NOTE 2.1 - MATERIAL ACCOUNTING POLICIES
A. Statement of compliance
The standalone Ind AS financial statements of the Company
have been prepared in accordance with the Indian
Accounting Standards (Ind AS) specified under Section 133
of the Companies Act, 2013 read with the Companies (Indian
Accounting Standards) Rules, 2015 (as amended from time to
time) and presentation requirements of Division II of Schedule
III to the Companies Act, 2013 (IND AS compliant Schedule
III), to the extent applicable. The standalone Ind AS financial
statements of the company also includes financial information
and other explanatory information of Trident Limited
Employee Welfare Trust.
Basis of preparation and presentation
The standalone Ind AS financial statements have been
prepared under the historical cost convention on accrual basis
except for following assets and liabilities which have been
measured at fair value:
1. Derivative financial instruments
2. Certain financial assets and liabilities measured at
fair value (refer accounting policy regarding financial
instruments in Note O-Financial Instruments)
3. Defined benefit plans - plan assets are
measured at fair value
Accounting policies have been consistently applied except
where a newly issued accounting standard is initially adopted
or a revision to an existing accounting standard requires a
change in the accounting policy hitherto in use.
The standalone Ind AS financial statements of the Company are
presented in Indian Rupee ('INR') and all values are rounded
to the nearest million with one decimal place (INR 000,000),
except when otherwise indicated.
The Company has prepared the financial statements on the
basis that it will continue to operate as a going concern.
The standalone statement of cash flows has been prepared in
accordance with Ind AS 7 - 'Statement of Cash Flows' using
the indirect method, as prescribed under the Companies Act,
2013 read with the Companies (Indian Accounting Standards)
Rules, 2015, as amended.
B Revenue recognition
Revenue from contracts with customers is recognised
when control of the goods is transferred to the customer on
satisfaction of performance obligations. The Performance
obligations as per contracts with customers are fulfilled at
the time of dispatch or delivery of goods depending upon the
terms agreed with customer.
The Company has generally concluded that it is the principal
in its revenue arrangements because it typically controls the
goods before transferring them to the customer.
Revenue towards satisfaction of a performance obligation is
measured at the amount of transaction price (net of variable
consideration) allocated to that performance obligation. The
transaction price of goods sold is net of variable considerable
on account of trade discounts and volume rebates and
incentives etc. offered by the Company as part of the contract.
Variable consideration includes trade discounts, volume
rebates and incentives, etc. The Company estimates the
variable consideration with respect to above based on an
analysis of accumulated historical experience. The Company
adjusts estimate of revenue at the earlier of when the most
likely amount of consideration expected to be received changes
or when the consideration becomes fixed.
Amounts disclosed as revenue are net of returns and
allowances. The Company collects goods and services tax
on behalf of the government and therefore, these are not
economic benefits flowing to the Company. Hence, these are
excluded from the revenue.
The revenue in respect of duty drawback and similar
other export benefits (Refer Note C- Government grants/
subsidies) is recognised on post export basis at the rate at
which the entitlements accrue and is included in the ' Other
operating revenue '.
Dividend income
Dividend on financial assets is recognised when the Company's
right to receive the dividends is established, it is probable that
the economic benefits associated with the dividend will flow to
the entity, the dividend does not represent a recovery of part
of cost of the investment and the amount of dividend can be
measured reliably.
Other income
Insurance claims are recognised when there exists no
significant uncertainty with regards to the amounts to be
realised and the ultimate collection thereof.
Contract balances - Trade receivables
A trade receivable is recognised if the amount of consideration
is unconditional (i.e., only the passage of time is required before
payment of the consideration is due). Refer to accounting
policies of financial assets in section - Financial instruments -
initial recognition and subsequent measurement.
C Government grants/subsidies
Government grants are recognised where there is reasonable
assurance that the grant will be received and all attached
conditions will be complied with. When the grant relates to
an expense item, it is recognised as income on a systematic
basis over the periods that the related costs, for which it
is intended to compensate, are expensed. When the grant
relates to an asset, the government grant related to asset is
presented by deducting the grant in arriving at the carrying
amount of the asset.
D Borrowing costs
Borrowing costs include interest and amortisation of ancillary
costs incurred in relation to borrowings. Borrowing costs,
allocated to and utilised for qualifying assets, pertaining
to the period from commencement of activities relating to
construction/development of the qualifying asset upto the
date of capitalisation of such asset are added to the cost of
the assets. Qualifying asset is one that necessarily takes
substantial period of time to get ready for its intended use.
Borrowing cost also includes exchange differences to the
extent regarded as an adjustment to the borrowing costs.
