Note-2 Material Accounting Policies:
i) Basis of Preparation
The Financial Statements are prepared in accordance with Indian Accounting Standards (Ind AS) notified under
Section 133 of the Companies Act, 2013 (“Act”) read with Companies (Indian Accounting Standards) Rules, 2015
(as amended); and the other relevant provisions of the Act and Rules thereunder.
The Financial Statements have been prepared under historical cost convention basis except
a) Certain financial assets and financial liabilities measured at fair value (refer accounting policies for financial
instruments).
b) Assets held for sale -measured at fair Value less cost to sell.
c) Defined Benefits plans -Plan assets measured at Fair Value
Accounting policies have been consistently applied except where a newly issued accounting standard is initially
adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
ii) Use of Estimates
The preparation of the financial statements in conformity with Ind AS requires management to make estimates
and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the
disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of
revenues and expenses during the period. Accounting estimates could change from period to period. Actual results
could differ from those estimates. Appropriate changes in estimates are made as management becomes aware of
changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements
in the period in which changes are made and, if material, their effects are disclosed in the notes on the financial
statements.
iii) Revenue Recognition
The Company derives its revenue primarily from sales of manufactured goods, traded goods and related services
Revenue is recognized on satisfaction of performance obligation upon transfer of control of promised products or
services to customers in an amount that reflects the consideration the company expects to receive in exchange
for those products or services. Revenue is measured based on the transaction price (which is the Consideration,
adjusted to discounts, incentives and returns etc., if any) that is allocated to that Performance Obligation. These
are generally accounted for as variable considerations estimated in the same period the related sales occur. The
methodology and assumptions used to estimate rebates and returns are monitored and adjusted regularly in the
light of contractual and legal obligations, historical trends, past experiences and Projected Market Conditions.
The company does not expect to 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, it does not adjust
any of the transaction prices for the time value of Money.
The Company satisfies a performance obligation and recognizes revenue over time, if one of the Following criteria
is met:
> The Company simultaneously receives and consumes the benefits provided by the Company’s Performance
as the Company performs; or
> The Company’s Performance creates or enhances an asset that the customer controls as the asset is created
or enhanced; or
> The Company’s Performance does not create an asset with an alternative use to the Company and an entity
has an enforceable right to the Payment for Performance completed to date
For performance obligations where one of the above conditions are not met revenue is recognized at the Point in
time at which the Performance obligation is satisfied.
Revenue from sale of Products and services are recognized at the time of satisfaction of performance obligation
The period over which the revenue is recognized is based on entity right to payment for performance Completed. In
determining whether an entity has right to payment, the entity shall consider whether it would have an enforceable
right to demand or retain payment for performance completed to date if the contract were to be terminated before
completion for reasons other than entity’s failure to perform as per the terms of Contract
Revenue in excess of invoicing are classified as Contract asset while invoicing in excess of revenues are classified
as contract Liabilities
Trade Receivables
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of
business and reflect Company’s unconditional right to consideration (that is, payment is due only on the passage of
time). Trade receivables are recognized initially at the transaction price as they do not contain Significant financing
components
Other Income
Dividend Income is recognized when the Company’s right to receive the payment is established, which is generally
when shareholders approve the dividend.
Interest Income on all debt instruments measured at amortized cost is recorded using the effective interest rate
(EIR).
Other items of income are accounted as and when the right to receive such income arises and it is probable that
the economic benefits will flow to the Company and the amount of the Income can be measured reliably.
iv) Inventories
Inventories of Raw Materials, Finished Goods, Semi-Finished Goods, Trading Goods, and Stores, Spares and other
components, Packing Materials, Fuel and Oil are valued at cost or net realizable value, whichever is lower. Goods
in transit are valued at cost or net realizable value, whichever is lower. Cost comprises of all cost of purchases,
cost of conversion and other costs incurred in bringing the inventory to their present location and conditions. Cost
is arrived at on FIFO basis. Due allowance is estimated and made for defective and obsolete items, wherever
necessary.
