2 Summary of Material Accounting Policies
2.1 Basis of Preparation and Measurement
Statement of Compliance
The financial statements have been prepared in accordance with the Indian Accounting Standards (hereinafter referred
to as the 'Ind AS') as notified by Ministry of Corporate Affairs pursuant to Section 133 of the Companies Act, 2013 read
w'th Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 as amended.
These financial statements have been prepared on accrual and going concern basis. The accounting policies are applied
consistently to all the periods presented in the financial statements.
Historical Cost Conventions and Fair Value
The financial statements have been prepared under the historical cost convention on accrual basis and the following
items, which are measured on following basis on each reporting date:
- Certain financial assets and liabilities that is measured at fair value.
- Defined benefit liability/(assets): present value of Defined benefit obligation.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
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, regardless of whether that price is directly observable or estimated using
another valuation technique.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the
degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair
value measurement in its entirety, which are described as follows:
- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the company
can access at the measurement date;
- level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or
liability, either directly or indirectly; and
- level 3 inputs are unobservable inputs for the asset or liability.
Reporting Presentation Currency
The Financial Statements are presented in Indian Rupees, which is the functional currency of the Company and the
currency of the primary economic env'ronment in which the Company operates, and all values are rounded to the nearest
Lakhs with two decimals, except as otherwise stated.
2.2 Inventories
Inventories are measured at lower of cost and net realisable value after prov'ding for obsolescence, if any. Cost of
inventories comprises of cost of purchase, cost of conversion and other costs including manufacturing overheads
incurred in bringing them to their respective present location and condition. Cost of raw materials is determined on
FIFO basis. Process chemicals, stores, packing materials are determined on weighted average basis. Net realisable 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. Further the cost for Work-in-Progress includes material cost, stage wise direct cost and
other related manufacturing overheads. Non usable wastes are valued at net realizable value. Materials and other items
held for use in the production of inventories are not written down below costs, if finished goods in which they will be
incorporated are expected to be sold at or above cost.
2.3 Property, Plant and Equipment
Property, Plant and Equipment held for use in the production or supply of goods, or for administrative purposes are
stated at cost less accumulated depreciation and any accumulated impairment losses, if any. Cost comprises of purchase
price and any directly attributable cost of bringing the assets to its working condition for its intended use. Property,
plant and equipment acquired in a business combination are recognised at fair value or at carrying cost for acquisition
under common control, as the case may be.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flow to the company and the cost of the
item can be measured reliably. If significant parts of an item of property, plant and equipment have different useful
lives, then they are accounted for as a separate items (major components) of property, plant and equipment. All other
repairs and maintenance are charged to statement of profit and loss during the reporting period in which they are
incurred.
Property, plant and equipment which are not ready for intended use as on the date of Balance Sheet are disclosed as
"Capital work-in-progress".
An item of property, plant and equipment is de-recognised 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 net disposal proceeds and the carrying amount
of the asset and is recognised in the statement of profit and loss.
2.4 Intangible Assets
Intangible Assets are stated at cost less accumulated amortization and impairment loss, if any.
Intangible Assets which are not ready for intended use as on the date of Balance Sheet are disclosed as "Intangible
Assets Under Development".
2.5 Depreciation and Amortisation
Depreciation on property, plant and equipment has been prov'ded on straight-line basis over the estimated useful life
as prescribed under Schedule II to the Companies Act, 2013 or as per estimated useful life re-assessed by the Company.
In case of certain class of assets, the Company uses different useful life than those prescribed in Schedule II of the
Companies Act, 2013. The useful life has been assessed based on technical adv'ce, taking into account the nature of the
asset, the estimated usage of the asset on the basis of the management's best estimation of getting economic benefits
from those classes of assets. The Company uses its technical expertise along with historical and industry trends for
arriving at the economic life of an asset.
Property, Plant and Equipment's residual values, estimated useful lives are reviewed at each balance sheet date and
changes, if any, are treated as changes in accounting estimates.
Freehold Land and Capital Work in Progress are not depreciated.
2.6 FinancialAssets
Financial assets are initially measured on trade date at fair value, plus transaction costs. All recognised financial assets
are subsequently measured in their entirety at either amortized cost or at fair value.
(a) Classification
The Investments and other financial assets has been classified as per Company's business model for managing the
financial assets and the contractual terms of the cash flows.
(b) Measurement
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive
income. For investments in debt instruments, this will depend on the business model in which the investment is held.
