B.2 Summary of Material Accounting Policies
(a) Current and Non-Current Classification
The Company presents assets and liabilities in the Balance Sheet based on Current/ Non-Current classification.
An asset is treated as Current when it is -
- Expected to be realised or intended to be sold or consumed in normal operating cycle;
- Held primarily for the purpose of trading;
- Expected to be realised within twelve months after the reporting period, or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the
reporting period.
All other assets are classified as non-current.
A liability is current when:
- It is expected to be settled in normal operating cycle;
- It is held primarily for the purpose of trading;
- It is due to be settled within twelve months after the reporting period, or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as non-current.
Deferred tax Assets and liabilities are classified as non-current Assets and liabilities.
(b) Property, plant and equipment
• Freehold land:
Freehold land is carried at historical cost.
• Property, plant and equipment:
Property, Plant and Equipment are stated at cost, net recoverable taxes, trade discount and rebate less accumulated depreciation and
impairment losses, if any. Such cost included purchase price, borrowing cost and any cost directly attributable to bring the assets
to its working condition for its intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate
variations attributable to the assets. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset,
as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and the cost
can be measured reliably.
Property, Plant and Equipment which are significant to the total cost of that item of Property, Plant and Equipment and having
different useful life are accounted separately.
• Leasehold land:
Leasehold land is stated at historical cost less amounts written off proportionate to expired lease period.
• Capital Work-In-Progress:
Capital Work-In-Progress includes expenditure during construction period incurred on projects under implementation treated as
pre-operative expenses pending allocation to the assets. These expenses are apportioned to the respective fixed assets on their
completion / commencement of commercial production.
(c) Depreciation and Amortisation:
Depreciation on Property, Plant and Equipment is provided using straight-line method. Depreciation is provided based on useful life of
the assets as prescribed in accordance with the Part C of Schedule II of the Companies Act, 2013 except in respect of the following assets,
where useful life is different from those prescribed in Part C of Schedule II.
The residual values, useful lives and methods of depreciation of Property, Plant and Equipment are reviewed at each financial year end
and adjusted prospectively, if appropriate.
Depreciation on addition to assets or on sale/discardment of assets, is calculated pro rata from the date of such addition or upto the date
of sale/discardment, as the case may be.
Gains or losses arising from derecognition of Property, Plant and Equipment are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognised in the statement of Profit and Loss when the assets is derecognised.
(d) Impairment of Non Financial Assets- Property, Plant and Equipment
The Company assesses at each reporting date as to whether there is any indication that any Property, Monetary Plant and Equipment
and group of Assets, called Cash Generating Units (CGU) may be impaired. If any such indication exists, the recoverable amount of an
asset or CGU is estimated to determine the extent of impairment, if any. When it is not possible to estimate the recoverable amount of an
individual asset, the Company estimates the recoverable amount of the CGU to which the asset belongs.
An impairment loss is recognised in the Statement of Profit and Loss to the extent, asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is higher of an asset’s fair value less cost of disposal and value in use. Value in use is based on the
estimated future cash flows, discounted to their present value using pre-tax discount rate that reflects current market assessments of the
time value of money and risk specific to the assets.
The impairment loss recognised in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.
(e) Lease
At the date of commencement of the lease, the Company recognizes a right-of-use asset (“ROU”) and a corresponding lease liability for
all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value
leases. For these short-term and low value leases, the Company recognizes the lease payments as an operating expense on a straight-line
basis over the term of the lease.
The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease
payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are
subsequently measured at cost less accumulated depreciation and impairment losses. Certain lease arrangements include the options to
extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably
certain that they will be exercised. Right-of-use assets are depreciated from the commencement date on a straight-line basis over the
shorter of the lease term and useful life of the underlying asset. Right of use assets are evaluated for recoverability whenever events
or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the
recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is 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 lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are
discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the
country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if
the Company changes its assessment if whether it will exercise an extension or a termination option. Lease liability and ROU asset have
been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
(f) Finance Costs
Finance costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of
time to get ready for its intended use are capitalised as part of the cost of the asset. All other finance costs are expensed in the period in
which they occur. Finance costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
(g) Inventories
Inventories of Raw Materials, Packing Materials, Stores and Spares, Work-in Progress, Traded goods and Finished goods are valued
‘at cost and net realisable value’ whichever is lower. Cost comprises all cost of purchase, appropriate direct production overheads and
other costs incurred in bringing the inventories to their present location and condition. Cost formulae used is ‘Weighted Average Cost’.
Adequate allowance is made for defective, obsolete and slow-moving items. Net realisable value is the estimated selling price in the
ordinary course of business, less the estimated costs necessary to make the sale. Raw materials and other supplies held for use in the
production of inventories are not written down below cost except in case the prices of Raw Materials have dropped to the extent where
cost Finished goods manufactured out of it exceed its net realisable value.
(h) Provisions
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it 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 obligation. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that
reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of
time is recognised as a finance cost.
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