If payment terms for inventory are on deferred basis i.e. beyond normal credit terms, then cost is determined by
discounting the future cash flows at an interest rate determined with reference to the market rates. The difference
between total cost and deemed cost is recognized as interest expense over the period of financing under the
effective interest method.
v) Property, plant and equipment
Property, plant and equipment are stated at cost, net of accumulated depreciation and/or accumulated impairment
losses, if any.
vi) Capital Work in Progress
Cost of assets not ready for use at the balance sheet date is disclosed under capital work-in-progress. Expenditure
during construction period is also included under Capital Work in Progress.
vii) Intangible Assets
Intangible assets acquired are measured on initial recognition at cost. Following initial recognition, intangible assets
are carried at cost less any accumulated amortization and accumulated impairment losses, if any.
viii) Depreciation
Depreciation on Property, Plant and Equipment has been provided on the Written down Value method based on
the useful life of the assets as prescribed in Schedule II to the Companies Act, 2013. Leasehold Land is amortized
over the period of lease. Leasehold improvements are amortized over the period of lease or estimated useful life,
whichever is lower
Intangible assets are amortized on a straight-line basis over the estimated useful economic life.
Depreciation methods, useful lives and residual values are reviewed at each reporting date.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as
separate items (major components) of property, plant and equipment. Subsequent expenditure relating to property,
plant and equipment is capitalized only when it is probable that future economic benefits associated with these
will flow to the Company and the cost of the item can be measured reliably. Repairs and maintenance costs are
recognized in the statement of profit and loss when incurred. The cost and related accumulated depreciation are
eliminated from the financial statements upon sale or disposition of the asset and the resultant gains or losses are
recognized in the statement of profit and loss.
ix) Investment Property
Investment property applies to owner-occupied property and is held to earn rentals or for capital appreciation
or both. Hence such properties are reclassified from Property, Plant and Equipment to Investment property.
Investment property is measured at its cost, including related transaction cost less depreciation and impairment,
if any. Investment properties are depreciated using the written down value method over their estimated useful life.
Any transfer to or from Investment property is done at the carrying amount of the Investment Property.
x) Non-Current assets held for Sale
The Company classifies non-current assets as held for sale if their carrying amount will be recovered principally
through sale rather than through continuing use Actions required to complete the sale should indicate that it is
unlikely that significant changes to the sale will be made or that the decision to sell will be withdrawn. The criteria
for held for sale classification is met only when the assets is available for immediate sale in its present condition
subject only to terms that are usual and customary for sale of such assets & its sale is highly probable.
Non-Current assets held for Sale are measured at the lower of their Carrying amount and the fair Value less cost
to sell
Property, Plant and equipment and intangible assets once classified as held for sale are not depreciated or
amortized.
xi) Government Subsidy
The Company recognizes government grants only when there is reasonable assurance that the conditions attached
to them shall be complied with, and the grants will be received.
Government grants relating to the purchase of property, plant and equipment are treated as deferred income and
are recognized in net profit in the statement of profit and loss on a systematic and rational basis over the remaining
useful life of the asset.
Government grants related to revenue are recognized on a systematic basis in net profit in the statement of profit
and loss over the periods necessary to match them with the related costs which they are intended to compensate.
xii) Borrowings
Borrowings are initially recognized at net of transaction Cost incurred and measured at amortized Cost. Any difference
between the proceeds (net of transaction costs) and the redemption amount is recognized in the statement of Profit
& Loss over the period of borrowings using the effective Interest method.
Borrowing costs majorly include interest and amortization of ancillary costs incurred in connection with the
arrangement of borrowings. Borrowing costs directly attributable to the acquisition, construction or production of
an asset that necessarily takes a substantial period to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are expensed in the period in which they occur.
