A. MATERIAL ACCOUNTING POLICIES
a) Basis of Preparation
These financial statements have been prepared in accordance with the Indian Accounting Standards (hereinafter refered to as 'Ind AS') notified under Companies (Indian Accounting Standards) Rules 2015.
The financial Statements have been prepared on accrual and going concern basis. The accounting policies are applied consistently for all the periods presented in the financial statements.
The preparation of the financial statements, in conformity with generally accepted accounting principles, requires the use of estimates and assumptions that affect the reported amount of assets and liabilities as at the Balance Sheet date, reported amounts of revenues and expenses during the period and disclosure of contingent liabilities as at that date. The estimates and assumptions used in these financial statements are based upon the management's evaluation of the relevant facts and circumstances as of the date of the financial statements.
The Assets and Liabilities have been classified as current or non-current as per the Company's normal operating cycle and other criteria as set out in the Division II of Schedule III to the Companies Act, 2013. The Company's normal operating cycle has been ascertained as 12 months based on the nature of products and the time between acquisition of assets for processing and their realisation in cash or cash equivalents.
b) These financial statements are prepared under the historical cost convention unless otherwise indicated.
c) Property, Plant and Equipment
a) Property, plant and equipment is stated at acquisition cost net of GST credits as reduced by accumulated depreciation and accumulated impairment losses, if any.
b) Depreciation on Property, Plant and Equipment has been provided under the Straight Line Method in accordance with Schedule II of the Companies Act 2013 except for certain Plant and Equipments.
c) Leasehold Land: Premium paid on Leasehold Land is amortised over the lease period.
d) The expenditure during construction period relating to the new project till the commencement of commercial production is capitalised and allocated to the relevant equipments.
e) In accordance with IndAS 23, the borrowing costs attributable to the qualifying assets that necessarily takes substantial period to get ready for its intended use are capitalised.
f) Grants received for Investment in Property Plant & Equipment are recognized in Statement of Profit or Loss on a systematic basis over the useful life of the asset.
g) The cost of software relating to ERP is amortised over the estimated useful life viz., 5 years. The cost of other intangible assets are amortised over the estimated useful life viz., 3 years.
h) Upon first time adoption of IndAS, the carrying value of all the assets as at Transition date i.e. 01st April 2016 has been considered as its Deemed cost.
d) Goodwill
Goodwill represents the cost of acquired business as established at the date of acquisition of the business in excess of the acquirer's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities less accumulated impairment losses, if any. Goodwill is tested for impairment annually or when events or circumstances indicate that the implied fair value of goodwill is less than its carrying amount.
Impairment
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, the Company estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating units (CGU) fair value less costs of disposal and its value in use. Impairment loss is recognised when the recoverable amount is lower than the carrying amount of the CGU
e) Investments in Subsidiaries and Associates
Investments in subsidiaries and associates are carried at cost less accumulated impairment losses if any.
f) Inventories
The stock of raw materials, work-in-progress, stores, loose tools and goods in transit are valued at cost (net of GST credits) on weighted average basis. The stock of finished goods are valued at cost (net of GST credits including appropriate overheads) or net realisable value whichever is lower.”
g) Financial instruments
i) Financial assets:
Financial asset is recognised at fair value. In case of financial assets which are recognised at fair value through profit and loss, its transaction cost is recognised in the Statement of profit and loss. In other cases, the acquisition cost of the financial assets is net of the attributable transaction cost. Financial assets are subsequently classified and measured at:
i) Amortised cost or
ii) Fair Value through profit and loss(FVTPL)
iii) Fair Value through other comprehensive income (FVTOCI)
Trade receivables and Loans:
Trade receivables and Loans are initially recognised at fair value. Subsequently, these assets are held at amortised cost, using Effective Interest Rate method net of any expected credit losses. The Effective Interest Rate is the rate that discounts estimated future cash receipts through the expected life of financial instrument.
