B. MATERIAL ACCOUNTING POLICIES
(i) Statement of Compliance
These financial statements have been prepared in
accordance with I nd AS prescribed under Section 133
of the Companies Act read with Companies (Indian
Accounting Standards) Rules as amended from time to
time.
(ii) Basis of Accounting
These financial statements have been prepared on the
historical cost basis, except for certain financial
instruments and defined benefits plans which are
measured at fair values at the end of each reporting
period. Historical cost is generally based on the value
of the consideration given in exchange for goods and
services. Fair value is the price that would be received
to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the
measurement date.
The Functional currency of the Company is in Indian
Rupees. These Financial Information are presented in
Indian Rupees. All amounts have been rounded off to
the nearest Lakhs and rounded off to two decimals
except for Earnings Per Share and where mentioned
otherwise.
All the assets and liabilities have been classified as
current and non-current as per the company's normal
operating cycle and criteria set out in Schedule III
(Division II) of the Companies Act 2013.
The Company has ascertained it's operating cycle as 12
months for the purpose of current and non- current
classification of assets and liabilities.
(iii) Use of Estimates
The preparation of the Financial Statements in
conformity with Ind AS requires the management to
make estimates, judgments and assumptions. These
estimates, judgment and assumptions affect the
application of accounting policies and the reported
amount of Assets and Liabilities and disclosure of
contingent Liabilities on the date of the Financial
Statements and reported amounts of revenues and
expenses for the year.
Estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the
estimates are revised, and future periods are affected.
Key sources of estimation of uncertainty at the date of
the financial statements, which may cause a material
adjustment to the carrying amounts of assets and
liabilities within the next financial year, is in respect of
impairment of investments, useful lives of property,
plant and equipment, valuation of deferred tax assets,
provisions and contingent liabilities and fair value
measurement of financial instruments have been
discussed below. Key source of estimation of
uncertainty in respect of revenue recognition and
employee benefits have been discussed in their
respective policies.
Useful lives of property, plant and equipment
The Company reviews the useful life of property, plant
and equipment at the end of each reporting period.
This reassessment may result in change in
depreciation expense in future periods.
Valuation of deferred tax assets
The Company reviews the carrying amount of deferred
tax assets at the end of each year. The policy has been
explained under note B (xxii).
iv) Property, plant and equipment
Property, plant and equipment are carried at the cost
of acquisition revalued amount or construction less
accumulated depreciation. Costs directly attributable
to acquisition are capitalized until the property, plant
and equipment are ready for use, as intended by
management.
Depreciation has been provided on straight line
method in accordance with the life of the respective
assets as prescribed in Schedule II of the Companies
Act, 2013 except certain assets for which useful life of
assets has been ascertained based on report of
technical experts. All assets costing ? 5,000 or below
are fully depreciated in the year of addition.
The Company, based on technical assessment made
by technical expert and management estimate,
depreciates Building and Plant & Equipment over
estimated useful lives which are different from the
useful life prescribed in Schedule II to the Companies
Act, 2013. The Management believes that these
estimated useful lives are realistic and reflect fair
approximation of the period over which the assets are
likely to be used. The estimated useful lives and
residual value are reviewed at the end of each
reporting period, with the effect of any change in
estimate accounted for on a prospective basis. The
estimated useful lives are as mentioned below:
Capital work-in-progress
Capital work-in-progress / Intangible assets under
development are carried at cost, comprising direct
cost, related incidental expenses and attributable
borrowing cost. Advances paid towards the
acquisition of property, plant and equipment
outstanding at each Balance Sheet date is classified as
Capital Advances.
Investment Properties
Properties that are held for - long term rental yields or
for capital appreciation or both, and that is not
occupied by the Company, is classified as investment
property. Investment property is measured initially at
its cost, including related transaction costs and where
applicable borrowing costs. Subsequent expenditure
is capitalised to the asset's carrying amount only when
it is probable that future economic benefits associated
with expenditure will flow to the Company and the
cost of the item can be measured reliably. All other
repairs and maintenance costs are expensed when
incurred. When part of an investment property is
replaced, the carrying amount of the replaced part is
derecognised.