Interest revenue earned on the temporary investment of
specific borrowings for qualifying assets pending their
expenditure, is deducted from the borrowing costs eligible for
capitalisation.
All other borrowing costs are recognised in the Statement of
Profit and Loss in the period in which they are incurred.
E Income taxes
Income tax expense comprises current income tax
and deferred tax.
Current tax expense for the year is ascertained on the basis
of assessable profits computed in accordance with the
provisions of the Income Tax Act, 1961. The tax rates and tax
laws used to compute the amount are those that are enacted
or substantively enacted, at the reporting date.
Deferred tax is recognised using the balance sheet method on
temporary differences between the carrying amounts of assets
and liabilities in the standalone Ind AS financial statements
and the corresponding tax bases used in the computation
of taxable profit. Deferred tax assets are recognised for
all deductible temporary differences, the carry forward of
unused tax credits and unused tax losses to the extent that
it is probable that taxable profits will be available against
which those deductible temporary differences can be utilised.
Such deferred tax assets and liabilities are not recognised if
the temporary difference arises from the initial recognition
(other than in a business combination) of assets and liabilities
in a transaction that affects neither the taxable profit nor the
accounting profit.
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 asset to be recovered.
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 realised, based on tax rates (and
tax laws) that have been enacted or substantively enacted by
the end of the reporting period.
Current and deferred tax are recognised in the Statement
of Profit and Loss, except when they relate to items that are
recognised in other comprehensive income or directly in
equity, in which case, the current and deferred tax are also
recognised in other comprehensive income or directly in equity
respectively. Management periodically evaluates positions
taken in the tax returns with respect to situations in which
applicable tax regulations are subject to interpretation and
considers whether it is probable that a taxation authority will
accept an uncertain tax treatment. The Company shall reflect
the effect of uncertainty for each uncertain tax treatment by
using either most likely method or expected value method,
depending on which method predicts better resolution
of the treatment.
The Company offsets deferred tax assets and deferred tax
liabilities if and only if it has a legally enforceable right to
set off current tax assets and current tax liabilities and the
deferred tax assets and deferred tax liabilities relate to income
taxes levied by the same taxation authority.
Retirement and Employee benefits
The Company has schemes of employees benefits such as
Provident fund, Gratuity and Compensated absences, which
are dealt with as under:
Defined Contribution
Provident fund is the defined contribution scheme. The
contribution to this scheme is charged to the Statement
of Profit and Loss of the year in which contribution to such
scheme become due and when services are rendered by the
employees. The Company has no obligation other than the
contribution payable to the provident fund. If the contribution
payable to the scheme for services received before the
balance sheet date exceeds the contribution already paid, the
deficit payable to the scheme is recognised as a liability after
deducting the contribution already paid. If the contribution
already paid exceeds the contribution due for services received
before the balance sheet date, then excess is recognised as
an asset to the extent that the pre-payment will lead to, for
example, a reduction in future payment or a cash refund.
Defined Benefit plan
Gratuity liability in respect of employees of the Company is
covered through trusts' gratuity schemes managed by Life
Insurance Corporation of India, SBI Life Insurance Company
Limited, Kotak Mahindra and Bajaj Allianz. The cost of providing
benefits is determined using the projected unit credit method,
with actuarial valuations being carried out at each balance
sheet date by an independent valuer. Remeasurement gains
and losses are recognised in other comprehensive income in
the period in which they occur. Remeasurement recognised
in other comprehensive income is reflected immediately in
retained earnings and is not reclassified to the Statement
of Profit and Loss. Past service cost is recognised in the
Statement of Profit and Loss in the period of a plan amendment.
Net interest is calculated by applying the discount rate at the
beginning of the period to the net defined benefit liability or
asset. Defined benefit costs are categorised as follows:
• service cost (including current service cost, past service
cost, as well as gains and losses on curtailments
and settlements);
• net interest expense or income; and
• re-measurement
Short-term employee benefits
The undiscounted amount of short-term employee benefits
expected to be paid in exchange for the services rendered by
employees are recognised on an undiscounted accrual basis
during the year when the employees render the services. These
benefits include performance incentive and compensated
absences which are expected to occur within twelve months
after the end of the period in which the employee renders the
related services.
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 service are recognised as a liability at the
present value of the defined benefit obligation as at the balance
sheet date. The cost of providing benefits is determined using
the projected unit credit method, with actuarial valuations
being carried out at each balance sheet date. Actuarial gains
and losses are recognised in the Statement of Profit and Loss
in the period in which they occur. The Company presents the
entire leave liability as current liability, since it does not have
an unconditional right to defer its settlement for 12 months
after the reporting period.
