2. Significant accounting policies:
A Summary of the significant accounting policies applied in the
preparation of the financial statements is as given below. These
accounting policies have been applied consistently to all the periods
presented in the financial statements.
2.1 Ind AS 105: Non-Current Assets held for Sale or Discontinued
Operations:
This standard specifies accounting for assets held for sale, and the
presentation and disclosure for discontinued operations:
(a) Assets that meet the criteria to be classified as held for s. tie to be
measured at the lower of carrying amount and fair value less cost to
sell, and depreciation on such assets to cease; and
(b) Assets that meet the criteria to be classified as held for sale to be
presented separately in the balance sheet and the results of
discontinued operations to be presented separately in the statement
of profit and loss.
2^2 Ind AS 106; Exploration for Evolution of Mineral resources:
This standard specifies the financial reporting for the exploration for
evaluation of mineral resources. In particular, this standard reqt i -es:
a. Limited improvements to existing accounting practices for exploration
and evaluation of expenditures
b. Entities that recognize exploration and evaluation of assets to assess
such assets for impairment in accordance with this standard and
measure any impairment.
Disclosures that identify and explain the amounts in the entity’s financial
statements arising from the exploration for the evaluation of mineral
resources and help users of those financial statements understand the
amount, timing, and certainty of future cash flows from any exploration and
evaluation of assets recognized.
This Ind AS 106 is not applicable, the company is in the business of IT
Product development & Software. Hence this Ind AS does not have any
financial impact on the financial statements of the company.
2.3 Ind AS-16: Property, Plant and Equipment;
Property, Plant and Equipment are stated at cost less accumulated
depreciation. . .
Cost of an item of property, plant and equipment comprises its purchase
price, including import duties and non-refundable purchase taxes, after
deducting trade discounts and rebates, any directly attributable cost ol
bringing the item to its working condition for its intended use and estimated
costs of dismantling and removing the item and restoring the site on which
it is located.
The cost of a self-constructed item of property, plant and equipment
comprises the cost of materials and direct labor, any other costs directly
attributable to bringing the item to working condition for its intended use,
and estimated costs of dismantling and removing the item and restoring the
site on which it is located.
Property, plant, and equipment which are significant to the total cost of that
item of Property Plant and Equipment and having different useful life are
accounted for separately.
Gains or losses arising from de recognition of property’, plant and
equipment are measured as the difference between the net disposal
proceeds and carrying amount of the asset is recognized in the statement
of profit or loss when the asset is derecognized.
Depreciation on Property Plant and Equipment is provided on Straight line
method. Depreciation is provided based on useful lite as prescribed under
part C of schedule II of the Companies act, 2013.
Depreciation on additions (disposals) is provided on a pro-rata basis i.e.
from (up to) the date on which the asset is ready for use (disposed of).
Impairment
Property Plant and Equipment are evaluated for recoverability whenever
events or changes in circumstances indicate that their carrying amount
may not be recoverable. An impairment loss is recognised for the amount
by which the asset’s carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset ’s fair value less cost of disposal
and value in use. For the purposes of assessing impairment, assets are
grouped at the lowest levels for which there are separately identifiable cash
inflows which are largely independent of the cash inflows from other assets
or groups of assets (cash-generating units).
2.4 Impairment Assets (Ind AS 36)
The Company’s non-financial assets, other than deferred tax assets, are
reviewed at each reporting date to determine whether there is any indication
of impairment. If any such indication exists, Lhen the asset’s recoverable
amount is estimated.
For impairment testing, assets that do not generate independent cash
inflows are grouped together into cash-generating units (CGUs). Each CGU
represents the smallest group of assets that generates cash inflows that are
largely independent of the cash inflows of other assets or CGUs.
The recoverable amount of a CGU (or an individual asset) is the higher of
its value in use and its fair value less costs to sell. Value in use is based on
the estimated future cash flows, 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 CGU (or the asset).
An impairment loss is recognized if the carrying amount of an asset or CGU
exceeds its estimated recoverable amount. Impairment losses are
recognized in the statement of profit and loss. Impairment loss lecognized
in respect of a CGU is allocated first to reduce the carrying amount of any
goodwill allocated to the CGU, and then to reduce the cariying amounts of
die other assets of the CGU (or group of CGUs) on a pro rata basis.
The books of accounts of the company don’t carry any impairment of assets
during the reporting period, hence this accounting standard does not have
a financial impact on the financial statements of the company.
2.5 Intangible assets find AS 381:
Intangible assets are stated at cost less accumulated amortization and
impairment. Intangible assets are amortized over their estimated useful life
on straight line basis.