(v) Intangible Assets
Intangible Assets are recorded at the consideration
paid for acquisition less accumulated amortization
and accumulated impairment, if any, Amortization is
recognized at Straight Line Basis over their estimated
useful life. The estimated useful life and amortization
method are reviewed at the end of each reporting
period, with the effect of any changes in estimate
being accounted for on a prospective basis. Intangible
assets with indefinite useful lives that are acquired
separately are carried at cost less accumulated
impairment losses. Intangible assets are amortized on
Straight Line Basis over a period of 3 to 6 years.
(vi) Impairment of Non-Financial Assets
The Group 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 Group estimates the
asset's recoverable amount. An asset's recoverable
amount is the higher of an asset's or cash-generating
unit's (CGU) fair value less costs of disposal and its
value in use. The recoverable amount is determined for
an individual asset, unless the asset does not generate
cash inflows that are largely independent of those
from other assets or groups 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 net selling price, recent market
transactions are taken into account, if available. If no
such transactions can be identified, an appropriate
valuation model is used.
(vii) Derivative Financial Instrument
The Company enters into derivative financial
instruments to manage its exposure to foreign
exchange rate risks, including foreign exchange
forward contracts. The Company holds derivative
financial instruments such as forward foreign
exchange contracts to mitigate the risk of changes in
exchange rates on foreign currency exposures. The
counterpart for these contracts is generally a bank.
Derivatives are initially recognized at fair value at the
date the derivative contracts are entered into and are
subsequently remeasured to their fair value at the end
of each reporting period. The resulting gain or loss is
recognized to statement profit or loss immediately.
(viii) Financial Instrument
The Company recognizes financial assets and financial
liabilities when it becomes a party to the contractual
provisions of the instrument. All financial assets and
liabilities are recognized at fair value on initial
recognition, except for trade receivables which are
initially measured at transaction price. Transaction
costs that are directly attributable to the acquisition or
issue of financial assets and financial liabilities, that are
not measured at fair value through profit or loss, are
added/ deducted to the fair value on initial
recognition.
All recognized financial assets are subsequently
measured in their entirety at either amortized cost or
fair value, depending on the classification of the
financial assets.
(a) Financial assets carried at amortized cost
A Financial asset is subsequently measured at
amortized cost if it is held within a business model
whose objective is to hold the asset in order to
collect contractual cash flows and the contractual
terms of the financial asset give rise on specified
dates to cash flows that are solely payments of
principal and interest on the principal amount
outstanding.
b) Investment in Equity Instruments at fair value
through other comprehensive income
Equity investments are initially measured at fair
value plus transaction costs. Subsequently, they
are measured at fair value with gains and losses
arising from changes in fair value recognized in
other comprehensive income and accumulated in
the 'Reserve for equity instruments through other
comprehensive income'.
c) Financial assets at fair value through profit or
loss
A financial asset which is not classified in any of the
above categories is subsequently fair valued
through profit or loss.
d) Financial liabilities
Financial liabilities are subsequently carried at
amortized cost using the effective interest
method. For trade and other payables maturing
within one year from the Balance Sheet date, the
carrying amounts approximate fair value due to
the short maturity of these instruments.
e) Investment in Subsidiaries and Joint Ventures
Investments in Subsidiaries and Joint Ventures are
carried at cost less impairment, if any.
f) Impairment
The Company assesses at each reporting date
whether a financial asset (or a group of financial
assets) such as investments, trade receivables,
advances and security deposits held at amortized
cost and financial assets that are measured at fair
value through other comprehensive income are
tested for impairment based on evidence or
information that is available without undue cost or
effort. Expected credit losses are assessed and loss
allowances recognized if the credit quality of the
financial asset has deteriorated significantly since
initial recognition.
g) Offsetting Financial Instruments
Financial assets and liabilities are offset, and the
net amount is included in the Balance Sheet where
there is a legally enforceable right to offset the
recognized amounts and there is an intention to
settle on a net basis or realize the asset and settle
the liability simultaneously.