G Property, Plant and Equipment (PPE)
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
accumulated impairment losses (if any). Freehold land is not
depreciated and have been measured at fair value at the date
of transition i.e. April 01, 2015 to Ind AS. The Company regards
the fair value as deemed cost at the transition date.
Capital Work in progress is stated at cost, less any recognised
impairment loss.
Property, plant and equipment except freehold land is carried
at cost net of accumulated depreciation and accumulated
impairment losses if any. Cost comprises of its purchase price
including non-refundable duties and taxes and excluding any
trade discount and rebates and any directly attributable costs
of bringing the asset to it working condition and location for
its intended use. Cost also includes professional fees and, for
qualifying assets, borrowing costs capitalised in accordance
with the Company's accounting policy (refer note 2.1 (D)). Such
items are classified to the appropriate categories of property,
plant and equipment when completed and ready for intended
use. Depreciation of these assets commences when the assets
are ready for their intended use.
The Company reviews the estimated residual values and
expected useful lives of assets at least annually. In particular,
the Company considers the impact of health, safety and
environmental legislation in its assessment of expected useful
lives and estimated residual values.
Subsequent expenditure related to an item of PPE is capitalised
only when it is probable that future economic benefits associated
with these will flow to the Company and the cost of the item can be
measured reliably. Such cost includes the cost of replacing part
of the plant and equipment. When significant parts of plant and
equipment are required to be replaced at intervals, the Company
depreciates them separately based on their specific useful lives.
An item of property, plant and equipment and any significant part
initially recognised is derecognised upon disposal or when no
future economic benefits are expected from its use or disposal.
Gains or losses arising from derecognition of the assets 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.
H Depreciation on tangible assets
Depreciable amount for assets is the cost (net of amount
received towards government grant) of an asset, or other
amount substituted for cost, less its estimated residual value.
Depreciation on tangible property, plant and equipment
has been provided on the straight-line method as per the
useful life prescribed in Schedule II to the Companies Act,
2013 except in respect of the following categories of assets,
in whose case the life of the assets has been assessed as
under based on technical advice, taking into account the
nature of the asset, the estimated usage of the asset, the
operating conditions of the asset, past history of replacement,
anticipated technological changes, manufacturers warranties
and maintenance support, etc.:
Leasehold improvements are depreciated over the remaining
lease period or over the useful life, whichever is shorter.
When parts of an item of Property, plant and equipment have
different useful life, they are accounted for as separate items
(Major components) and are depreciated over the useful life of
part or the parent asset to which it relates, whichever is lower.
Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible
assets are carried at cost less accumulated amortisation
and accumulated impairment losses, if any. Intangible assets
with finite lives are amortised on a straight line basis over
the estimated useful economic life. The estimated useful life
and amortisation method are reviewed at the end of each
reporting period.
Development expenditures on an individual project are
recognised as an intangible asset when the Company
can demonstrate:
• The technical feasibility of completing the intangible
asset so that the asset will be available for use or sale
• Its intention to complete and its ability and intention to
use or sell the asset
• How the asset will generate future economic benefits
• The availability of resources to complete the asset
• The ability to measure reliably the expenditure
during development
Following initial recognition of the development expenditure
as an asset, the asset is carried at cost less any accumulated
amortisation and accumulated impairment losses. Amortisation
of the asset begins when development is complete and the
asset is available for use. Amortisation expense is recognised
in the Statement of Profit and Loss unless such expenditure
forms part of carrying value of another asset.
Intangible assets are amortised on the straight-line method as
per the useful life assessed based on expected future benefit,
taking into account the nature of the asset and the estimated
usage of the asset:
An intangible asset is derecognised upon disposal (i.e., at the
date the recipient obtains control) or when no future economic
benefits are expected from its use or disposal. Any gain or
loss arising upon derecognition of the asset (calculated as the
difference between the net disposal proceeds and the carrying
amount of the asset) is included in the Statement of Profit and
Loss. when the asset is derecognised.
Inventories
Raw materials, work in progress, finished goods, process waste
and stores and spares are valued at cost or net realisable
value, whichever is lower. Raw materials inventories held for
use in the production of inventories are not written down below
cost if the finished products in which they will be incorporated
are expected to be sold at or above cost. However, when a
decline in the price of raw materials indicates that the cost
of the finished products exceeds net realisable value, the
raw materials are written down to net realisable value. Net
realisable value represents the estimated selling price for
inventories less all estimated costs of completion and cost
necessary to make the sale. The basis of determining cost for
various categories of inventories is as follows:
- Raw materials: moving weighted average cost*:
Cost includes cost of purchase and other costs
incurred in bringing the inventories to their present
location and condition.
