Note No. 2 Material accounting policies
2.1 Basis of Preparation of Financial Statements
The Standalone Financial Statements have been prepared in accordance with Indian Accounting Standards
(Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 notified under Section 133 of
Companies Act, 2013, (the ‘Act') and other relevant provisions of the Act as amended from time to time.
2.2 Use of Estimates and Judgements
The standalone financial statements have been prepared on the historical cost basis except for: - certain
financial assets and liabilities (including derivative instruments), plan assets of the defined benefit plan and
equity settled share based payments that are measured at fair values at the end of each reporting period.
2.3 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for
estimated customer returns, rebates and other similar allowances.
2.3.1 Sale of goods
Revenue is recognised upon the transfer of control of promised goods to the customer, at an amount that
reflects the consideration to which the Company expects to be entitled in exchange for those goods, as
specified in the contract with the customer.In respect of sale of goods, control is generally transferred at a
point in time, which is usually upon dispatch or delivery to the customer, as per the terms of the contract. The
transaction price is determined based on the consideration specified in the contract with the customer and is
adjusted for variable consideration, such as volume discounts, rebates, promotional allowances, price
concessions, incentives, and returns, where applicable. Variable consideration is estimated at contract inception
and is constrained to the extent that it is highly probable that a significant reversal will not occur. Amounts
collected on behalf of the government, such as goods and services tax (GST) or other indirect taxes, are
excluded from revenue.
2.3.2 Rendering of services
Revenue from rendering services is recognised in accordance with the performance obligations and the allocated
transaction price. The outcome of a transaction is considered reliably measurable when all of the following
conditions are satisfied:
The amount of revenue can be measured reliably;
It is probable that the economic benefits associated with the transaction will flow to the company;
The stage of completion of the transaction at the reporting date can be measured reliably; and
The costs incurred for the transaction and the costs to complete the transaction can be measured reliably.
2.3.3 Recognition of revenue from sale of land and development rights
Revenue from sale of land and development rights is recognized upon transfer of control on the real
estate/ property, as per the terms of the contracts entered into with buyers, which generally coincides
with the firming of the sales contracts/ agreements. Revenue from sale of land and development rights is
only recognized when transfer of legal title to the buyer is not a condition precedent for transfer control on
the property to the buyer.
2.3.4 Royalties
Share of profit and royalty income under manufacturing and supply agreements with customers are
accrued based on confirmation received from customers.
2.3.5 Dividend and interest income
Dividend income from investments is recognised when the shareholder's right to receive payment has been
established (provided that it is probable that the economic benefits will flow to the Company and the amount of
income can be measured reliably).
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to
the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis,
by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that
exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's
net carrying amount on initial recognition.
2.3.6 Foreign currencies transactions and translation
The functional currency of the Company is the Indian Rupee (?).
T ransactions in foreign currencies are recorded at the exchange rate prevailing on the date of transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency
closing rates of exchange at the reporting date.
Exchange differences arising on settlement or translation of monetary items are recognised in Statement
of Profit and Loss except to the extent of exchange differences which are regarded as an adjustment to
interest costs on foreign currency borrowings that are directly attributable to the acquisition or construction
of qualifying assets, are capitalized as cost of assets. Non-monetary assets and liabilities that are
measured in terms of historical cost in foreign currencies are not retranslated. Income and expense items
in foreign currency are translated at the average exchange rates for the period, unless exchange rates
fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions
are used.
2.4 Employee benefits
2.4.1 Retirement benefit costs and termination benefits
Payments to defined contribution retirement benefit plans are recognised as an expense when employees
have rendered service entitling them to the contributions. For defined benefit retirement plans, the cost of
providing benefits is determined using the projected unit credit method, with actuarial valuations being
carried out at the end of each annual reporting period. Remeasurement, comprising actuarial gains and
losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding
net interest), is reflected immediately in the balance sheet with a charge or credit 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 statement of profit and
loss. Past service cost is recognised in 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
remeasurement The Company presents the first two components of defined benefit costs in statement of
profit and loss in the line item ‘Employee benefit expense'. Curtailment gains and losses are accounted
for as past service costs.
The retirement benefit obligation recognised in the balance sheet represents the actual deficit or surplus
in the Company's defined benefit plans. Any surplus resulting from this calculation is limited to the
present value of any economic benefits available in the form of refunds from the plans or reductions in
future contributions to the plans.
A liability for a termination benefit is recognised at the earlier of when the entity can no longer withdraw
the offer of the termination benefit and when the entity recognises any related restructuring costs.
2.4.2 Defined contribution plan
Contribution to defined contribution plans are recognised as expense when employees have rendered
services entitling them to such benefits.