(ix) Measurement of Fair Values
Certain accounting policies and disclosures of the
Company require the measurement of fair values, for
both financial and non-financial assets and liabilities.
The Company has an established control framework
with respect to the measurement of fair values.
Fair Values are categorized into different levels in a fair
value hierarchy based on the inputs used in the
valuation techniques as follows:
Ý Level 1: quoted prices (unadjusted) in active markets
for identical assets or liabilities.
Ý Level 2: inputs other than quoted prices included in
Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived
from prices).
Ý Level 3: inputs for the asset or liability that are not
based on observable market data (unobservable
inputs).
When measuring the fair value of an asset or liability,
the company uses observable market data as far as
possible. If the inputs used to measure the fair value of
an asset or a liability fall into a different level of the fair
value hierarchy, then the fair value measurement is
categorized in its entirety in the same level of the fair
value hierarchy as the lowest level input that is
significant to the entire measurement
(x) Revenue Recognition
Sales revenue is measured at fair value of the
consideration received or receivable and stated at net
of GST, trade discounts, and rebates. Income from
services is recognized as the services are rendered
based on agreement/ arrangement with the
concerned parties. Export incentives, certain
insurance and other claims, where quantum of
accruals cannot be ascertained with reasonable
certainty, are accounted on acceptance basis.
a. Revenue from Operations
Revenue from the sale of goods is recognized
when the goods are delivered and titles have been
passed, at which time all the following conditions
are satisfied:
- the Company has transferred to the buyer the
significant risks and rewards of ownership of
the goods;
- the Company retains neither continuing
managerial involvement to the degree usually
associated with ownership not effective
control over the goods sold;
- the amount of revenue can be measured
reliably;
- it is probable that the economic benefits
associated with the transaction will flow to the
Company;
- the costs incurred or to be incurred in respect
of the transaction can be measured reliably.
- Rent Income/Lease Rentals
b. Revenue from construction contracts
Revenue from contract with customers is
recognised when a performance obligation is
satisfied by transferred of promised goods or
services to a customer.
For performance obligation satisfied over time,
the revenue recognition is done by measuring the
progress towards complete satisfaction of
performance obligation.
The progress is measured in terms of a proportion
of actual cost incurred to date, to the total
estimated cost attributable to the performance
obligation.
The company transfers controls of a goods or
service over time and therefore satisfies a
performance obligation and recognise revenue
over a period of time if one of following criteria is
met:
(i) The customer simultaneously consumes the
benefits of Company's performance or
(ii) The customer controls the assets as it is being
created/enhanced by the company's
performance or
(iii) There is no alternative use of assets and the
company has either explicit or implicit rights
of payment considering legal precedents.
Transaction price is the amount of consideration to
which company expects to be entitled in exchange for
transferring goods or services to a customer. The
company includes Variable consideration as part of
transaction price when there is basis to reasonably
estimate the amount of the variable consideration and
when it is probable that a significant reversal of
cumulative revenue recognised will not occur when
the uncertainty associated with the variable
consideration is resolved. Variable consideration is
estimated using the expected value method or most
likely amount as appropriate in a given circumstance.
Payment terms agreed with a customer are as per
business practice and the financing component, if
significant, is separated from the transaction price.
Significant judgements are used in:
1. Determining the revenue to be recognised in case of
performance obligation satisfied over a period of
time, revenue recognition is done by measuring the
progress towards complete satisfaction of
performance obligation.
2. Determining the expected losses, which are
recognised in the period in which such losses become
probable based on the expected total contract cost as
at the reporting date.
3. Determining the method to be applied to arrive at the
variable consideration requiring an adjustment to the
price.
For contracts where the aggregate of contract cost
incurred to-date plus recognised profits (or minus
recognised losses as the case may be) exceeds the
progress billing, the surplus is shown as contract assets
and termed as "unbilled revenue". For contracts where
the progress billing exceeds the aggregate of contract
cost incurred to-date plus recognised profits (or minus
recognised losses as the case may be), the surplus is
shown as contract liability and termed as "Advances
from customer". The amounts billed on the customer
for work performed and are unconditionally due for
payment i.e only passage of time is required before
payment falls due, are disclosed in the Balance Sheet
as trade receivables. The amount of retention money
held by customers pending completion of
performance milestone is disclosed as part of contract
asset and is classified as trade receivables when it
became due for payment.
