Note 2 Material accounting policies
2.1 Basis of preparation
Statement of Compliance with Ind AS
These financial statements have been prepared in accordance with the Indian Accounting Standards (referred to as “Ind AS”) as
prescribed under Section 133 of the Companies Act, 2013 ("The Act") read with the Companies (Indian Accounting Standards) Rules,
2015 (as amended from time to time) and presentation requirements of Division II of Schedule III to the Act.
Accounting policies have been consistently applied except where a newly issued Ind AS is initially adopted or a revision to an existing
Ind AS requires a change in the accounting policy hitherto in use.
All Ind AS issued and notified till the financial statements are approved for issue by the Board of Directors have been considered in
preparing these financial statements.
Basis of measurement
These financial statements have been prepared under the historical cost convention and on accrual basis, except in respect of certain
financial instruments which are measured in terms of relevant Ind AS at fair value / cost/ amortised cost, where applicable, at the end
of each balance sheet date.
Functional /presentation currency and rounding-off of amounts
The items included in the financial statements (including notes thereon) are measured using the currency of the primary economic
environment in which the Company operates (“the functional currency”) and are, therefore, presented in Indian Rupees (“INR” or
“Rupees” or “Rs.” or T). All amount disclosed in the financial statements including notes thereon have been rounded off to the nearest
rupees in lakh upto 2 decimal as per the requirement of Schedule III to the Act, unless therwise stated.
Operating Cycle
All assets and liabilities (other than Deferred tax assets/ 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 and Ind AS 1 - Presentation of Financial Statements. The
Company has identified its operating cycle as 12 months for current and non-current classification of assets and liabilities. Deferred tax
assets and liabilities are considered non-current.
2.2 Use of estimates
The preparation of financial statements in conformity with Ind AS requires management to make judgements, estimates and
assumptions that affect the application of the accounting policies and the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the
year. Actual results could differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period;
they are recognised in the period of the revision and future periods if the revision affects both current and future periods.
2.3 Property, plant and equipment (PPE) and Depreciation
a) Property, plant and equipment are stated at cost of acquisition less accumulated depreciation and impairment, if any. For this
purpose, cost includes deemed cost which represents the carrying value of PPE recognised as at 1st April, 2016 (date of transition
to Ind AS) measured as per the previous GAAP.
b) Cost is inclusive of inward freight, non-refundable taxes and duties and directly attributable costs of bringing an asset to the
location and condition of its intended use. In addition, interest on borrowings used to finance the construction of qualifying assets
is capitalised as part of the asset’s cost until such time that the asset is ready for its intended use. All upgradation / enhancements
are charged off as revenue expenditure unless they bring similar significant additional benefits.
The cost and related accumulated depreciation are derecognised 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.
c) Depreciation of these assets commences when the assets are ready for their intended use. Depreciation on items of PPE
is provided on a straight line basis to allocate their cost, net of their residual value of 5% over the estimated useful life of the
respective asset as specified in Schedule II to the Act or based on technical evaluation which in the view of the management best
represents the period for which the asset is expected to be used:
d) Treatment of expenditure during construction period:
Property, plant and equipment that are not ready for intended use on the balance sheet date are disclosed as “Capital work in¬
progress”. Advances paid towards acquiring property, plant and equipment outstanding at each balance sheet date are classified
as Capital advances under “Other non-current assets”. Directly attributable expenditures (including finance costs relating to
borrowed funds for construction or acquisition of property, plant and equipment) incurred on projects under implementation are
treated as pre-operative expenses pending allocation to the assets and are shown under “Capital work-in-progress”.
2.4 Intangible Assets
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated
impairment losses. Amortisation is recognised on straight-line basis over their estimated useful lives. The estimated useful lives,
residual values, and amortisation method are reviewed at least annually during each financial year-end and adjusted prospectively,
wherever appropriate.
Derecognition of intangible assets:
An Intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or
losses arising from derecognition of Intangible asset, measured as the difference between the net disposal proceeds and the carrying
amount of the asset, are recognised in the statement of profit and loss when the asset is derecognised.
2.5 Impairment of Assets
Property, plant and equipment and intangible assets are evaluated for recoverability whenever events or changes in circumstances
indicate that the carrying amounts may not be recoverable. An impairment loss is recognized in the statement of profit and loss for the
amount by which the carrying amount of the asset exceeds its recoverable amount, 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. The recoverable amount is the higher of an asset’s fair value
less costs to sell and value in use.
If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount
is reassessed and the impairment loss previously recognized is reversed such that the asset is recognized at its recoverable amount
but not exceeding the value which would have been reported if the impairment loss had not been recognized.
2.6 Inventories
Inventories are valued at lower of cost and net realisable value after providing for obsolescence, if any
Cost of inventory comprises of purchase price, cost of conversion and other directly attributable costs that have been incurred in
bringing the inventories to their respective present location and condition. Borrowing costs are not included in the value of inventories.
The cost of inventories is computed on weighted average basis. Inventories are written down on a case-by-case basis if the anticipated
net realizable value declines below the carrying amount of inventories. Such write downs are recognised in the Statement of profit
and loss.
Net realizable value is the estimated selling price in the ordinary course of business less estimated cost of completion and estimated
costs necessary to make the sale.
2.7 Revenue recognition
Revenue is recognised upon transfer of control of promised goods or services to customers at an amount to which the entity expects
to be entitled following a five-step model in accordance with Ind AS 115. Revenue is measured based on the consideration specified in
a contract with a customer, and is reduced for volume discounts, rebates and other similar allowances.
a) Sale of goods
The revenue is recognised on satisfaction of performance obligation, when control over the goods has been transferred and/ or
goods are delivered to the customers. The performance obligation in the case of sale of goods is satisfied at a point in time i.e.
when the goods is shipped to the customers or delivered to the customers as may be specified in the contracts with them or the
Company has sufficient evidence that all the criteria for acceptance have been satisfied.
Revenue is measured at the amount of transaction price (consideration specified in the contract with the customers) allocated to
that performance obligation. The transaction price of goods sold is net of variable consideration on account of discounts/rebate
offered by the Company and excludes amounts collected on behalf of third parties. Revenue are net of estimated returns and
taxes collected from customers.
The transaction price is documented on the sales invoice and payment is generally due as per agreed credit terms with customer.
Payment terms agreed with a customer are as per business practice and the financing component, if significant, is separated
from the transaction price and accounted as interest income.
The consideration is generally fixed. Variable consideration, if any, is only recognised when it is highly probable that a significant
reversal will not occur.
Sales return is variable consideration that is recognised and recorded based on historical experience, market conditions and
provided for in the year of sale as reduction from revenue. The methodology and assumptions used to estimate returns are
monitored and adjusted regularly in line with trade practices, historical trends, past experience and projected market conditions.
b) Interest income
Interest income is recorded on accrual basis using the effective interest rate (EIR) method.
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