- Work in progress: cost of raw materials plus conversion
cost depending upon the stage of completion. Cost is
determined on a moving weighted average basis except
for work-in-progress inventory of towel and sheeting
divisions for which cost is determined on a monthly
weighted average basis.
- Stock-in-trade (acquired for trading) - Cost is determined
on a moving weighted average basis including other
costs incurred in bringing the inventories to their present
location and condition.
- Finished goods (including stock in transit): cost of raw
materials plus conversion cost and packing cost. Cost
is determined on a moving weighted average basis
except for finished goods inventory of towel and sheeting
divisions for which cost is determined on a monthly
weighted average basis.
- Process waste is valued at net realisable value.
- Stores and spares: moving weighted average cost
- Cost includes cost of purchase and other costs
incurred in bringing the inventories to their present
location and condition.
* Includes by products which is valued at net realisable value.
K Impairment of Non- Financial Assets
The Company 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 Company 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 fair
value less costs of disposal, recent market transactions are
taken into account, if available, and if no such transactions can
be identified an appropriate valuation model is used.
The Company bases its impairment calculation on detailed
budgets and forecast calculations which are prepared
separately for each of the Company's CGU's to which the
individual assets are allocated. These budgets and forecast
calculations generally cover a period of five years. For longer
periods, a long term growth rate is calculated and applied to
projected future cash flows after the fifth year.
An assessment is made at each reporting date as to whether
there is any indication that previously recognised impairment
losses may no longer exist or may have decreased. If such
indication exists, the Company estimates the asset's or CGU's
recoverable amount. A previously recognised impairment loss
is reversed only if there has been a change in the assumptions
used to determine the asset's recoverable amount since the
last impairment loss was recognised. The reversal is limited
so that the carrying amount of the asset does not exceed its
recoverable amount, nor exceed the carrying amount that
would have been determined, net of depreciation, had no
impairment loss been recognised for the asset in prior years.
Such reversal is recognised in the Statement of Profit and Loss.
Capital work in progress and intangibles asset under
development is tested for impairment annually.
L Segment reporting
The Company identifies primary segments based on the
dominant source, nature of risks and returns and the internal
organisation and management structure. The operating
segments are the segments for which standalone financial
information is available and for which operating profit/
loss amounts are evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in
assessing performance.
Operating segments are reported in a manner consistent with
the internal reporting provided to the Chief Operating Decision
Maker (CODM). CODM review the performance of the Company
according to the nature of products manufactured with each
segment representing a strategic business unit that offers
different products and serves different markets. The analysis of
geographical segments is based on the locations of customers.
M Leases
The Company assesses at contract inception whether a
contract is, or contains, a lease. That is, if the contract conveys
the right to control the use of an identified asset for a period of
time in exchange for consideration.
Company as a lessee
The Company applies a single recognition and measurement
approach for all leases, except for short-term leases and
leases of low-value assets. The Company recognises lease
liabilities to make lease payments and right-of-use assets
representing the right to use the underlying assets.
i) 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 amount of lease liabilities
recognised, 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 shorter
of the lease term and the estimated useful lives of the
assets, as follows:
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.
The right-of-use assets are also subject to impairment.
Refer to the accounting policies in section 2.1 (K)
Impairment of non-financial assets.
ii) 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 are fixed payments.
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.
The Company's lease liabilities are disclosed separately
in the Balance Sheet (see Note 40).
iii) Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition
exemption to its short-term leases except in case of lease
contracts with related parties since there exist economic
incentive for the Company to continue using the leased
premises for a period longer than the 11 months and
considering the contract is with the related parties, it
does not foresee non-renewalewal of the lease term for future
periods, thus basis the substance and economics of the
arrangements, management believes that under Ind AS
116, the lease terms in the arrangements with related
parties have been determined considering the period for
which management has an economic incentive to use the
leased asset (i.e. reasonable certain to use the asset for
the said period of economic incentive). Such assessment
of incremental period is based on management
assessment of various factors including the remaining
useful life of the asset as on the date of transition. The
management has assessed period of arrangements with
related parties as 10 years as at April 01, 2019. 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.
Company as a lessor
Leases in which the Company does not transfer substantially
all the risks and rewards of ownership of an asset are
classified as operating leases. Rental income from operating
lease is recognised on a straight-line basis over the term of the
relevant lease. Initial direct costs incurred in negotiating and
arranging an operating lease are added to the carrying amount
of the leased asset and recognised over the lease term on the
same basis as rental income. Contingent rents are recognised
as revenue in the period in which they are earned.
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