2.4.3 Compensated absences
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 recognised at an actuarially determined liability at
the present value of the defined benefit obligation at the Balance sheet date. In respect of compensated
absences expected to occur within twelve months after the end of the period in which the employee
renders the related services, liability for short-term employee benefits is measured at the undiscounted
amount of the benefits expected to be paid in exchange for the related service.
2.4.4 Long term Incentive Plans
Under the Plan, certain employees are eligible for retention and performance linked payouts. These
payouts are accrued as and when services are rendered and/ or when the specific performance criteria
are met.
2.5 Share-based payment arrangements
2.5.1 Share-based payment transactions of the Company
Equity-settled share-based payments to employees and others providing similar services are measured
at the fair value of the equity instruments at the grant date.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a
straight-line basis over the vesting period, based on the Company's estimate of equity instruments that
will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the
Company revises its estimate of the number of equity instruments expected to vest. The impact of the
revision of the original estimates, if any, is recognised in statement of profit and loss such that the
cumulative expense reflects the revised estimate,with a corresponding adjustment to the equity-settled
employee benefits reserve.
2.5.2 Share-based payment transactions of the acquiree in a business combination
When the share-based payment awards held by the employees of an acquiree (acquiree awards) are
replaced by the Company's share-based payment awards (replacement awards), both the acquiree awards
and the replacement awards are measured in accordance with Ind AS 102 ("market-based measure") at the
acquisition date. The portion of the replacement awards that is included in measuring the consideration
transferred in a business combination equals the market-based measure of the acquiree awards multiplied by
the ratio of the portion of the vesting period completed to the greater of the total vesting period or the original
vesting period of the acquiree award. The excess of the market-based measure of the replacement awards over
the market based measure of the acquiree awards included in measuring the consideration transferred is
recognised as remuneration cost for post-combination service.
However, when the acquiree awards expire as a consequence of a business combination and the Company
replaces those awards when it does not have an obligation to do so, the replacement awards are measured
at their market-based measure in accordance with Ind AS 102. All of the market-based measure of the
replacement awards is recognised as remuneration cost for post-combination service.
2.6 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
2.6.1 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 standalone 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 that have been enacted or substantively enacted by the end of
the reporting period.
2.6.2 Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities
in the standalone financial statements and the corresponding tax bases used in the computation of
taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred
tax assets are generally recognised 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 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. In addition, deferred tax liabilities are not
recognised if the temporary difference arises from the initial recognition of goodwill.
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.
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.
Deferred tax assets include Minimum Alternate Tax (MAT) paid in accordance with the tax laws in India,
which is likely to give future economic benefits in the form of availability of set-off against future tax
liability. Accordingly, MAT is recognised as deferred tax asset in the Standalone Balance sheet when the
asset can be measured reliably and it is probable that the future economic benefit associated with the
asset will be realised.
2.6.3 Current and deferred tax for the year
Current and deferred tax are recognised in standalone 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.
Where current tax or deferred tax arises from the initial accounting for a business combination, the tax
effect is included in the accounting for the business combination.
2.7 Property, plant and equipment
Property, plant and equipment 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.
Properties in the course of construction for production, supply or administrative purposes are carried at
cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying assets,
borrowing costs capitalised in accordance with the Company's accounting policy. Such properties are
classified to the appropriate categories of property, plant and equipment when completed and ready for
intended use. Depreciation of these assets, on the same basis as other property assets, commences
when the assets are ready for their intended use. Freehold land is not depreciated.
Depreciation is recognised so as to write off the cost of assets (other than freehold land and properties
under construction) less their residual values over their useful lives, using the straight-line method. The
estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting
period, with the effect of any changes in estimate accounted for on a prospective basis.
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned
assets. However, when there is no reasonable certainty that ownership will be obtained by the end of the lease
term, assets are depreciated over the shorter of the lease term and their useful lives.
Depreciation on tangible fixed assets 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 to be different and are 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.
An item of property, plant and equipment is derecognised 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 property, plant and equipment is determined as the difference between
the sales proceeds and the carrying amount of the asset and is recognised in standalone statement of
profit and loss.
When an item of property, plant and equipment is acquired in exchange for a non-monetary asset or
assets, or a combination of monetary and nonmonetary assets, the cost of that item is measured at fair
value (even if the entity cannot immediately derecognise the asset given up) unless the exchange transaction
lacks commercial substance or the fair value of neither the asset received nor the asset given up is
reliably measurable. If the acquired item is not measured at fair value, its cost is measured at the carrying
amount of the asset given up.
2.8 Investment Property
(a) Recognition and Measurement
Property held to earn rentals or for capital appreciation or both rather than for use in the production or
supply of goods or services or for administrative purposes; or sale in the ordinary course of business is
recognised as Investment Property. Land held for a currently undetermined future use is also recognised
as Investment Property.
An investment property is measured initially at its cost. The cost of an investment property comprises its
purchase price and any directly attributable expenditure. After initial recognition, the Company carries the
investment property at the cost.
