enacted by the Balance Sheet date.
Deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unabsorbed depreciation
(as per taxation laws) only if it is probable that future taxable amounts will be available to utilise those temporary differences
and losses.
Deferred income tax is provided on temporary differences arising between the tax bases of assets and liabilities and their
carrying amounts in the financial statements.
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.
The Company has thus disclosed the Income Tax Assets/ Liabilities on a net basis as the same is settled within the same tax
jurisdiction, which is in line with Ind AS 12.
|