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 as estimated by the Management as under:
(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. Classf ication 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 specif ic/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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