Investments:
All investments in equity instruments (other than in Subsidiaries and Associates covered under (d) above) classifiedunderfinancialassets,areinitiallymeasuredatfairvalue. FairValuechangesonanEquityinstruments is recognised in the Statement of Profit and Loss or Other Comprehensive Income,as the case may be. Dividend income on the investments in equity instruments are recognised as 'other income' in the Statement of Profit and Loss.
ii) Financial liabilities:
Financial liabilities are initially measured at amortised cost. In case of trade payables, they are initially recognised at fair value and subsequently, these liabilities are held at amortised cost using Effective Interest Rate method.
h) Provisions and Contingent liabilities:
Provisions are recognised when the Company has a present obligation as a result of an event and is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligations. Provisions are measured at the best estimate of the expenditure required to settle the present obligation at the Balance Sheet date.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurence or non-occurence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that a outflow of resources will be required to settle the obligation or the amount of obligation cannot be measured with sufficient reliability.
i) Revenue recognition:
Revenue towards satisfaction of a performance obligation and when the goods are delivered as per the relevant terms of the contract, measured at transaction price. Service income is recognised once the obligations are performed. Interest income is accrued on a time basis at an applicable effective interest rate. Dividend income is recognised when right to receive the payment is established. Export incentives are recognised as revenue, when exports are made.
j) Employee Benefits Provident Fund:
(i) Defined Contribution Plan
Eligible employees receive benefits from Provident Fund which is defined contribution plan. Both, the employees and the Company make monthly contributions to the regional provident fund authorities.
(ii) Defined Benefit Plan
For plants in Tamil nadu , the PF contribution by employee and Employer are managed by Trust . The Company has an obligation to make good the shortfall,if any between the return from the investments made from the trust and the notified interest rate accrued to the employees account.
Gratuity:
The gratuity plan provides for a lump sum payment to vested employees eligible for gratuity at the time of retirement, death, incapacity or termination of employment. Liabilities with regard to the gratuity plan are determined by actuarial valuation as at the Balance Sheet date based upon which the Company contributes all the ascertained liabilities, which is the administrator of the plan.
Unencashed Leave Salary:
Unencashed leave salary is accounted on actuarial valuation and the Company contributes part of the ascertained liabilities, which is the administrator of the plan.
Others:
Contributions to defined contribution schemes such as Employees State Insurance, Superannuation are charged as expenses based on the amount of contribution required to be made. These benefits are classified as defined contribution schemes as the Company has no obligation beyond what has been recognised as expense in the Statement of profit and loss.
k) Research & Development expenses:
Revenue expenditure on Research & Development is charged to profit & loss account in the year in which it is incurred.
l) Leases:
The company has applied IND AS 116 . The Lease liability is initially measured at the present value of remaining payments as at the commencement date discounted using the lessee's incremental borrowing rate. The cost of Right of Use Assets shall comprise of amount of initial mesurement of lease liability adjusted for any payments made after or before the commencement of lease term less any lease incentive received. The Leased Assets are depreciated on straight line basis over the period of lease.
m) Foreign Currency Transactions
Transactions in Foreign currencies are accounted at the rates of exchange prevailing as on the date of the transaction. Exchange differences arising on the settlement of such transactions are recognised in the Statement of Profit and Loss. Monetary assets and liabilities denominated in foreign currency are reinstated at the rate of exchange prevailing on the reporting date.”
n) Derivative contracts:
Forward contracts are entered to hedge the foreign currency risk.The profit/ loss arising on these contracts is accounted for as income/ expenditure on the date of settlement of the contract.
The outstanding contracts are Marked to Market on the reporting date and the net loss/ gain arising therefrom is recognised in the Statement of Profit and Loss.
o) Earnings per share:
Earnings per share (EPS) is computed by dividing the net profit/ (loss) after tax for the year attributable to the equity shareholders by weighted average number of equity shares outstanding during the year. Equity shares issued for bonus issue, rights issue, business combination are considered as it it had been issued at beginning oft the earliest reported period
p) Income taxes
Current tax is the amount of tax payable on the taxable income for the year and is determined in accordance with the provisions of the Income Tax Act, 1961.
Deferred tax assets and liabilities are recognised for temporary differences arising between the tax base of assets and liabilities and their carrying amount.
Deferred tax assets in respect of unabsorbed depreciation and carry forward of losses are recognised only if there is virtual certainty that there will be sufficient future taxable income available to realise such assets. Other deferred tax assets are recognised if there is reasonable certainty that there will be sufficient future taxable income available to realise such assets.
Deferred tax assets and liabilities are measured at the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
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