2. SIGNIFICANT ACCOUNTING POLICIES:
a) Basis of preparation
i. Compliance with Ind AS
The financial statements comply in all material aspects with Indian Accounting Standards (“Ind
AS”) notified under Section 133 of the Companies Act, 2013 ("the Act”) [Companies (Indian
Accounting Standards) Rules, 2015] and other relevant provisions of the Act
The financial statements am presented in Indian Rupees (INR) and all values am rounded to
the nearest lakhs, except when otherwise indicated. The Company has adopted the Revised
Schedule III as issued by MCA and accordingly numbers of comparative period has been
reclassified as required.
The accounting policies are applied consistently to all the periods presented in the financial
statements.
ii. Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following:
• certain financial assets and liabilities that is measured at fair value;
• assets held for sale measured at lower of carrying amount or fair value less cost to sell; and
• employee’s defined benefit plan as per actuarial valuation
iii. Current and non-currant classification
All assets and liabilities have been classified as current or non-current as per the Company's
normal operating cycle and other criteria set out in the Schedule III to the Act The operating
cycle is the time between the acquisition of assets for processing and their realization in cash
and cash equivalents. The Company has identified twelve months as its operating cycle.
b) Property, plant and equipment
All items of property, plant and equipment and Capital Work in Progress are stated at historical
cost less depreciation and impairment except freehold land which is carried at historical cost. The
cost comprises of Purchase price, borrowing cost if capitalization criteria are met and any
expenditure directly attributable for bringing an asset to working condition and location for its
intended use. Any trade discounts and rebates are deducted in arriving at the purchase price.
Subsequent costs are included in the asset's carrying amount or recognised as separate assets,
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 The carrying amount of
any component accounted for as a separate asset is derecognized when replaced All other
repairs and maintenance are charged to profit or loss during the reporting period in which they are
incurred
Capital work- in- progress includes cost of property, plant and equipment under installation / under
development as at the balance sheet date
Transition to Ind AS
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its
property, plant and equipment recognised as at 1 April 2015 measured as per the previous GAAP
and use that carrying value as the deemed cost of the property, plant and equipment.
Depreciation methods, estimated useful lives and residual value
Depreciation is calculated using the straight-line method to allocate their cost, net of their residual
values, over their estimated useful lives or, in the case of certain leased furniture, fittings and
equipment, the shorter lease term. Leasehold improvements are amortised over the period of
lease or estimated useful life, whichever is lower.
The residual values are not more than 5% of the original cost of the asset The assets residual
values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting
period
Cost of assets not ready for their intended use at the balance sheet date is disclosed under
Capital Work-in-Progress.
An asset's carrying amount is written down immediately to its recoverable amount if the assets
carrying amount is greater than its estimated recoverable amount
Gains and losses on disposals are determined by comparing proceeds with carrying amount.
These are included in profit or loss within other gains/ (losses).
c) Leases
Lesssee:
At inception of a contract, the Company assesses whether a contract is, or contain a lease. 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 -this may be specified explicitly or implicitly,
and should be physically distinct or represent substantially all of the capacity of a physically
distinct asset If the supplier has a substantive substation right, then the asset is not identified;
• The Company has the right to substantially all of the economic benefits from the use of the
asset throughout the period of use; and
• The Company has the right to direct the use of the asset. The Company has this right when it
has the decision making rights that are most relevant to changing how and for what purposes the
asset is used. In rare cases where the decision about how and for what purpose the asset is
used is predetermined, the Company has the right to direct the use of the asset if either. • The
Company has the right to operate the asset or
• The Company designed the asset in a way that predetermines how and for what purposes it
will be used
As a practical expedient, accounting standards permit a lessee not to separate non-lease
components, and instead account for any lease and associated non-lease components as a
single arrangement The Company has not used this practical expedient At inception or on
reassessment of a contract that contains a lease component, the Company allocates the
consideration in the contract to each lease component on the basis of their relative stand-alone
prices.
