3 Material Accounting Policies
(a) Property, Plant and Equipment
The Company has elected to continue with the carrying value of its Property Plant & Equipment (PPE) recognised as of April 1,
2016 (transition date) measured as per the Previous GAAP and used that carrying value as its deemed cost as on the transition
date as per Para D7AA of Ind AS 101.
Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the
Balance Sheet at cost less accumulated depreciation and impairment losses, if any. Freehold land is not depreciated.
Property, Plant & Equipment (PPE) comprises of Tangible assets and Capital Work in progress (except Right Of Use assets). PPE are
stated at cost, net of tax/duty credit availed, if any, after reducing accumulated depreciation and accumulated impairment losses,
if any; until the date of the Balance Sheet. The cost of PPE comprises of its purchase price or its construction cost (net of applicable
tax credit, if any), any cost directly attributable to bring the asset into the location and condition necessary for it to be capable of
operating in the manner intended by the management. Direct costs are capitalized until the asset is ready for use and includes
borrowing cost capitalised in accordance with the Company's accounting policy.
Capital work in progress includes the cost of PPE that are not yet ready for the intended use.
An item of PPE is de-recognized upon disposal or when no future economic benefits are expected to arise from the continued use
of the asset. Any gain or loss arising on the disposal or retirement of an item of PPE is determined as the difference between the
sales proceeds and the carrying amount of the asset and is recognized in the Statement of Profit and Loss.
Depreciation of these PPE commences when the assets are ready for their intended use.
Depreciation is provided on the cost of Property, Plant and Equipment (other than land and properties under construction) less
their estimated residual value, using the straight-line method over the useful life of PPE as stated in the Schedule II to the
Companies Act, 2013 or based on technical assessment by the Company.
Useful lives of each class of PPE as prescribed under Part C of Schedule II to the Companies Act, 2013 and adopted by the
company are as under:
The estimated useful lives, residual values and depreciation method are reviewed on an annual basis and if necessary, changes in
estimates are accounted for prospectively.
As per internal technical evaluation carried out by the management, the management of the company believes that its PPE are of
such nature that separate components are not distinctly identifiable having different useful life and therefore, Component level
accounting and reporting is not practically feasible for the company.
Depreciation on additions/deletions to PPE during the year is provided for on a pro-rata basis with reference to the date of
additions/deletions.
Depreciation on subsequent expenditure on PPE arising on account of capital improvement or other factors is provided for
prospectively over the remaining useful life.
(b) Intangible Assets
Company has elected to continue with the carrying value of its Intangible assets recognised as of April 1,2016 (transition date)
measured as per the Previous GAAP and used that carrying value as its deemed cost as on the transition date as per Para D7AA of
Ind AS 101.
Intangible assets with finite useful life acquired separately, are recognized only if it is probable that future economic benefits that
are attributable to the assets will flow to the enterprise and the cost of assets can be measured reliably. The intangible assets are
recorded at cost and are carried at cost less accumulated amortization and accumulated impairment losses, if any.
Intangible assets are amortized over the estimated period of benefit, not exceeding ten years.
Intangible assets is derecognized on disposal, or when no future economic benefits are expected from use or disposal. Gains or
losses arising from derecognition of an intangible asset are determined as the difference between the net disposal proceeds and
the carrying amount of the asset, and recognized in the Statement of Profit and Loss when the asset is derecognized.
Intangible assets are amortised on Straight Line Method from the date they are available for use, over the useful lives of the assets
(c) Impairment of non-financial assets
The Company reviews at each reporting period whether there is any indication that an asset may be impaired. If at the end of
reporting period any such indication exists, the company estimates the recoverable amount of the asset. If such recoverable
amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying
amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is
recognized in the Statement of Profit & Loss. If at the reporting period, there is an indication that there is change in the previously
assessed impairment loss, the recoverable amount is reassessed and the asset is reflected at the recoverable amount.
Recoverable amount is the higher of fair value less costs of disposal and value in use. 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 for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately
in the Statement of Profit and Loss.