Impairment loss (termed as provision for impairment
loss in financial statement) is recognised in the
statement of Profit & Loss to the extent the carrying
amount of the contract assets exceeds the remaining
performance obligations (after deducting the costs
that relate directly to fulfil such remaining
performance obligations).
c. Other Income
Other income comprises of primarily of Interest
Income, Dividend Income, Gain/ (Loss) on sale of
Investments, Rental Income and Claims (if any).
Interest Income from a financial asset is recognized
when it is probable that the economic benefits will
flow to the Company and the amount of income can
be measured reliably. Interest income is accrued on a
time basis, by reference to the principal outstanding
and at the effective interest rate applicable, which is
the rate that exactly discounts estimated future cash
receipts through the expected life of the financial asset
to the asset's net carrying amount on initial
recognition.
Dividend Income is recognized as and when right to
receive payment is established provided, which is
generally after the shareholders approves it in the
Annual General Meeting.
Gain/ (Loss) on sale of Current/ Non Current
Investments are recognized at the time of
redemption/ Sale and at Fair value at each reporting
period.
Rent Income/Lease rentals are recognized on accrual
basis in accordance with the terms of agreements.
Insurance and other claims are accounted for as and
when admitted by the appropriate authorities in view
of uncertainty involved in ascertainment of final claim.
(xi) Employee Benefits
The Company's contribution to provident fund,
pension fund, employees' state insurance scheme and
super-annuation fund are charged on accrual basis to
Statement of Profit & Loss.
a. Short term benefits:
Short term employee benefits are recognized as an
expense at the undiscounted amount in the
statement of profit and loss of the year in which the
related service is rendered.
b. Defined contribution retirement benefits:
Payments to defined contribution retirement
benefits are recognized as an expense when
employees have rendered services entitling them
to the contributions. Defined contribution plans
are those plans where the Company pays fixed
contributions to funds/schemes managed by
independent trusts or authority. Contributions are
paid in return for services rendered by the
employees during the year. The Company has no
legal or constructive obligation to pay further
contributions if the fund/scheme does not hold
sufficient assets to pay/extend employee benefits.
The Company provides Provident Fund facility to
all employees. The contributions are expensed as
they are incurred in line with the treatment of
wages and salaries. The Company's Provident Fund
is exempted under section17 of Employees'
Provident Fund and Miscellaneous Provision Act,
1952. Conditions for exemption stipulate that the
Company shall make good deficiency, if any, in the
interest rate declared by the trust vis s-vis interest
rate declared by the Employees' Provident Fund
Organisation.
c. Defined benefit retirement benefits:
The cost of providing defined benefit retirement
benefits are determined using the projected unit
credit method, with independent actuarial
valuations being carried out at the end of each
reporting period. The Company provides gratuity
to its employees.
Remeasurement, comprising actuarial gains and
losses, return on plan assets excluding amounts
included in net interest on the net benefit liability
(asset) and any change in the effect of the asset
ceiling (if applicable) are recognized in the balance
sheet with a charge or credit recognized in other
comprehensive income in the period in which they
occur. Remeasurement recognized in the
comprehensive income are not reclassified to the
statement of profit and loss but recognized directly
in the retained earnings. Past service costs are
recognized in the statement of profit and loss in
the period in which the amendment to plan occurs.
Net interest is calculated by applying the discount
rate to the net defined liability or asset at the
beginning of the period, taking into account of any
changes in the net defined benefit liability (asset)
during the period as a result of contribution and
benefit payments.
Defined benefit costs which are recognized in the
statement of profit and loss are categorized as
follows
- Service cost (including current service cost,
past service cost as well as gains and losses on
curtailments and settlements); and
- Net interest expense or income; and
The retirement benefit obligation recognized in
the standalone Balance Sheet represents the
actual deficit or surplus in the Company's defined
benefit plans. Any surplus resulting from this
calculation is limited to the present value of any
economic benefits available in the form of refunds
from the plans or reduction in future contributions
to the plans.