The Company recognises a right of use asset and a lease liability at the lease commencement
date. The right of use asset is initially measured at cost, which comprises of the initial amount of
the lease liability adjusted for any lease payments made at or before the commencement date,
plus any initial direct costs incurred and estimated dilapidation cost less any lease incentives—
received. The right of use asset is subsequently amounted using the straight-line method over
the shorter of the useful life of the leased asset or the period of lease. If ownership of the leased
asset is automatically transferred at the end of the lease term or the exercise of a purchase
option is reflected in the lease payments, the right of use asset is amortised on a straightline
basis over the expected useful life of the leased asset.
The lease liability is initially measured at the present value of the lease payments that are not paid at
commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be
readily determined, the Company's incremental borrowing rate. The lease liability is measured at
amortised cost using the effective interest method. It is re-measured when there is a change in future
lease payments
Lease payments include fixed payments, including in-substance fixed payments, amounts expected to
be payable under a residual value guarantee, the exercise price of a purchase option if the Company
is reasonably certain to exercise that option and payment of penalties for terminating the lease if the
lease term considered reflects that the Company shall exercise termination option The Company also
recognises a right of use asset which comprises of amount of initial measurement of the lease liability,
any initial direct cost incurred by the Company
Lessor:
At the inception of a lease, the lease arrangement is classified as either a finance lease or an
operating lease, based on contractual terms and substance of the lease arrangement Whenever
the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee,
the contract is classified as a finance lease All other leases are classified as operating leases
d) intangible assets
Intangible assets purchased are measured at cost or fair value as on the date of acquisition less
accumulated amortisation and impairment if any
Amortisation is provided on a straight-line basis over estimated useful lives of the intangible assets as
per details below:
Internally generated intangible asset:
Research costs are charged to the statement of Profit and Loss in the year in which they are incurred.
Product development costs incurred on new vehicle platform, engines, transmission and new products
are recognised as intangible assets, when feasibility has been established, the Company has
committed technical, financial and other resources to complete the development and it is probable that
asset will generate future economic benefits. The cost of an internally generated intangible asset is
the sum of directly attributable expenditure incurred from the date when the intangible asset first
meets the recognition criteria to the completion of its development Interest cost incurred is capitalised
up to the date the asset is ready for its intended use for qualifying assets, based on borrowings
incurred specifically for financing the asset or the weighted average rate of ail other borrowings if no
specific borrowings have been incurred for the asset. Product development expenditure is measured
at cost less accumulated amortisation and impairment if any Amortisation is not recorded on product
engineering in progress until development is complete
Derecognition of intangible assets
An item of intangible assets is derecognized on disposal or when fully amortized and no longer in use.
Any gain or loss arising from derecognition of an item of intangible assets is included in the statement
of profit and loss.
e) Investments in subsidiaries, joint ventures and associates measured at cost - non-current
Investments in Subsidiaries, Joint ventures and Associates are carried at cost less accumulated
impairment losses, if any. Where an indication of impairment exists, the carrying amount of the
investment is assessed and written down immediately to its recoverable amount On disposal of
investments in Subsidiaries, Joint ventures and Associates, the difference between net disposal
proceeds and the carrying amounts are recognised in the statement of profit and loss.
f) Investments and other financial assets:
Financial instalments are recognised when the Company becomes a party to the contract that
gives rise to financial assets and financial liabilities.
i. Classification
The Company classifies its financial assets in the following measurement categories:
• those to be measured subsequently at fair value (either through other comprehensive
income, or through profit or loss), and
• those measured at amortised cost.