An assessment is made at an interval of 3 years to see if there are any indications that impairment losses recognized earlier may no
longer exist or may have come down. The impairment loss is reversed, if there has been a change in the estimates which has the
effect of increasing the asset's recoverable amount since the previous impairment loss was recognized. If it is so, the carrying
amount of the asset is increased to the lower of its recoverable amount and the carrying amount that has been determined, net of
depreciation, had no impairment loss been recognized for the asset in prior years. After a reversal, the depreciation charge is
adjusted in future periods to allocate the asset's revised carrying amount, less any residual value, on a systematic basis over its
remaining useful life. Reversals of Impairment loss are recognized in the Statement of Profit and Loss.
(d) Inventories
Inventories are valued at lower of cost and net realizable value after providing for obsolescence and other losses, where
considered necessary. The basis of determining the value of each class of inventory is as follows:
(e) Revenue and Income Recognition
Revenues are recognized when the Company satisfies the performance obligation by transferring a promised product or service
to a customer, in an amount that reflects the consideration which the company expects to receive in exchange of those goods or
services. A product is transferred when the customer obtains control of that product, which is either at the point in time when the
product is delivered to the Customer premises or at the point in time when the title is passed to the customer based on the
contractual terms.
Revenue from services is recognised at a point in time or over the time depending upon the terms of the contract as and when
performance obligations are fulfilled.
Revenue is measured at the transaction price of the consideration received or receivable duly adjusted for variable consideration
and the same represents amounts receivable for goods and services provided in the normal course of business. Revenue also
excludes tax collected from customers. Contract modifications are accounted for as a part of existing contract or separate
contract based on conditions prescribed in Ind AS 115. Any retrospective revision in prices is accounted for in the year of such
revision.
Interest income is recognised using effective interest method. The effective interest rate is the rate that exactly discounts
estimated future cash receipts through expected life of the financial asset to the gross carrying amount of the financial asset.
When calculating the effective interest rate, the company estimates the expected cash flows by considering all the contractual
terms of the financial instrument but does not consider the expected credit losses.
Dividend income is recognised when the right to receive the same is established.
Export incentives are accrued in the year when the right to receive the same is established in respect of exports made and are
accounted to the extent there is no significant uncertainty about the measurability and ultimate realization/ utilization of such
benefits/ duty credit.
Other income is recognized on accrual basis except when realization of such income is uncertain.
(f) Foreign Exchange Transactions
Transactions in currencies other than the Company's functional currency (foreign currencies) are recognized at the rates of
exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign
currencies are translated using exchange rate prevailing on the last day of the reporting period.
Non monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the
exchange rate at the date of transaction.
Exchange differences on monetary items are recognized in the Statement of Profit and Loss in the period in which they arise.
(g) Leases
As Lessee
The Company assesses whether a contract, is, or 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:
- the contract involves the use of an identified asset;
- the Company has substantially all of the economic benefits from use of the asset throughout the period of the lease and
- the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognises a lease liability for all lease arrangements in which it is a
lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases and corresponding Right-
of-use Asset . For these short-term and low value leases, the Company recognises the lease payments as an operating expense on
a straight-line basis over the term of the lease.
The Right-of-use Assets are initially recognized at cost, which comprises the initial amount of the lease liabilities adjusted for any
lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They
are subsequently measured at cost less accumulated depreciation and impairment losses and adjusted for any remeasurement
of the lease liabilities.
Right-of-use Assets are depreciated on a straight-line basis over the shorter of the lease term and useful life of the underlying
asset.
The lease liability is initially measured at the present value of the future lease payments. The lease payments are discounted using
the interest rate implicit in the lease or, if it is not readily determinable, using the incremental borrowing rate. Lease liabilities are
remeasured with a corresponding adjustment to the related right of use asset if the Company changes its assessment if whether it
will exercise an extension or a termination option.
The Company accounts for each lease component within the contract as a lease separately from non-lease components of the
contract and allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of
the lease component and the aggregate stand-alone price of the non-lease components, except for leases where the company
has elected to use practical expedient not to separate non-lease payments from the calculation of the lease liability and ROU asset
where the entire consideration is treated as lease component.
Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases of Property, Plant and Equipment (i.e.,
those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It
also applies the lease of low-value assets recognition exemption to leases that are considered of low value. Lease payments on
short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term or another
systematic basis if that basis is more representative of the pattern of the lessee's benefit.
As lessor
Rental income from operating lease is recognised on a straight-line basis over the term of the relevant lease except where:
(i) Another systematic basis is more representative of the time pattern of the benefit derived from the asset given on lease.; or
(ii) The payments to the lessor are structured to increase in line with expected general inflation to compensate for the lessor's
expected inflationary cost increases.
(h) Employees Benefits
(i) Defined Contribution Plan
The company's contribution to defined contribution plan paid/payable for the year is charged to the Statement of Profit and
loss.
(ii) Defined Benefit Plan
The liabilities towards defined benefit schemes are determined using the Projected Unit Credit method. Actuarial valuations
under the Projected Unit Credit method are carried out at the balance sheet date. Actuarial gains and losses are recognized in
the Statement of Profit and Loss in the period of occurrence of such gains and losses. Past service cost is recognized
immediately to the extent that the benefits are already vested and otherwise it is amortized on straight-line basis over the
remaining average period until the benefits become vested.
The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit
obligation as reduced by plan assets.
(iii) Short Term Employee Benefits
Short-term employee benefits expected to be paid in exchange for the services rendered by employees are recognized
undiscounted during the period employee renders services. These benefits include salaries, wages, bonus, performance
incentives, etc.
(iv) Other Long Term Employee Benefits
Compensated absences which are not expected to occur within twelve months after the end of the period in which the
employee renders the related services are recognized as an actuarially determined liability at present value of the defined
benefit obligation at the balance sheet date.
(i) Borrowing Cost
Borrowing costs are interest and ancillary costs incurred in connection with the arrangement of borrowings. Income earned on
temporary deployement of borrowed funds, pending utilization for expenditure on the qualifying assets, is deducted from the
borrowing costs eligible for capitalization.
General and specific borrowing costs attributable to acquisition and construction of qualifying assets is added to the cost of
the assets upto the date the asset is ready for its intended use. A qualifying asset is an asset that necessarily takes a substantial
period of time to get ready for its intended use. Capitalisation of borrowing costs is suspended and charged to the Statement
of Profit and Loss during extended periods when active development activity on the qualifying assets is interrupted. All other
borrowing costs are recognised in the Statement of Profit and Loss in the period in which they are incurred.
(j) Income Taxes
Income tax expense represents the sum of the current tax and deferred tax.
(i) Current Tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from 'profit before tax' as reported in
the Statement of Profit and Loss because of items of income or expense that are taxable or deductible in other years and
items that are never taxable or deductible. The Company's current tax is calculated using tax rates and laws that have been
enacted or substantively enacted by the end of the reporting period.
(ii) Deferred Tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the Financial
Statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally
recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary
differences to the extent that it is probable that taxable profits will be available against which those deductible temporary
differences can be utilized.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it
is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be
utilized.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability
is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end
of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in
which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and
liabilities.
(iii)Current and Deferred Tax Expense for the Year
Current and deferred tax expense is 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.
(k) Financial Instruments
Financial assets and financial liabilities are recognized when Company becomes a party to the contractual provisions of the
instruments. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial
liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or
financial liabilities at fair value through profit or loss are recognized immediately in the Statement of Profit and Loss.