Subsequent costs are included in assets earning amount or recognized or
recognized as a separate asset, as appropriate, only when it is probable that
future economic benefits associated with the item will flow to the entity and
the cost can be measured reliably.
The residual Values, useful lives, and methods of depreciation of Property
Plant and Equipment are reviewed at each financial year end and adjusted
prospectively, if appropriate.
Gains or losses arising from de-recognition of Intangible asset are measured
as the difference between the net disposal proceeds and carrying amount of
the asset is recognized in the statement of profit or loss when the asset is
derecognized.
2.6 Cash Flow Statement (Ind AS 7):
Cash flows are reported using the indirect method under Ind AS 7, whereby
profit/(loss) before extraordinary items and tax 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 flows from operating, investing
and financing activities of the Company are segregated based on the
available information.
Cash comprises cash on hand and demand deposits with ba iks. Cash
equivalents are short-term balances (with an original maturit' of three
months or less from the date of acquisition), highly liquid investm nts that
are readily convertible into known amounts of cash and which b • subject
to insignificant risk of changes in value.
2.7 Operating Cycle:
The Company has adopted its normal operating cycle as twelve months
based on the nature of products and the time between the acquisition of
assets for processing and their realization, for the purpose of current / non¬
current classification of assets and liabilities.
2.8 Capital Work in Progress
Capital Work in Progress (CWIP) includes Civil Works in Progress, Plant &
Equipment under erection and Preoperative Expenditure pending allocation
on the assets to be acquired/commissioned, capitalized. It also includes
payments made towards technical know-how fee and for other General
Administrative Expenses incurred for bringing the asset into existence. The
Capital Work in Progress is no more eligible to use so it has been written
off during the year.
2.9 Investments:
Investments are classified as Non-Current and Current investments.
Investments, which are readily realisable and are intended to be held for
not more than one year from the date on which such investments are made,
are classified as current investments. All other investments are classified
as non-current investments.
Current investments arc carried at lower of cost and fair value. Non-Current
Investments are carried at cost less provision for other than temporary
diminution, if any, in value of such investments.
2.10 Effects of changes in Foreign Rates (Ind AS 21):
Foreign currency transactions are recorded at the exchange rates prevailing
on the dates when the relevant transactions took place. Exchange
differences arising on settled foreign currency transactions during the year
and translation of assets and liabilities at the year-end are recognized in
the statement of profit and loss.
In respect of Forward contracts entered into to hedge risks associated with
foreign currency fluctuation on its assets and liabilities, the premium or
discount at the inception of the contract is amortized as income or expense
over die period of contract. Any profit or loss arising from the cancellation
or renewal of forward contracts is recognized as income or expense in the
period in which such cancellation or renewal is made.
The company has not entered into any foreign exchange transactions
during the reporting period; hence this accounting standard does not have
a financial impact on the financial statements.
2.11 Borrowing Costs (lad AS 231:
Borrowing costs direedy attributable to the acquisition, construction, or
production of qualifying assets, which are assets that necessarily take a
substantial period to get ready for their intended use or sale, are added to
die cost of those assets, until such time as the assets is substantially ready
for the intended use or sale.
Investment income earned on temporary investment of specific borrowings
pending their expenditure on qualifying assets is recognized in the
statement of profit and loss.
Discounts or premiums and expenses on the issue of debt securities are
amortized over the term of related securities are included within borrowing
costs. Premiums payable on early redemptions of debt securities, in lieu of
future costs, are recognised as borrowing costs.
All other borrowing costs are recognized as expenses in the period in which
it is incurred.
2.12 Revenue Recognition (Ind AS 18):
Revenue is recognized to the extent that it is probable that the economic
benefits will How to the Company and the revenue can be reliably .ensured.
The following specific recognition criteria must also be met befoi e revenue
is recognized:
a) Sales Revenue is recognized on dispatch to customers as per the terms
of the order. Gross sales are net of returns and applicable trade
discounts and excluding GST billed to the customers.
b) A subsidy from Government is recognized when such subsidy has been
earned by the company and it is reasonably certain that the ultimate
collection will be made.
c) Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head “other income” in the
statement of profit and loss.
d) All other incomes are recognized based on the communications held
with the parties and based on the certainty of the incomes.
2.13 Accounting for Government Grants and Disclosure of Government
Assistance (Ind AS 201:
Government grants:
Government grants are not recognized until there is a reasonable
assurance that the Company will comply with the conditions attached to
them and that the grants will be received.