The Classification depends on the entity's business model for managing the financial assets
and the contractual term of the cash flows
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 instalments, 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.
ii. Measurement of financial assets
At initial recognition, the Company measures a financial asset and financial liabilities at its fair
value plus, in the case of a financial asset not at fair value through profit or loss, transaction
costs that are directly attributable to the acquisition of the financial asset Transaction costs of
financial assets carried at fair value through profit or loss are expensed in profit or loss. The
Company's financial liabilities include trade and other payables and borrowings
Financial assets with embedded derivatives are considered in their entirety when determining
whether their cash flows are solely payment of principal and interest
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. The Company classifies its
debt instruments into following categories:
Amortized 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 amortized cost
Interest income from these financial assets is included in other income using the effective
interest rate method.
Equity instruments,
The Company subsequently measures all equity investments other than in subsidiaries, joint
ventures and associates at fair value. The Company's management has elected to present fair
value gains and losses on equity investments through the Statement of Profit and Loss
Dividends from such investments are recognised in profit or loss as other income when the right
to receive of the Company established.
Financial liabilities
Financial liabilities are measured at amortized cost using the effective interest method. Gains
and losses are recognised in profit or loss when the liabilities are derecognized as well as
through the EIR amortization process. The EIR amortization is included in finance cost in the
statement of profit and loss For trade and other payables maturing within one year from the
balance sheet date, the carrying amounts approximate fair value due to the short maturity of
these instruments.
iii. 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 only, 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
The company has estimated the percentage of ECI to be calculated which is mentioned below:
iv. Derecognition of financial instruments
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 right to receive the cash flows of the financial asset, but assumes a
contractual obligation to pay the cash flows to one or more recipients.
Where the entity has transferred an asset, the company evaluates whether it has transferred
substantially all risks and rewards of ownership of the financial asset In such cases, the
financial asset is derecognised Where the entity has not transferred substantially all risks and
rewards of ownership of the financial asset, the financial asset is not derecognised
Where the entity has neither transferred a financial asset nor retains substantially all risks and
rewards of ownership of the financial asset the financial asset is derecognised if the company
has not retained control of the financial asset Where the company retains control of the
financial asset the asset is continued to be recognised to the extent of continuing involvement
in the financial asset
A financial liability is recognised when the obligation specified in the contract is discharged,
completed or expired
v. Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the balance
sheet when, and only when, the Company currently has a legally enforceable right to set off the
amounts and it intends either to settle them on a net basis or to realize the asset and settle the
liability simultaneously.
g) Finance income
For all financial instruments measured at amortized cost, interest income is recorded using the
effective interest rate (EIR) 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 instalment (for
example, prepayment, extension, call and similar options but does not consider the expected ,
h) 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 dividend will flow to the Company, and
the amount of the dividend can be measured reliably
I) Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest method, less provision for impairment
j) Cash and Cash Equivalents
Cash and cash equivalents includes cash in hand, deposits with banks and short term highly
liquid investments, which are readily convertible into cash and have original maturities of three
months or less from the Balance Sheet date
k) Revenue Recognition:
The Company earns revenue primarily from sale of automotive components The Company has
applied Ind AS 115 which establishes a comprehensive framework for determining whether, how
much and when revenue is to be recognized
The revenue is recognized on satisfaction of performance obligation upon transfer of control of
promised products or services to customers in an amount that reflects the consideration the
Company expects to receive in exchange for those products or services
The Company does not expect to have any contracts where the period between the transfer of the
promised goods or services to the customer and payment by the customer exceeds one year. As
a consequence, it does not adjust any of the transaction prices for the time value of money.
The period over which revenue is recognised is based on entity’s right to payment for
performance completed. In determining whether an entity has right to payment the entity shall
consider whether it would have an enforceable right to demand or retain payment for performance
completed to date if the contract were to be terminated before completion for reasons other than
entity’s failure to perform as per the terms of the contract
The Company provides volume rebates to certain customers once the quantity of products purchased
during the period exceeds a threshold specified and also accrues discounts to certain customers
based on customary business practices which is derived on the basis of crude price volatility and
various market demand - supply situations
l) Employee Benefits:
Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled
wholly within 12 months after the end of the period in which the employees render the related
service ana recognised in respect of employees's service up to the end of the reporting period and
are measured at the amounts expected to be paid when the liabilities are settled The liabilities
are presented as current employee benefit obligations in the balance sheet.