The Company ceases capitalizing borrowing costs when substantially all the activities necessary to prepare the
qualifying asset for its intended use or sale are complete.
xiii) Income Tax
Income tax expense comprises current tax expense and the net change in the deferred tax asset or liability during
the year. Current and deferred tax are recognized in the statement of profit and loss, except when they relate
to items that are recognized in other comprehensive income or directly in equity, in which case, the current and
deferred tax are also recognized in other comprehensive income or directly in equity, respectively.
a) Current Income Tax
Current income tax for the current and prior periods is measured at the amount expected to be recovered from
or paid to the taxation authorities based on the taxable income for that period. The tax rates and tax laws used
to compute the amount are those that are enacted or substantively enacted by the balance sheet date.
Current tax assets and liabilities are offset only if, the Company:
> has a legally enforceable right to set off the recognized amounts; and
> Intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
b) Deferred Income Tax
Deferred tax is recognized for the future tax consequences of deductible temporary differences between the
carrying values of assets and liabilities and their respective tax bases at the reporting date, using the tax rates
and laws that are enacted or substantively enacted as on reporting date.
Deferred tax assets are recognized to the extent that it is probable that future taxable income will be available
against which the deductible temporary differences, unused tax losses and credits can be utilized.
Deferred tax assets and liabilities are offset only if:
> Entity has a legally enforceable right to set off current tax assets against current tax liabilities; and
> Deferred tax assets and the deferred tax liabilities relate to the income taxes levied by the same taxation
authority.
xiv) Leases
At inception of Contract, the Company assesses whether the 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. At inception or on reassessment of a contract that contains a lease Component, the
Company allocates Consideration in the contract to each lease component on the basis of their relative standalone
price.
As a Lessee
i) Right of use assets
The Company recognizes right of use assets at the commencement date of the lease. Right of use assets
are measured at cost less any accumulated depreciation and impairment Losses and adjusted for any re
measurement of Lease Liabilities. The Cost of right to use assets include the amount of lease Liabilities
recognized, initial direct cost incurred, Lease payments made at or before commencement date less any lease
incentives received. Right of use assets are depreciated on a straight Line basis over the shorter of the lease
term and the estimated useful lives of the assets.
The Company presents right to use assets that do not meet the definition of Investment property in “Property,
Plant and Equipment”
ii) Lease Liabilities
At the Commencement date of the Lease, the Company recognizes Lease Liabilities measured at the present
value of lease payments to be made over the Lease term. In Calculating the present Value of lease payments,
the Company generally uses its incremental borrowing rate at the Lease Commencement date if the discount
rate implicit in the lease is not readily determinable.
Lease payments included in the measurement of the Lease Liability are made up of fixed payments (including
in substance, fixed) and payments arising from options reasonably certain to be exercised. Subsequent to
initial measurement, the liability will be reduced for payments made and increased for interest expenses. It is
re measured to reflect any reassessment or modification.
The Company presents lease Liabilities under Financial Liabilities in the Balance sheet
The Company has elected to account for short term leases and Leases of Low Value assets using the exemption
given under Ind AS 116, Leases. Instead of recognizing a right of use asset and Lease Liability, the payments
in relation to these are recognized as an expense in the profit or loss on a straight Line basis over the Lease
term or on another systematic basis if that basis is more representative of the pattern of the Company benefit
As a Lessor
Leases for which the Company is a Lessor is classified as Finance or operating Lease
Lease income from operating leases where the Company is a Lessor is recognized in income on a straight-line
basis over the Lease Term unless the receipts are structured to increase in line with expected general inflation
to Compensate for the expected inflationary cost increases. The respective leased assets are included in the
balance sheet based on their nature
xv) Financial Assets
a) Initial recognition and measurement
All financial assets (not measured subsequently at fair value through profit or loss) are recognised initially at
fair value plus transaction costs that are attributable to the acquisition of the financial asset. However, Trade
receivables that do not contain a significant financing component are measured at transaction price.
b) Subsequent measurement
Subsequent measurement is determined with reference to the classification of the respective financial assets.
