NOTE -1B - SIGNIFICANT ACCOUNTING POLICIES
1B.1 Basis of Preparation
The standalone financial statements have been prepared in accordance with Indian Accounting Standards ("Ind AS") as notified by Ministry of Corporate Affairs pursuant to Section 133 of the Companies Act. 2013 (’Act1) read with the Companies (Indian Accounting Standards) Rules. 2015 as amended and other relevant provisions of the Act.
Accordingly, the Company has prepared these standalone Financial Statements which comprise the Balance Sheet as at 31st March. 2024, the Statement of Profit and Loss (including Other Comprehensive Income) for the year ended 31st March 2024, the Statement of Changes in Equity and the Statement of Cash Flows for the year ended 31st March 2024 and accounting policies and other explanatory information (together hereinafter referred to as the Financial Statements').
The standalone financial statements of the Company for the year ended March 31. 2024 have been authorized for issue in accordance with a resolution passed in the Meeting of the Board of Directors held on 29th May. 2024.
1B.2 Basis of Measurement
The standalone financial statements have been prepared on a going concern basis using historical cost convention and on accrual method of accounting, except for the following assets and liabilities which have been measured at fair value:
- Certain financial assets and liabilities (including derivative instruments):
• Defined benefit plans - plan assets
- Assets Held lor Sale
1B.3 Functional and Presentation Currency
These standalone financial statements are presented in Indian Rupees (INR). which is the Company’s functional currency.
1B.4 Summar^ol^
1B.4.1 Property, Plant and Equipment (PPE)
(a) Property. Plant and Equipmont arc stated at cost, net of recoverable taxes, trade discounts and rebates less accumulated depreciation and impairment losses, if any. Such cost includes purchase pnee. borrowing cost and any other cost directly attributable to bringing the assets to its working condition for its intended use. net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the assets.
(b) Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item vail flow to the entity and the cost can be measured reliably. In the carrying amount of an item of PPE. the cost of replacing the part of such an item is recognized when that cost is incurred if the recognition criterias are met. The carrying amount of those parts that are replaced is derecognized in accordance with the derecognition principles.
(c) Expenses incurred in relation to a project, net of income earned during the project development stage prior to its intended use. are considered as Pre - Operative Expenses and are disclosed under 'Capital Wor1<-in-Progress'.
(d) Depreciation on Properly. Plant and Equipment is provided by the Parent Company using straight line method, except on Freehold Land, on which no depreciation is provided. Depreciation on Property. Plant and Equipment is provided by the Subsidiary Companies namely 'Shree Venkatesh Industries Pvt. Ltd.' & 'Shree Venkatesh Polymers Pvt. Ltd.' using written down value method.Depreciation provided is based on useful life of the assets as prescribed in Schedule II to the Companies Act. 2013 . If significant parts of an item of Property, Plant and Equipment have different useful lives, then they are accounted and depreciated for as separate items (major components) of Property. Plant and Equipment. In respect of the Dies and Moulds, the useful life is estimated at 12 years, which is different from the prescribed life of 8 years under Schedule II to the Companies Act. 2013.
(e) The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
(f) Gains or losses arising from derecognition of a property, plant and equipment arc measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the Statement of Profit and Loss when the asset is derecognized.
(g> Spare parts procured along with the Plant & Machinery or subsequently which meet the recognition criteria are capitalized and added in the carrying amount of such item. The carrying amount of those spare parts that are replaced is derecognized when no future economic benefits are expected from their use or upon disposal. Other machinery spares are treated as ‘stores & spares" forming part of the inventory.
1B.4.2 Leases
Ihe Company as aJteasg
(a) The Company's lease asset classes consist of leases for land. The Company assesses whether a contract contains a lease, at inception of a contract. 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. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether:
(i) the contract involves the use ot an identified asset;
(ii) the Company substantially has aJI of the economic benefits from use of the asset through the period of the lease; and
(iii) the Company has the right to direct the use of the asset.
(b) Ind AS 116 requires lessees to determine the lease term as the non-cancellable period of a lease adjusted with any option to extend or terminate the lease, if the use ol such option is reasonably certain. The Company makes an assessment on the expected lease term on a lease-by-lease basis and thereby assesses whether it is reasonably certain that any options to extend or terminate the contract will be exercised. In evaluating the lease term, the Company considers factors such as any significant leasehold improvements undertaken over the lease term, costs relating to the termination ot the lease and the importance of the underlying asset to Company's operations taking into account the location of the underlying asset and the availability of suitable alternatives. The lease term in future periods is reassessed to ensure that the lease term reflects the current economic circumstances. After considering current and future economic conditions, the Company has concluded that no changes are required to lease period relating to the existing lease contracts.
(c) At the date of commencement of the lease, the Company recognizes a Right-of-Use (ROU) asset and a corresponding lease liability for all lease arrangements in which it is a lessee, except for short term leases and low value leases. For these short term and low-value leases, the Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
(d) The lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
(e) The ROU assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.
(f) ROU assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset. ROU assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the lair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash tlows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
(g) The lease liability is initially measured at amortized cost at the present value of the future lease payments made over the lease term. The lease payments are discounted using the interest rate implicit in the lease or. if not readily determinable, using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related ROU asset if the Company changes its assessment of whether it will exercise an extension or a termination option.