Retirement and other employee benefits
Defined contribution plans
The Company makes contributions to Provident fund, Maharashtra Labour Welfare Funds and
Employee state insurance scheme, which are defined contribution plan for eligible employees
Under the scheme, the Company is required to contribute a specified percentage of the salary to
fund the benefits. The Company has no further payment obligations once the contributions have
been paid The contributions are accounted for as defined contribution plans and the contributions
are recognised as employee benefit expense when they are due. Prepaid contributions are
recognised as an asset to the extent that a cash refund or a reduction in the future payments is
available
Defined Benefit plans
The Company provides for gratuity for employees as per the Payment of Gratuity Act 1972/
Company Policy Gratuity is payable on death / retirement / termination and the benefit vests after
5 year of continuous service The amount of gratuity payable on retirement/ termination is the
employee's last drawn salary per month computed proportionately as per the Payment of Gratuity
Act, 1972/ Company policy multiplied for the number of years of service. The obligation as at
reporting date is worked out based on Actuarial assessment under PUC method considering
estimates as per prevailing practices
The Employee's Gratuity Fund Scheme, which is defined benefit plan, is managed by Trust with its
investments maintained with insurance Company (LIC of India). The liabilities with respect to Gratuity
Plan are determined by actuarial valuation, based upon which the Company contributes to the Gratuity
Scheme The difference, if any, between the actuarial valuation of the gratuity of employees at the
year end and the balance of funds is provided for as assets/ (liability) in the books
m) income Tax
Income tax expense comprises current tax expense and the net change in the deferred tax asset
or liability during the year. Current and deferred tax are recognised 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 recognised in other
comprehensive income or directly in equity, respectively The income tax expense or credit for the
period is the tax payable on the current period s taxable income based on the applicable income
tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable
to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the end of the reporting period in the countries where the company and its subsidiaries
and associates operate and generate taxable income. Management periodically evaluates
positions taken in tax returns with respect to situations in which applicable tax regulation is
subject to interpretation. It establishes provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the financial
statements. Deferred income tax is determined using tax rates (and laws) that have been enacted
or substantially enacted by the end of the reporting period and are expected to apply when the
related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for all deductible temporary differences and unused tax losses
only if it is probable that future taxable amounts will be available to utilise those temporary
differences and losses. The carrying amount of deferred tax assets are reviewed at each reporting
date and reduced to the extent that it is no longer probable that sufficient future taxable income
will be available to allow all or part of the deferred tax asset to be utilized.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset
current tax assets and liabilities and when the deferred tax balances relate to the same taxation
authority Current tax assets and tax liabilities are offset where the entity has a legally enforceable
right to offset and intends either to settle on a net basis, or to realise the asset and settle the
liability simultaneously.
On March 30, 2019, the Ministry of Corporate Affairs issued amendments in the guidance to the
Ind AS 12 - Income taxes The amendment relating to income tax consequences of dividend
clarify that an entity shall recognise the income tax consequences of dividends in profit or loss,
other comprehensive income or equity according to where the entity originally recognised those
past transactions or events. It is relevant to note that the amendment does not amend situations
where the entity pays a tax on dividend which is effectively a portion of dividends paid to taxation
authorities on behalf of shareholders. Such amount paid or payable to taxation authorities
continues to be charged to equity as part of dividend, in accordance with Ind AS 12. ^
The amendment to Appendix C of Ind AS 12 specifies that the amendment is to be applied to the
determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax
rates, when there is uncertainty over income tax treatments under Ind AS 12. It outlines the
following:
(1) the entity has to use judgement, to determine whether each tax treatment should be
considered separately or whether some can be considered together The decision should be
based on the approach which provides better predictions of the resolution of the uncertainty
Financial Statements.