The Company classifies financial assets as subsequently measured at amortised cost, fair value through other
comprehensive income or fair value through profit or loss on the basis of its business model for managing the
financial assets and the contractual cash flow characteristics of the financial asset.
(i) Debt instruments at amortised cost
A 'debt instrument' is measured at the amortised cost if both the following conditions are met:
> The asset is held within a business model whose objective is to hold assets for collecting contractual
cash flows, and
> Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of
principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the
effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount
or premium and fees or costs that are an integral part of the EIR. The EIR amortisation is included in
finance income in the Statement of Profit & Loss. The losses arising from impairment are recognised in
the Statement of Profit & Loss.
(ii) Debt instruments at Fair value through Other Comprehensive Income (FVOCI)
A 'debt instrument' is measured at the fair value through other comprehensive income if both the following
conditions are met:
> The asset is held within a business model whose objective is achieved by both collecting contractual
cash flows and selling financial assets
> Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of
principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, these assets are subsequently measured at fair value. Interest income under
effective interest method, foreign exchange gains and losses and impairment are recognised in the
Statement of Profit & Loss. Other net gains and losses are recognised in other comprehensive Income.
(iii) Debt instruments at Fair value through profit or loss (FVTPL)
Fair value through profit or loss is a residual category for debt instruments. Any debt instrument, which
does not meet the criteria for categorisation as at amortised cost or as FVOCI, is classified as at FVTPL.
(iv) Equity investments
All equity investments in scope of Ind-AS 109 are measured at fair value. Equity instruments which are
held for trading are classified as at FVTPL. For all other equity instruments, the Company decides to
classify the same either as at FVOCI or FVTPL. The Company makes such election on an instrument-by¬
instrument basis. The classification is made on initial recognition and is irrevocable.
For equity instruments classified as FVOCI, all fair value changes on the instrument, excluding dividends,
are recognized in other comprehensive income (OCI).
Equity instruments included within the FVTPL category are measured at fair value with all changes
recognized in the Statement of Profit & Loss.
c) Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets)
is primarily derecognised (i.e. removed from the Company's Balance Sheet) when:
> The rights to receive cash flows from the asset have expired, or
> The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation
to pay the received cash flows in full without material delay to a third party under a 'pass-through'
arrangement; and either:
- The Company has transferred substantially all the risks and rewards of the asset, or
- The Company has neither transferred nor retained substantially all the risks and rewards of the asset
but has transferred control of the asset.
d) Impairment of financial assets
The Company measures the expected credit loss associated with its assets based on historical trend, industry
practices and the Business environment in which the entity operates or any other appropriate basis. The
impairment methodology applied depends on whether there has been as significant increase in credit risk.
e) Income Recognition
Interest Income from debt instruments is recognised using the effective interest rate method.
xvi) Financial Liabilities
a) Initial recognition and measurement
All financial liabilities are recognised initially at fair value net of transaction costs that are attributable to the
respective liabilities.
b) Subsequent measurement
Subsequent measurement is determined with reference to the classification of the respective financial liabilities.
The measurement of financial liabilities depends on their classification, as described below:
> Financial Liabilities at fair value through profit or loss (FVTPL)
A financial liability is classified as at fair value through profit or loss if it is classified as held-for-trading or
is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and
changes therein, including any interest expense, are recognised in Statement of Profit & Loss.
> Financial Liabilities measured at amortised cost
After initial recognition, financial liabilities other than those which are classified as fair value through profit
or loss are subsequently measured at amortised cost using the effective interest rate method (“EIR”).
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees
or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the
Statement of Profit & Loss.
c) De recognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms,
or the terms of an existing liability are substantially modified, such an exchange or modification is treated as
the de-recognition of the original liability and the recognition of a new liability. The difference in the respective
carrying amounts is recognised in the Statement of Profit & Loss.
xvii) Offsetting of financial instruments
Financial assets and financial liabilities are offset, and the net amount is reported in the balance sheet if there
is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net
basis, or to realise the assets and settle the liabilities simultaneously.
xviii) Fair value of financial instruments
In determining the fair value of its financial instruments, the Company uses following hierarchy and assumptions
that are based on market conditions and risks existing at each reporting date.