For investments in equity instruments, this will depend on whether the Company has made an irrevocable election
at the time of initial recognition to account for the equity investment at fair value through other comprehensive
income.
(b.1) Debt Instruments
Subsequent measurement of debt instruments depends on the Company's business model for managing the asset
and the cash flow characteristics of the asset. There are three measurement categories into which the Company's
classifies its debt instruments:
Amortised Cost:
Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of
principal and interest are measured at amortised cost. A gain or loss on a debt investment that is subsequently
measured at amortised cost is recognised in profit or loss when the asset is derecognised or impaired. Interest
income from these financial assets is included in profit and loss using the effective interest rate method.
fair value through other comprehensive income (FVoCI):
Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets' cash
flows represent solely payments of principal and interest, are measured at fair value through other comprehensive
income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment
gains or losses, interest revenue and foreign exchange gains and losses which are recognised in profit and loss.
When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified
from equity to profit or loss and recognised in other gains/ (losses). Interest income from these financial assets is
included in profit and loss using the effective interest rate method.
Fair value through profit or loss (FVTPL):
Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A
gain or loss on a debt investment that is subsequently measured at fair value through profit or loss is recognised
in profit or loss and presented net in the statement of profit and loss w'thin other gains/(losses) in the period in
which it arises.
(b.2) Equity instruments
The Company subsequently measures all equity investments (other than Investment in Associates) at fair value.
Where the Company's management has elected to present fair value gains and losses on equity investments
in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit
or loss. Dividends from such investments are recognised in profit or loss when the Company's right to receive
payments is established.
(b.3) Trade Receivables
Trade receivables are amounts due from customers for goods sold in the ordinary course of business. If collection
is expect to be collected w'thin a period of 12 months or less from the reporting date, they are classified as
current assets otherw'se as non-current assets.
Trade receivables are measured at their transaction price unless it contains a significant financing component.
Loss allowance for expected life time credit loss is recognized on initial recognition.
Changes in the fair value of financial assets at fair value through profit or loss are recognised in other gain/
(losses) in the statement of profit and loss. Impairment losses (and reversal of impairment losses) on equity
investments measured at FVOCI are not reported separately from other changes in fair value.
(c) Impairment of financial assets
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at
amortised cost and FVOCI debt instruments. The impairment methodology applied depends on whether there has
been a significant increase in credit risk.
For trade receivables, the company applies the simplified approach permitted by Ind AS 109 Financial Instruments,
which requires expected lifetime losses to be recognised from initial recognition of the receivables.
(d) Derecognition of financial assets
A financial asset is derecognised only when
- the Company has transferred the rights to receive cash flows from the financial asset or
- retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual
obligation to pay the cash flows to one or more recipients.
(e) offsetting financial instruments
Financial assets and liabilities are being offset and the net amount reported in the Financial Statements when
there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net
basis or realise the asset and settle the liability simultaneously.
(f) Income recognition
(f.1) Interest Income
Interest income from debt instruments is recognised using the effective interest rate method. The effective
interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the
financial asset to the gross carrying amount of a 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.
(f.2) Dividends
Dividends are recognised in profit or loss only when the right to receive payment is established, it is probable that
the economic benefits associated with the div'dend will flow to the Company, and the amount of the dividend can
be measured reliably.
2.7 Financial Liabilities
Initial recognition and measurement
Financial liabilities are recognised when the Company becomes a party to the contractual prov'sions of the instrument.
Financial liabilities are initially measured at the amortised cost unless at initial recognition, they are classified as fair
value through profit and loss. In case of trade payables, they are initially recognised at fair value and subsequently,
these liabilities are held at amortised cost, using the effective interest rate method.
Subsequent measurement
Financial liabilities are subsequently measured at amortised cost using the EIR method. Financial liabilities carried at
fair value through profit or loss are measured at fair value with all changes in fair value recognised in the Statement of
Profit and Loss.
Derecognition
A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled or expires.
2.8 Cash and Cash Equivalents
Cash and cash equivalents comprise cash at bank and in hand, short-term deposits and highly liquid investments with an
original maturity of three months or less which are readily convertible in cash and subject to insignificant risk of change
in value.
For the purposes of the Statement of Cash Flow, cash and cash equivalents is as defined above, net of outstanding bank
overdrafts. In the balance sheet, bank overdrafts are shown within borrowings in current liabilities.
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