Note 2 SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of Preparation of Financial Statements
The financial statements are prepared under the historical cost convention in accordance with the generally
accepted accounting principles in India. As per MCA notification dated 16th February 2015, the companies whose
shares are listed on "SME exchange" are exempted from the compulsory requirement of adoption of IND AS. As the
company is exempted from the compulsory requirement of adoption of IND AS, the company has not adopted IND
AS. The applicable mandatory Accounting Standards (as amended) specified under Section 133 of the Companies
Act, 2013 read with Rule 7 of the Companies (Accounts) Rule, 2014 of India have been followed in preparation of
these financial statements.
2.2 Use of Estimates
The preparation of Financial Statements requires the management to make certain estimates and assumptions that
affect the amounts reported in the Financial Statements and notes thereto. The management believes that the
estimates and assumptions are reasonable and prudent but actual results may differ from them. They are reviewed
on a on-going basis and any revision to accounting estimates is recognised prospectively in current and future
period. Accounting estimates and assumptions that have a significant effect on the amounts reported in the
Financial Statements include:
i) Net Realisable Value of Inventories;
ii) Useful life and residual value of Property, Plant and Equipment's and Intangible Assets;
iii) Defined Benefit Obligation;
iv) Deferred Tax Asset or Liability;
v) Provision for Trade Receivable;
vi) Other Provisions and Contingencies
2.3 Revenue Recognition
Revenue is recognised to the extent, that it is probable that the economic benefits will flow to the Entity and the
revenue can be reliably measured.
(1) Sales
i) Sale of Goods;
Revenue from sale of goods is recognised when the significant risks and rewards of ownership of the goods are
transferred to the buyer and are recorded net of trade discounts, rebates, Sales Tax, Value Added Tax, Goods and
Service Tax.
ii) Sale of Services;
In case of Completed service contract revenues are recognised immediately when the service is provided and
approved by the contractee, whereas in case of Proportionate completion of contract revenue is recognised
proportionately by reference to the performance of each act.
The collection of Goods and Service Tax by company on behalf of government are not economic benefits to the
Company and hence they are excluded from the revenue and in case of services, the revenue is recognised when
the benefits are transferred.
(2) Interest Income
Interest income is recognized on accrual basis except when realization of such income is uncertain.
(3) Dividend
Dividend income is recognized when the right to receive payment is established.
(4) Insurance Claims
Insurance and other claims are recognised only when it is reasonably certain that the ultimate collection will be
2.4 Property, Plant and Equipment
Property, Plant & Equipment (PPE) comprises of Tangible assets and Capital Work in progress. PPE are stated at
cost, net of tax/duty credit availed, if any, after reducing accumulated depreciation and accumulated impairment
losses, if any; until the date of the Balance Sheet. The cost of PPE comprises of its purchase price or its construction
cost (net of applicable tax credit, if any), any cost directly attributable to bring the asset into the location and
condition necessary for it to be capable of operating in the manner intended by the management and
decommissioning costs. Direct costs are capitalized until the asset is ready for its intended use and includes
borrowing cost capitalised in accordance with the Company's accounting policy.
Depreciation of PPE commences when the assets are ready for their intended use. Depreciation is provided on the
cost of PPE (other than properties under construction) less their residual values, using straight line method (SLM)
over the useful life of the PPE as stated in the Schedule II to the Companies Act, 2013. Useful Life of each class of
PPE as prescribed under Part C of Schedule II to Companies Act.
2.5 Foreign Currency Transactions & Forward Contracts
Initial recognition:
Foreign currency transactions are recorded in the reporting currency by applying the exchange rate between the
reporting currency and the foreign currency at the date of the transaction.
Conversion:
Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in
terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the
transaction; non-monetary items which are carried at fair value or other similar valuation denominated in a foreign
currency are reported using the exchange rates that existed when such values were determined.
Exchange differences:
Exchange differences arising on the settlement of monetary items or on reporting the Entity's monetary items at
rates different from those at which they were initially recorded during the year, or reported in previous financial
statements, are recognised as income or as expenses in the year in which they occur.
|