7. Summary of Material Accounting Policies
The financial statements have been prepared using the
material accounting policies and measurement bases
summarized below.
a. Current / Non-Current 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 Schedule III of the Act.
Based on the nature of products & time between the
acquisition of the assets for processing and there are
realisation in cash & cash equivalents, the company has
ascertained its operating cycle upto 12 months for the
purpose of current/non -current classification of assets
& liabilities.
b. Property, Plant and Equipment & Depreciation
• All items of Property, Plant and Equipment are
stated at cost less accumulated depreciation and
impairment losses, if any. The 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.
> Expenses incurred up to date of putting
them in commercial use.
• The Company is following the useful life method
of depreciation as per the useful life as specified
in Schedule II to the Act. The Carrying amount of
assets is being depreciated over the remaining
useful life of the assets. On assets sold, discarded
etc, during the year depreciation is provided up to
the date of sale/discard. Depreciation is calculated
on a straight-line basis over the estimated useful
lives of the assets.
• Useful life is reviewed at each financial year.
• Carrying value of PPE are reviewed for impairment
when events or changes in circumstances
indicates that the carrying value may not be
recoverable.
• Capital work in progress in respect of assets which
are not ready for their intended use are carried at
cost comprising of direct costs related incidental
expenses and attributable interest.
• The Company periodically reviews its Capital
work-in-progress and in case of abandoned
works, provision for unserviceable cost is provided
for, as required, basis the technical assessment.
Further, provisions made are reviewed at regular
intervals and in case work has been subsequently
taken up, then provision earlier provided for is
written back to the extent the same is no longer
required.
• The company has not taken any residual value of
Property, Plant and Equipment.
c. Intangible Assets
• Intangible assets are stated at cost less
accumulated amortisation and impairment losses,
if any. The company amortizes its intangible
assets over a period of 20 years.
• The amortization period and the amortization
method of intangible assets with a finite useful
life are reviewed at each financial year end and
adjusted prospectively, wherever required.
• Intangible assets that are acquired by the
Company and that have finite useful lives are
measured at cost less accumulated amortisation
and accumulated impairment losses, if any.
Subsequent expenditures are capitalised
only when they increase the future economic
benefits embodied in the specific asset to which
they relate.
• Research cost & related expenditures are
recognised in the Standalone Statement of Profit
and Loss in the period in which such expenditure
is incurred.
• Intangible Assets with finite lives are amortized
on a straight-line basis over the estimated useful
economic life. The amortization expense on
intangible assets with finite lives are recognized
in the Standalone Statement of Profit and Loss
d. Investment in Subsidiary
The company has elected to recognise its investments
in equity instruments in subsidiaries at cost less
impairment loss, if any in accordance with option
available in Ind AS 27 'Separate Financial Statements'.
e. Inventories
Inventories are valued at the lower of cost and net
realisable value and Cost is determined on First in First
Out (FIFO) basis.
Costs incurred in bringing each product to its present
location and condition are accounted for as follows:
• Raw materials: cost includes cost of purchase and
other costs incurred in bringing the inventories
to their present location and condition. Cost is
determined on first in, first out basis.
• Finished goods and work in progress: cost
includes cost of direct materials and labour and a
proportion of manufacturing overheads based on
the normal operating capacity. Cost is determined
on first-in, first-out basis.
• Traded goods: cost includes cost of purchase and
other costs incurred in bringing the inventories to
their present location and condition.
• Spares and consumables: - At cost.
f. Trade Receivables
In respect of trade receivables, the Company applies
the simplified approach of Ind AS 109 'Financial
Instruments', which requires measurement of loss
allowance at an amount equal to lifetime expected
credit losses. Lifetime expected credit losses are the
expected credit losses that result from all possible
default events over the expected life of a financial
instrument.
g. Cash & Cash Equivalents
The Company considers all highly liquid financial
instruments, which are readily convertible into known
amounts of cash that are subject to an insignificant risk
of change in value and having original maturities of
three months or less from the date of purchase, to be
cash equivalents. Cash and cash equivalents consist
of balances with banks which are unrestricted for
withdrawal and usage.
h. Financial Instruments
A financial instrument is any contract that gives rise to
a financial asset of one entity and a financial liability or
equity instrument of another entity.
Initial recognition and measurement
• Financial assets and financial liabilities are
recognized when the Company becomes a party
to the contractual provisions of the financial
instrument and are measured initially at fair value
adjusted for transaction costs through profit
or loss.
• An equity instrument is any contract that
evidences a residual interest in the assets of
an entity after deducting all of its liabilities.
Equity instruments issued by the Company are
recognised at the proceeds received, net of direct
issue cost.
Subsequent measurement of financial assets and
financial liabilities:
• All Financial liabilities and Financial Assets are
subsequently measured at Fair value through
profit & loss.