(b) Fair Value
Fair value of investment property is based on a valuation by an independent valuer who holds a recognised
and relevant professional qualification and has recent experience in the location and category of the
investment property being valued.
(c) Gain or loss on Disposal
Any gain or loss on disposal of an Investment Property is recognised in the Standalone Statement of
Profit and Loss.
2.9 Intangible assets
2.9.1 Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated
amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis
over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the
end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective
basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less
accumulated impairment losses.
2.9.2 Internally-generated intangible assets - research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
An internally-generated intangible asset arising from development (or from the development phase of an
internal project) is recognised if, and only if, all of the following have been demonstrated:
- the technical feasibility of completing the intangible asset so that it will be available for use or sale;
- the intention to complete the intangible asset and use or sell it;
- the ability to use or sell the intangible asset;
- how the intangible asset will generate probable future economic benefits;
- the availability of adequate technical, financial and other resources to complete the development
and to use or sell the intangible asset; and
- the ability to measure reliably the expenditure attributable to the intangible asset during its
development.
The amount initially recognised for internally generated intangible assets is the sum of the expenditure
incurred from the date when the intangible asset first meets the recognition criteria listed above. Where
no internally-generated intangible asset can be recognised, development expenditure is recognised in
standalone statement of profit and loss in the period in which it is incurred.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less
accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets
that are acquired separately.
2.9.3 Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and recognised separately from goodwill are initially
recognised at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at
cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible
assets that are acquired separately.
2.9.4 Derecognition of intangible assets
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from
use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the
difference between the net disposal proceeds and the carrying amount of the asset, are recognised in
statement of profit and loss when the asset is derecognised.
2.10 Impairment of assets
2.10.1 Impairment of financial assets:
The Company assesses at each date of balance sheet, whether a financial asset or a group of financial
assets is impaired. Ind AS 109 requires expected credit losses to be measured through a loss allowance.
The Company recognises lifetime expected losses for all contract assets and / or all trade receivables
that do not constitute a financing transaction. For all other financial assets, expected credit losses are
measured at an amount equal to the twelve-month expected credit losses or at an amount equal to the life
time expected credit losses if the credit risk on the financial asset has increased significantly, since initial
recognition.
2.10.2 Impairment of investment in subsidiaries, associates and joint ventures
The Company reviews its carrying value of investments in subsidiaries at cost, annually, or more frequently
when there is an indication for impairment. If the recoverable amount is less than its carrying amount, the
impairment loss is accounted for.
2.10.3 Impairment of non-financial assets other than goodwill
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible
assets to determine whether there is any indication that those assets have suffered an impairment loss. If any
such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the
impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the
Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a
reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual
cash generating units, or otherwise they are allocated to the smallest group of cash-generating units for which
a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for
impairment at least annually, and whenever there is an indication that the asset may be impaired.
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 recognised immediately in standalone statement of profit and loss.
When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash generating unit)
is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does
not exceed the carrying amount that would have been determined had no impairment loss been recognised for
the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately
in standalone statement of profit and loss.
2.11 Inventories
Inventories are valued at the lower of cost and the net realisable value after providing for obsolescence and
other losses, where considered necessary. Cost includes all charges in bringing the goods to the point of
sale, including octroi and other levies, transit insurance and receiving charges. Work-in-progress and
finished goods include appropriate proportion of overheads and, where applicable,. Cost is determined as
follows:
Raw materials, packing materials and consumables: First In First Out
Work-in progress: at material cost and an appropriate share of production overheads
Finished goods: material cost and an appropriate share of production overheads wherever applicable
Stock-in trade: First In First Out
2.12 Segment Reporting
Operating Segments are defined as components of an enterprise for which discrete financial information
is available that is evaluated regularly by chief operating decision making body, in deciding how to allocate
resources and assessing performance.
The reporting of segment information is the same as provided to the management for the purpose of the
performance assessment and resource allocation to the segments.
Segment revenue, segment expenses, segment assets and segment liabilities have been identified to
segments on the basis of their relationship to the operating activities of the segment. Inter segment
revenue is accounted on the basis of transactions which are primarily determined based on market/ fair
value factors. Revenue, expenses, assets and liabilities which relate to the company as a whole and are
not allocable to segments on a reasonable basis have been included under - Unallocated revenue/ expenses/
assets/ liabilities.
2.13 Cash and Cash Equivalents
Cash and cash equivalents include cash, cheques on hand, cash at bank and short term deposits with
banks having original maturity of three months or less, which are subject to insignificant risk of changes
in value.
2.14 Statement of Cash Flows
Cash flows are reported using the indirect method whereby profit/(loss) is adjusted for the effects of
transactions of non- cash nature and any deferrals or accruals of past or future cash receipts or payments.
The cash flow from operating, investing and financing activities of the company are segmented based on
the available information.
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