The liability for termination benefit is recognized
at the earlier of when the entity can no longer
withdraw the offer of the termination benefit and
when the entity recognizes any related
restructuring costs.
d. Voluntary Retirement Scheme Benefits
Voluntary retirement scheme benefits are
recognized as an expense in the year they are
incurred.
(xii) Custom Duty & Goods & Service Tax (GST)
GST Credit availed on Raw materials, Stores and Capital
Goods are reduced from the cost of the Respective
Goods.
(xiii) Research and Development
Research and Development expenditures of revenue
nature are charged to Profit & Loss Account, while
capital expenditure is added to the cost of fixed assets
in the year in which these are incurred.
(xiv) Valuation of Inventories
Raw materials, work-in-progress and finished products
are valued at lower of cost and net realisable value
after providing for obsolescence and other losses,
where considered necessary. Cost includes purchase
price and all other costs incurred in bringing the
inventories to their present location and condition.
Cost are assigned to individual items of inventory on
weighted average basis.
Stores and Spares are valued on the "weighted
average" basis.
(xv) Lease
a. Where the Company is the lessee
Right-of-use assets
The Company recognises right-of-use assets at the
commencement date of the lease (i.e., the date the
underlying asset is available for use). Right-of-use
assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted
for any remeasurement of lease liabilities. The cost
of right-of-use assets includes the present value of
lease payments to be made over the lease term,
initial direct costs incurred, and lease payments
made at or before the commencement date less
any lease incentives received. Right-of-use assets
are depreciated on a straight-line basis over the
lease agreement period of underlying assets.
If ownership of the leased asset transfers to the
company at the end of the lease term or the cost
reflects the exercise of a purchase option,
depreciation is calculated using the estimated
useful life of the asset.
Lease Liabilities
At the commencement date of the lease, the
Company recognises lease liabilities measured at
the present value of lease payments to be made
over the lease term. The lease payments include
fixed payments (including in substance fixed
payments) less any lease incentives receivable,
variable lease payments that depend on an index
or a rate, and amounts expected to be paid under
residual value guarantees. The lease payments also
include the exercise price of a purchase option
reasonably certain to be exercised by the company
and payments of penalties for terminating the
lease, if the lease term reflects the company
exercising the option to terminate. Variable lease
payments that do not depend on an index or a rate
are recognised as expenses (unless they are
incurred to produce inventories) in the period in
which the event or condition that triggers the
payment occurs.
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. After the commencement date, the
amount of lease liabilities is increased to reflect the
accretion of interest and reduced for the lease
payments made. In addition, the carrying amount
of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change
in the lease payments (e.g., changes to future
payments resulting from a change in an index or
rate used to determine such lease payments) or a
change in the assessment of an option to purchase
the underlying asset.
b. Where the Company is the lessor
Assets subject to operating leases are included in
fixed assets. Lease income is recognized in the
statement of profit and loss on a straight-line basis
over the lease term. Costs, including depreciation
are recognized as an expense in the statement of
Profit &Loss. Initial direct costs such as legal costs,
brokerage costs, etc. are recognized immediately
in the statement of Profit &Loss.
Assets given under a finance lease are recognized
as a receivable at an amount equal to the net
investment in the lease. Lease income is
recognized over the period of the lease so as to
yield a constant rate of return on the net
investment in the lease. Initial direct costs relating
to assets given on finance leases are charged to
statement of Profit & Loss.
(xvi) Foreign Currency Transactions and Exchange
Differences
Transactions in currencies other than entity's
functional currency (spot rates) are recorded at the
rates of exchange prevailing on the date of the
transaction. Monetary assets and liabilities
denominated in foreign currencies (other than
derivative contracts) remaining unsettled at the end of
the each reporting period are premeasured at the
rates of exchange prevailing at that date. Exchange
difference on monetary items are recognized in the
statement of Profit & Loss in the period in which they
arise. Non-monetary items carried at historical cost are
translated using exchange rates at the dates of the
initial transaction.
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