(2) the entity is to assume that the taxation authority will have full knowledge of all relevant
information while examining any amount
(3) entity has to consider the probability of the relevant taxation authority accepting the tax
treatment and the determination of taxable profit (tax loss), tax bases, unused tax losses,
unused tax credits and tax rates would depend upon the probability
The effect on adoption of Ind AS 12 Appendix C is insignificant in the financial statements
On September 20, 2019, the Government of India, vide the Taxation Laws (Amendment)
Ordinance 2019, inserted Section 115BAA in the Income Tax Act.1961, which provides domestic
companies, an option to pay income tax at reduced rate (i.e 22% plus applicable surcharge and
cess) effective from April 1, 2019, subject to certain conditions. The tax expenses for the year
ended March 31, 2021, March 31, 2022 and March 31, 2023 have been provided at reduced tax
rate.
n) Foreign Currency transactions:
Functional and presentation currency
Items included in the financial statements of the company are measured using the currency of the
primary economic environment in which the entity operates (the functional currency). The financial
statements are presented in Indian rupee (INR), which is URAVI T & WEDGE LAMPS LTD's
functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates
at the dates of the transactions Foreign exchange gains and losses resulting from the settlement
of such transactions and from the translation of monetary assets and liabilities denominated in
foreign currencies at year end exchange rates are generally recognised in profit or loss _
o) Inventories:
Inventories which comprise raw materials, work-in-progress, finished goods and stores and
spares, are carried at the lower of cost and net realizable value.
Cost of inventories comprises all costs of purchase (net of recoverable taxes, where applicable),
costs of conversion and other costs incurred in bringing the inventories to their present location
and condition.
The basis of determining costs for various categories of inventories is as follows: -
Raw materials, stores and spares - First in first out method
Work-in-progress and finished goods Material cost plus appropriate share of
labor, manufacturing overheads.
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.
The net realizable value of work-in-progress is determined with reference to the selling prices of
related finished products. Raw materials and other supplies held for use in the production of
finished products are not written down below cost except in cases where material prices have
declined and it is estimated that the cost of the finished products will exceed their net realizable
value. The companion of cost and net realizable value is made on an item-by-item basis
p) Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing:
• the profit attributable to owners of the Company
• The weighted average number of equity 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 equity shares outstanding,
without a corresponding change in resources.
Diluted earnings per share
Diluted earnings per share adjusts the figures used In the determination of basic earnings per
share to take into account:
• the after income tax effect of interest and other financing costs associated with dilutive____
potential equity shares, and
• the weighted average number of additional equity shares that would have been outstanding
assuming the conversion of all dilutive potential equity shares.
q) Segment Reporting:
The Company is primarily engaged in the activity of manufacturing and supply of automotive
components and considers it to be a single reportable business segment. The operations of the
Company are within the geographical territory of India which is considered as a single
geographical segment Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision maker.
The Managing Director, who has been identified as being the chief operating decision maker,
assesses the financial performance and position of the company, and makes strategic decisions.
r) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are
subsequently measured at amortised cost Any difference between the proceeds (net of
transaction costs) and the redemption amount is recognised in profit or loss over the period of the
borrowings using the effective interest method
Borrowings are classified as current liabilities unless the Company has an unconditional right to
defer settlement of the liability for at least 12 months after the reporting period. Where there is a
breach of a material provision of a long-term loan arrangement on or before the end of the
reporting period with the effect that the liability becomes payable on demand on the reporting
date, the entity does not classify the liability as current, if the lender agreed, after the reporting
period and before the approval of the financial statements for issue, not to demand payment as a
consequence of the breach.
s) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset
which takes a substantial period of time to get ready for its intended use are capitalized as a part
of the cost of such assets, until such time the asset is substantially ready for its intended use. All
other borrowing costs are recognized in the Statement of Profit and Loss in the period they occur.
Borrowing costs consist of interest and other costs incurred in connection with borrowing of funds.
Other borrowing costs are expensed in the period in which they are incurred.
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