Government grants are recognized in the Statement of Profit and Loss on
a systematic basis over the years in which the Company recognizes as
expenses the related costs for which the grants are intended to compensate
or when performance obligations are me.
Government grants, whose primary condition is that the Company should
purchase, construct, or otherwise acquire non-current assets and
nonmonetary grants are recognized and disclosed as ‘deferred income’
under non-current liability in the Balance Sheet and transferred to the
Statement of Profit and Loss on a systematic and rational basis over the
useful lives of the related assets.
The benefit of a government loan at a below'-market rate of interest and
the effect of this favorable interest is treated as a government grant. The
loan or assistance is initially recognized at fair value and the government
grant is measured as the difference between proceeds received and the fair
value of the loan based on prevailing market interest rates and recognized
to the income statement immediately on fulfillment of the performance
obligations. The loan is subsequently measured as per the accounting
policy applicable to financial liabilities.
2.14 Inventories (Ind AS 2>:
Inventories are assets:
a. Held for sale in the ordinary course of business.
b. In the process of production for such sale;
c. In the form of materials or supplies to be consumed in the production
process or in the rendering of services
Net Realizable value is the estimated selling price in the ordinary course of
business less the estimated costs of completion and the estimated costs
necessary to make the sale.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date.
• Cost of Material excludes duties and taxes which are sul m quently
recoverable.
• Stocks at Depots are inclusive of duty, wherever applicable, paid at the time
of dispatch from Factories.
• Based on the information provided the difference between physical
verification and valuation of the inventories are charged to the profit and
loss account.
2.IS Trade Receivables - Doubtful debts:
A Trade receivable represents the company’s right to an amount of
consideration that is unconditional.
Provision is made in the Accounts for Debts/Advances which is in the
opinion of Management Are Considered doubtful of Recovery.
2.16 Retirement and other Employee Benefits:
Retirement benefit in the form of provident fund is a defined co. ribution
scheme. The Company has no obligation other than the contribution
payable to the provident fund. The Company recognizes the contribution
payable to the provident fund scheme as expenditure when an employee
renders related service.
Gratuity liability is a defined benefit obligation and the cost of providing the
benefits under this plan is determined on the basis of actuarial valuation
at each year-end. Actuarial valuation is carried out for this plan using the
projected unit credit method. Actuarial gains and losses for defined benefits
plan is recognized in full in the period in which they occur in the statement
of profit and loss.
Accumulated leave, which is expected to be utilized within the next 12
months, is treated as short term employee benefit. The Company measures
the expected cost of such absences as the additional amount that it expects
to pay as a result of the unused entitlement that has accumulated at the
reporting date.
The Company treats accumulated leave expected to be carrie . forward
beyond twelve months, as long-term employee benefit for measurement
purposes. Such long-term compensated absences are provided for based on
ihe actuarial valuation using the projected unit credit method at the year-
end. Actuarial gains/losses are immediately taken to the statement of profit
and loss and are not deferred. The Company presents leave as a current
liability in the balance sheet, to the extent it does not have an unconditional
right to defer its settlement for 12 months after the reporting date.
2.17 Ind AS 17- Leases
A Lease is classified as a Finance Lease if it transfers substantially all the
risks and rewards incidental to ownership. A lease is classified as an
operating lease if it does not transfer substantially all the risks and rewards
incidental to ownership.
Finance charges in respect of finance lease obligations are recognized as
finance costs in the statement of profit and loss. In respect of operating
leases for premises, which are cancelable / renewable by rautu I consent
on agreed terms, the aggregate lease rents payable is charged as n it in the
Statement of Profit and Loss.
Insurance Claims are accounted for on the basis of claims
admitted /expected to be admitted and to the extent that the amount
recoverable can be measured reliably and it is reasonable to expect ultimate
collection.
2.19 Earnings per Share (Ind AS 33j:
Basic earnings per share are calculated by dividing the net profit 01 loss for
the period attributable to equity shareholders by the weighted average
number of equities shares outstanding during the period. Partly paid equity
shares are treated as a fraction of an equity share to the extent that they
are entitled to participate in dividends relative to a fully paid equity share
during the reporting period. The weighted average number of equities
shares outstanding during the period is adjusted for events such as bonus
issue, bonus element in a rights issue, share split, and reverse share split
(consolidation of shares) that have changed the number of equities shares
outstanding, without a corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net profit or
loss for the period attributable to equity shareholders and the weighted
average number of shares outstanding during the period are adjusted for
the effects of all dilutive potential equity shares.
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