• Other than above, 'debt instrument' is measured
as at FVTOCI if both of the following criteria are
met:
a) The objective of the business model is
achieved both by collecting contractual
cash flows and selling the financial assets,
and
b) The contractual terms of the instrument give
rise on specified dates to cash flows that are
SPPI on the principal amount outstanding.
Debt instruments included within the FVTOCI
category are measured initially as well as at each
reporting date at fair value. Fair value movements
are recognized in the other comprehensive
income (OCI) and on derecognition of the asset,
cumulative gain or loss previously recognized in
OCI is reclassified from the equity to standalone
profit or loss.
Derecognition
• The company derecognises a financial asset only
when the contractual rights to the cash flows from
the asset expire, or when it transfers the financial
asset and substantially all the risks and rewards of
ownership of the asset to another entity.
• The Company derecognises financial liabilities
when, and only when, the Company's obligations
are discharged, cancelled or have expired.
• The difference between the carrying amount of
a financial liability (or part of a financial liability)
extinguished or transferred to another party and
the consideration paid, including any noncash
assets transferred or liabilities assumed, shall be
recognised in the Standalone Statement of Profit
and Loss.
i. Revenue Recognition
• Revenue is recognised when control of the
products being sold has transferred to the
customer and when there are no longer
any unfulfilled obligations to the customer.
This is generally on delivery to the customer but
depending on individual customer terms, this
can be at the time of dispatch, delivery or upon
formal customer acceptance. This is considered
the appropriate point where the performance
obligations in our contracts are satisfied as
company no longer have control over the
inventory Revenue is measured based on
transaction price, which is the fair value of the
consideration received or receivable, stated net of
discounts, returns and Indirect Taxes. No element
of financing is present in the pricing arrangement.
Settlement terms for credit sales ranging up to
120 days.
• Dividend income is recognized at the time when
the right to receive is established by the entity.
• Other income is accounted for on mercantile
basis unless otherwise stated in other IND AS.
j. Employee Benefits
• Current employee benefits
a) 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 are recognized in
respect of employees' services up to the end
of the reporting period and are measured at
the amounts expected to be incurred when
the liabilities are settled.
b) Expense in respect of other short-term
benefits is recognized on the basis of the
amount paid or payable for the period
during which services are rendered by the
employee.
• Post Retirement Employee Benefits
a) Payment for present liability of future
payment of Post Retirement Employee
Benefit being made to gratuity fund
which have invested in Aditya Birla Sunlife
Insurance Co Ltd. However, any deficit in
plan assets managed by fund as compared
to the liability based on an independent
actuarial valuation is recognised as a liability.
b) The company has adopted a policy of
compensated earned leave which are
accumulating in nature and is determined
by actuarial valuation at each reporting date
using projected unit credit method on the
additional amount expected to be paid /
availed as a result of the unused entitlement
that has accumulated at the balance
sheet date.
c) Gratuity liability accounted for on the basis
of actuarial valuation as per Ind AS 19
'Employee Benefits'. Liability recognized
in the Standalone Balance Sheet in
respect of gratuity is the present value
of the defined benefit obligation at the
end of each reporting period. The present
value of defined benefit is determined
by discounting the estimated future cash
outflows by reference to market yield at
the end of each reporting period. The net
interest cost is calculated by applying the
discount rate to the net balance of the
defined benefit obligation. This cost is
included in employee benefit expense in
the Standalone Statement of Profit and Loss.
Actuarial gain / loss pertaining to gratuity
are accounted for as OCI.
k. Foreign Currency Transactions
• Foreign currency transactions are recorded in the
functional currency, by applying the exchange
rate between the functional currency and the
foreign currency at the date of the transaction.
• Foreign currency monetary items outstanding
at the balance sheet date are converted to
functional currency using the closing rate.
Non-monetary items denominated in a foreign
currency which are carried at historical cost are
reported using the exchange rate at the date of
the transactions.
• Any income/expense arising from foreign
currency transactions is dealt in the standalone
statement of profit and loss for the year.
l. Borrowing Cost
Borrowing costs that are directly attributable to the
acquisition or construction of qualifying assets are
capitalized as part of costs of such assets till such time
as the assets is ready for its intended use. All other
borrowing costs are recognized as an expense in the
period in which incurred.
m. Government Grants
• The Company recognizes government grants
only when there is reasonable assurance that
the conditions attached to them shall be
complied with, and the grants will be received.
Government grants related to revenue are
recognized on a systematic basis in the
Standalone Statement of Profit and Loss over the
period necessary to match them with the related
costs which they are intended to compensate.
• Income from export incentives such as duty
drawback, merchandise export import scheme
are recognized on accrual basis.
• Income from incentives other than above are also
recognised on cash basis.
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