Fair value hierarchy:
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized
within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair
value measurement as a whole:
? Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities
? Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement
is directly or indirectly observable
? Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement
is unobservable
For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company
determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based
on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting
period.
xix) Cash & Cash Equivalents
The Company considers all highly liquid financial instruments, which are readily convertible into known amounts of
cash and that are subject to an insignificant risk of change in value and having original maturities of three months
or less from the date of purchase, to be cash equivalents.
Cash and cash equivalents comprise cash at banks and on hand and demand deposits with banks with an original
maturity of three months or less.
xx) Investment in Subsidiaries, Joint ventures & Associates - Unquoted
Investments in equity shares of Subsidiaries, Joint Ventures & Associates are recorded at cost and reviewed for
impairment at each reporting date.
xxi) Employee Benefits
> Short-term employee benefit
Short term employee benefits are recognized as an expense at an undiscounted amount in the Statement of
Profit & Loss of the year in which the related services are rendered.
> Post-employment benefits
The Company’s net obligation in respect of defined benefit plans such as gratuity is calculated separately for
each plan by estimating the amount of future benefit that the 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 at each reporting period end by a qualified actuary
using the projected unit credit method.
The current service cost of the defined benefit plan, recognized in the Statement of Profit & Loss as part of
employee benefit expense, reflects the increase in the defined benefit obligation resulting from employee
service in the current year, benefit changes, curtailments and settlements. Past service costs are recognized
immediately in the Statement of Profit & Loss. 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 & Loss.
Re-measurements which comprise of actuarial gains and losses, the return on plan assets (excluding net
interest) and the effect of the asset ceiling (if any, excluding net interest), are recognized immediately in other
comprehensive income.
> Other long-term employee benefits
Liability towards other long term employee benefits - leave encashment is determined on actuarial valuation by
qualified actuary by using Projected Unit Credit method.
The current service cost of other long-term employee benefits, recognized in the Statement of Profit & Loss as
part of employee benefit expense, reflects the increase in the obligation resulting from employee service in the
current year, benefit changes, curtailments and settlements. Past service costs are recognized immediately
in the Statement of Profit & Loss. The interest cost is calculated by applying the discount rate to the balance
of the obligation. This cost is included in the employee benefit expense in the Statement of Profit & Loss. Re¬
measurements are recognized in the Statement of Profit & Loss.
xxii) Foreign Currency Transactions:
a) Functional and Presentation Currency:
The Financial Statements are presented in Indian Rupee (?) which is Company’s Functional and Presentation
Currency. All amounts have been rounded off to the nearest lakhs, unless otherwise indicated.
b) Monetary Items
> Transactions denominated in foreign currency are normally accounted for at the exchange rate prevailing
at the time of transaction.
> Monetary assets (including loans to subsidiaries) and Liabilities in foreign currency transactions remaining
unsettled at the end of the year (other than forward contract transactions) are translated at the year-end
rates and the corresponding effect is given to the respective accounts.
> Exchange differences arising on account of fluctuations in the rate of exchange are recognized in the
statement of Profit & Loss.
> Exchange rate difference arising on account of conversion/translation of liabilities incurred for acquisition
of Fixed Assets is recognized in the Statement of Profit & Loss.
c) Non - Monetary Items
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.
xxiii) Impairment of Non-Financial Assets:
The Company assesses at each reporting date whether there is an indication that an asset may be impaired.
If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the
asset’s recoverable amount. An assets recoverable amount is the higher of an asset’s CGU’S fair value less
cost of disposal and its value in use. It is determined for an individual asset, unless the asset does not generate
cash inflows that are largely independent of those from other assets or Companies of assets. Where the carrying
amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down
to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no
such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated
by valuation multiples, or other fair value indicators
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