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
standalone financial statements are approved for issue by the Board of Directors have been considered in preparing
these standalone financial statements.
Basis of measurement
These standalone 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 standalone 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 "?"). All amount disclosed in the standalone financial statements
including notes thereon have been rounded off to the nearest rupees in Crore upto 2 decimal as per the requirement of
Schedule III to the Act, unless otherwise stated. Previous year figures were presented in lakh. Accordingly, figures for the
previous year have been regrouped/ rounded off to conform to current year presentation.
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 upgrades/ enhancements are charged to revenue unless they bring significant additional
future economic benefits.
The cost and related accumulated depreciation are derecognised from the standalone 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 assets, 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.
a) Cost of raw materials and stores and spare parts include cost of purchase and other costs incurred in bringing the
inventories to their present location and condition. Cost is determined on weighted average basis.
b) Cost of finished goods and work in progress include cost of direct materials and labour and a proportion of
manufacturing overheads allocated based on the normal operating capacity but excluding borrowing costs. Cost
is determined 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 is 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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