(l) Financial Assets
a. Classfication and Measurement
i) Cash and Cash Equivalents
The Company considers all highly liquid financial instruments, which are readily convertible into known amounts of cash
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 consist of balances with banks which are unrestricted
for withdrawal and usage.
ii) Financial Assets at Amortized Cost
Financial assets are subsequently measured at amortized cost using the effective interest method if these financial assets
are held within a business whose objective is to hold these assets 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.
iii) Financial Assets at Fair Value through Other Comprehensive Income
Financial assets are measured at fair value through other comprehensive income if these financial assets are held within a
business whose objective is achieved by both collecting contractual cash flows and selling financial assets 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.
iv) Financial Assets at Fair Value through Profit and Loss
Financial assets are measured at fair value through profit or loss unless it is measured at amortized cost or at fair value
through other comprehensive income on initial recognition.
b. Impairment of Financial Assets
In accordance with Ind AS 109, the Company applies Expected Credit Loss (ECL) model for measurement and recognition
of impairment loss on the financial assets and credit risk exposure.
i) Simplified Approach
The Company follows 'simplified approach' for recognition of impairment loss allowance on Trade Receivables.
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises
impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
ii) General Approach
For recognition of impairment loss on other financial assets and risk exposure, the Company determines that whether there
has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-
months ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If,
in a subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit
risk since initial recognition, then the entity reverts to recognising impairment loss allowance based on 12-months ECL.
Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a financial
instrument. The 12-months ECL is a portion of the lifetime ECL which results from default events that are possible within
12 months after the reporting date.
As a practical expedient, the Company uses a provision matrix to determine impairment loss allowance on its trade
receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade
receivables and is adjusted for forward-looking estimates. At every reporting date, the historical observed default rates are
updated and changes in the forward-looking estimates are analysed. On that basis, the Company estimates provision on
trade receivables at the reporting date. The specific/individual impairment assessment is carried out for major customers.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as expense (or income) in the
Statement of Profit and Loss.
c. Derecognition of Financial Assets
The Company derecognizes a financial asset when the contractual right to receive the cash flows from the asset expire, or
when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If
the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the
transferred asset, the Company recognises its retained interest in the asset and an associated liability for amounts it may
have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the
Company continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds
received.
On derecognition of a financial asset in its entirety (except for equity instruments designated as FVTOCI), the difference
between the asset's carrying amount and the sum of the consideration received and receivable is recognized in the
Statement of Profit and Loss.
(II) Financial Liabilities
a. Classification and Measurement
i) Financial Guarantee Contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for
a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt
instrument.
Financial guarantee contracts issued by the Company are initially measured at their fair values and, if not designated as at
FVTPL, are subsequently measured at the higher of:
- the amount of loss allowance determined in accordance with impairment requirements of Ind AS 109; and
- the amount initially recognized less, when appropriate, the cumulative amount of income recognized in accordance with
principles enunciated in Ind AS 115.
ii) Other Liabilities
Other Financial liabilities are measured at amortized cost using the effective interest method.
The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest
income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts
through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on
initial recognition.
iii) Financial Liabilities and Equity Instruments
Classification as Debt or Equity:
Debt and equity instruments issued by the Company are classified as financial liabilities or as equity in accordance with the
substance of the Contractual arrangements and the definitions of a financial liability and an equity instrument.
iv) Derecognition of Financial Liabilities
The company derecognizes a financial liability when its contractual obligations are discharged or cancelled or expire. The
difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is
recognized in Statement of Profit and Loss.
(III) Equity Instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of it's
liabilities.
Equity Instruments issued by a Company are recognized at the proceeds received.
(IV) Offsetting
Financial assets and financial liabilities are offset and the net amount is reported 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 realise the asset and
settle the liability simultaneously.
(l) Government grants
Government grants are recognized only when there is reasonable assurance that the conditions attached to them shall be
complied with, and the grants will be received. Deferred income is recognized in the statement of profit or loss on a systematic
and rational basis over the useful life of the asset. Government grants related to revenue are recognized on a systematic basis in
the statement of profit or loss over the periods as and when related obligations are achieved to match them with the related costs
which they are intended to compensate.
(m) Earnings Per Share
Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post-tax effect of exceptional items, if
any) by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by
dividing the profit / (loss) after tax (including the post-tax effect of exceptional items, if any) as adjusted for dividend, interest and
other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted
average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity
shares which could have been issued on the conversion of all dilutive potential equity shares.
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