(h) Lease liability and ROU assets have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
The Company as a lessor
(a) The Company has not entered into any tong term lease contract during the year in the capacity of 'Lessor*.
Adoption of Ind AS 116
Ministry of Corporate Affairs ("MCA") through Companies {Indian Accounting Standards) Amendment Rules, 2019 and Companies (Indian
Accounting Standards) Second Amendment Rules, has notified Ind AS 116 Leases, which replaces the existing lease standard, Ind AS 17
Leases, and other interpretations. Ind AS 116 sets out the principles for the recognition, measurement, presentation and disclosure of
leases for both lessees and lessors. It introduces a single, on-balance sheet lease accounting model for lessees.
1B.4.3 Capital Work-in-Progress
(a) Expenditure incurred on assets under construction (including a project) is carried at cost under 'Capital Work-in-Progress'. Such costs comprises purchase price of asset including import duties and non-refundable taxes and costs that are directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and after deducting trade discounts and rebates.
(b) Cost directly attributable to projects under construction include costs of employee benefits, expenditure in relation to survey and investigation activities of the projects, cost of site preparation, initial delivery and handling charges, installation and assembly costs, professional fees, expenditure on maintenance and up-gradation etc. of common public facilities, depreciation on assets used in construction of project, interest during construction and other costs if attributable to construction of projects. Such costs are accumulated under 'Capital Work-in-Progress' and subsequently allocated on systematic basis over major assets, other than land and infrastructure facilities, on commissionina of oroiects.
(c) Capital Expenditure incurred for creation of facilities, over which the Company does not have control but the creation of which is essential principally for construction ol the project, is capitalized and earned under 'Capital Work-in-Progress' and subsequently allocated on systematic basis over major assets, other than land and infrastructure facilities, on commissioning of projects, keeping m view the “attributability” and the "Unit of Measure" concepts in Ind AS 16- "Property. Plant & Equipment". Expenditure of such nature incurred after completion of the project, is charged to Statement of Profit and Loss.
1B.4.4 Investment Property
(a) Recognition and Measurement
The Freehold Land classified as Investment Property is stated at Revalued Cost as on the date of transition to Ind-AS.
(b) Depreciation
No depreciation is provided on Freehold Land, considering its infinite useful life.
(c) Disposal
Gains or losses arising from derecognition of investment property is measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss when the asset is derecognised.
1B.4.5 Intangible assets
(a) Intangible Assets purchased are stated at cost of acquisition net of recoverable taxes, trade discount and rebates less accumulated amortization /depletion and impairment loss, if any. Such cost includes purchase price, borrowing costs, and any cost directly attributable to bringing the asset to its working condition for the intonded use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the intangible assets. 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 entity and the cost can be measured reliably.
(b) Amortisation is provided on straight-line basis over estimated useful lives of the intangible assets, which is taken at 5 years for Computer Software. The amortisation period for intangible assets with finite useful lives are reviewed at least at each year end. Changes in useful lives are treated as changes in accounting estimates.
(c) Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss when the asset is derecognised.
(d) Revenue expenditure pertaining to research is charged to the Statement of Profit and Loss. Development costs of products are charged to the Statement of Profit and Loss unless a product's technological and commercial feasibility has been established, in which case such expenditure is capitalised.
(e) The Company has no internally generated Intangible Assets.
1B.4.6 Impairment of Non-Financial Assets - Property. Plant and Equipment and Intangible Assets
(a) The Company assesses at each reporting date as to whether there is any indication that any property, plant and equipment and intangible assets or group of assets, called Cash Generating Units (CGU) may be impaired. If any such indication exists the recoverable amount of an asset or CGU is estimated to determine the extent of impairment, if any. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the CGU to which the asset belonas.
(b) An impairment loss is recognised in the Statement of Profit and Loss to the extent asset's carrying amount exceeds its recoverable amount. The recoverable amount is higher of an asset's fair value less cost of disposal and value in use. Value in use is based on the estimated future cash flows, discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value ol monev and risk specific to the assets.
(c) The impairment loss recognised in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.
1B.4.7 Borrowing Costs
(a) Borrowing costs include exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use.
(b) Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
(c) All other borrowing costs are expensed in the period in which they occur.
1B.4.8 Inventories
(a) Items of inventories are measured at lower of cost and net realisable value after providing for obsolescence, if any. except in case of by-products which are valued at net realisable value. Cost of inventories comprises of cost of purchase, cost of conversion and other costs including manufacturing overheads net of recoverable taxes incurred in bringing them to their respective present location and condition.
(b) Cost of raw materials, work-in- progress, finished goods, stock-in-trade, stores and spares and packing materials are determined at Cost, with moving average price on First in First Out [FIFO] basis.
1B.4.9 Assets Hgld For $aje
The assets are classified as held for sale if their carrying amount is intended to be recovered principally through sale rather than through
continuing use. The condition for classification of held for sale is met when the asset is available for immediate sale and the same is highly
probable of being completed within one year from the date of classification under held for sale.
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