1.2 Material Accounting Policies
1.2.1 Basis of Preparation
a) Statement of Compliance
Theses financial statements of the Company have been prepared in accordance with the recognition and measurement principles
laid down in the Indian Accounting Standard (‘Ind AS’) as per the Companies (Indian Accounting Standards) Rules, 2015
notified under Section 133 of the Companies Act, 2013 (‘the Act’) and the other relevant provisions of the Act to the extent
applicable.
b) Basis of measurement
The financial statements have been prepared on the historical cost convention on accrual basis except for certain financial assets
and liabilities which are measured at fair value at the end of each reporting period. Historical cost is generally based on the fair
value of the consideration given in exchange of goods or services.
c ) Functional and Presentation currency
Items included in the financial statements of the Company are measured using the currency of the primary economic environment
in which the Company operates (“the functional currency”). The financial statements are presented in Indian National Rupee
(‘INR’), which is the Company’s functional and presentation currency. All amounts have been given in Round off to Lakhs,
unless otherwise indicated.
d) Current and Non-current classification
All Assets and Liabilities have been classified as current and non-current as per the Company’s normal operating cycle and
other criteria to the Companies Act, 2013. Based on the nature of the business of the Company and its business time cycle from
inception of an order and its completion on realization in cash and cash equivalents, the Company has ascertained the operating
cycle as 12 months for the purpose of current and non-current classification of assets and liabilities.
e) Use of judgments and estimates
In preparing these financial statements, the Management has made judgments, estimates and assumptions that affect the
application of accounting policies and the reported amount of assets, liabilities, the disclosure of contingent liabilities and
contingent assets as at the date of financial statements, income and expenses during the period. Actual results may differ from
these estimates. Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to estimates are recognized
prospectively in current and future periods.
f) Measurement of fair values
A number of the Company’s accounting policies and disclosures require measurement of fair values, for both financial and non¬
financial assets and liabilities. The Company has an established control framework with respect to measurement of fair values.
The directors are responsible for overseeing all significant fair value measurements, including Level 3 fair values. Directors
regularly reviews significant unobservable inputs and valuation adjustments.
Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as
follows:
- Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities.
- 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)
- 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 liability fall into different levels of the fair value hierarchy, then the fair value
measurement is categorised in its entirely in the same level of the fair value hierarchy as the lowest level input that is significant
to the entire measurement.
The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the
changes have occurred.
1.2.2 Summary of material accounting policies
The Company has consistently applied the following accounting policies to till periods presented in the financial statements.
a) 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 loss, if any. Cost of an item of property, plant
and equipment comprises its purchase price, including import duties and non-refundable purchase taxes, after
deducting trade discounts and rebates, any directly attributable cost of bringing the item to its working condition
for its intended use and estimated costs (Present Value) of dismantling and removing the item and restoring the
site on which it is located. 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.
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 statement of profit or loss during
the reporting period in which they are incurred. If an item of property, plant and equipment is purchased with
deferred credit period from supplier, such asset is recorded at its cash price equivalent value.
ii) Depreciation
Depreciation on property, plant and equipment is provided on the Straight Line Method based on the useful life
of assets as indicates under Schedule II of the Companies Act, 2013. Depreciation on additions to or on disposal
of assets is calculated on pro-rata basis i.e.from (upto) the date on which the property, plant and equipment is
available for use (disposed off).
b) Recoverability of 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.
c) Impairment of non-financial assets
At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than inventories and
deferred tax assets) to determine whether there is any indication on impairment. If any such indication exists, then the
asset’s recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset exceeds its
estimated recoverable amount. Impairment losses are recognised in Statement of Profit and Loss.
d ) Inventories
Inventories are valued at lower of Cost or Net Realisable value. The cost of finished goods is determined by taking
material, labour and related factory overheads including depreciation. Cost of material is determined on weighted
average cost basis. Further the cost for Work-in-progress includes material cost, stage wise direct cost and other related
manufacturing overheads including depreciation.Net realisable value is the estimated selling price in the ordinary course
of business, less estimated cost of completion and making the sale. Cost of raw materials, packing materials, stores and
spares are determined on weighted average basis. Obsolete, slow moving and defective inventories are identified at the
time of physical verification of inventories and where necessary, the same are written off or provision is made for such
inventories.
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