2.3 MATERIAL ACCOUNTING POLICIES
2.3.1 Revenue recognition
Interest income
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 recognised using the effective
interest rate (EIR) method, which is the rate that exactly
discounts estimated future cash receipts through
the expected life of the financial asset to that asset's
gross carrying amount. 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
Dividend Income
Dividend income from investments measured at fair value
through profit or loss as well as measured at fair value
through other comprehensive income is recognized in the
statement of profit and loss, when the right to receive the
payment is established, it is probable that the economic
benefits associated with the dividend will flow to the
Company and amount of dividend can be measured reliably.
Gain/Loss on sale of investments
Gain/loss on sale of investments is recognised on
settlement date basis. Gain/loss on sale of investments
is determined on the basis of weighted average cost
method. On disposal of an investment, the difference
between its carrying amount and net proceeds is charged
or credited to the Statement of Profit and Loss.
Receipt against License Agreement:
Revenue in respect of receipt against License Agreement
is recognized on accrual basis in accordance with the
terms of the relevant agreement.
Rent and Other income
Rent and other income is recognized on accrual basis
when no significant uncertainty exists with regard to the
amount to be realized and the ultimate collection thereof.
2.3.2 Employee benefits
(a) Retirement and termination benefits
Defined Benefit Plans:
The Company provides for gratuity, a defined benefit
retirement plan covering eligible employees. The Gratuity
Plan provides a lump sum payment to eligible employees
at retirement, death, incapacitation or termination of
employment, based on the respective employee's salary
and the tenure of employment with the Company in terms
of the provisions of the Payment of Gratuity Act, 1972.
Liabilities with regard to the Gratuity Plan are determined
by actuarial valuation, performed by an independent
actuary, at each balance sheet date using the projected
unit credit method. The company contributes ascertained
liabilities to a separate trust established by the Company.
Trustees administer contributions made to the trust
and the contributions are invested in the schemes as
permitted by Law.
The Company recognizes the net obligation of a defined
benefit plan in its balance sheet as an asset or liability.
Remeasurements comprising of actuarial gains and losses,
and the return on plan assets (excluding amounts included
in net interest on the net defined benefit lia bi lity/asset) are
recognized in Other Comprehensive Income which are not
reclassified to profit or loss in subsequent periods and are
reflected immediately in retained earnings.
(b) Short-term and other long-term employee benefits
Short-term employee benefits
All employee benefits payable wholly within twelve
months of rendering the service are classified as short-term
employee benefits.
Benefits such as salaries, wages, annual leaves etc., are
recognised as an expense at the undiscounted amount in
the Statement of Profit and Loss for the year in which the
employee renders the related service
Other long-term employee benefits- Compensated
absences entitlements
Compensated absences entitlements, 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 at the present value of
the obligation based on actuarial valuation as on the
reporting date, performed by an independent actuary
using projected unit credit method. The service cost,
interest cost and re-measurement gains and losses are
recognised in the statement of profit and loss.
2.3.3 Income taxes
Income tax expense comprises the current tax and
deferred tax.
Current tax
The current tax is based on taxable profit for the year.
Taxable profit differs from profit as reported in the
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.
Interest expenses and penalties, if any, related to income
tax are included in finance cost and other expenses
respectively. Interest Income, if any, related to income tax
refund is included in other income.
Current income tax assets/liabilities are recognized at the
amount expected to be paid to and/or recoverable from
the tax authorities.
Deferred tax
Deferred tax is recognised on temporary differences
between the carrying amounts of assets and liabilities in
the 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.
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 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. Unrecognized deferred tax assets are
re-assessed at each reporting date and are recognized to
the extent that it has become probable that future taxable
profits will allow the deferred tax asset to be recovered.
Minimum Alternate Tax (MAT) paid in accordance with
the tax laws, which gives future economic benefits in
the form of adjustment to future income-tax liability, is
considered as deferred tax asset if there is convincing
evidence that the Company will pay normal income-tax.
Accordingly, MAT Credit is recognised as asset when it is
probable that future economic benefit associated with it
will flow to the Company.
Current and deferred tax are recognised in profit or 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.
Current tax assets and current tax liabilities are offset when
there is a legally enforceable right to set off the recognised
amounts and there is an intention to settle the asset and
the liability on a net basis.
Deferred tax assets and deferred tax liabilities are offset
when there is a legally enforceable right to set off current
tax assets against current tax liabilities and the deferred
tax assets and the deferred tax liabilities relate to income
taxes levied by the same taxation authority.
2.3.4 Property, plant and equipment
Freehold land is carried at cost. All other items of property,
plant and equipment are stated at cost or deemed
cost applied on transition to Ind AS, less accumulated
depreciation and accumulated impairment losses, if any.
The Cost of an item of Property, plant and equipment
comprises:
a. its purchase price including import duties and
non-refundable purchase taxes after deducting
trade discounts and rebates
b. any attributable expenditure directly attributable for
bringing an asset to the location and the working
condition for its intended use and
c. the initial estimate of the costs of dismantling and
removing the item and restoring the site on which it
is located, the obligation for which an entity incurs
either when the item is acquired or as a consequence
of having used the item during a particular period for
purposes other than to produce inventories during
that period.
Subsequent expenditures relating to property, plant and
equipment is capitalized 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. Repairs and maintenance costs are recognized in
net profit in the statement of profit and loss when incurred.
An item of property, plant and equipment and any
significant part initially recognised is derecognised upon
disposal or retirement of the assets or when no future
economic benefits are expected from its use. The cost and
related accumulated depreciation are eliminated from the
financial statements upon sale or retirement of the asset
and the resultant gains or losses are recognized in the
statement of profit and loss.
Depreciation is provided on Straight Line Method on the
basis of useful lives of such assets specified in Schedule
II to the Companies Act, 2013 except the assets costing
H5000/- or below on which depreciation is charged @
100%. Depreciation is calculated on pro-rata basis.
2.3.5 Impairment of non-financial assets
At the end of each reporting period, the Company reviews
the carrying amounts of Property plant and equipment
and other non-financial 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).
For the purpose of impairment testing, the recoverable
amount is determined on an individual asset basis unless
the asset does not generate cash flows that are largely
independent of those from other assets. In such cases,
the recoverable amount is determined for the Cash
Generating Unit (CGU) to which the asset belongs.
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 the 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 the
statement of profit and loss.
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