2.1 Summary of material accounting policies
a. Basis of classification of current and non-current
Assets and Liabilities in the balance sheet have been
classified as either current or non-current based
upon the requirements of Schedule III notified
under the Companies Act, 2013.
An asset has been classified as current if (a) it is
expected to be realised in, or is intended for sale or
consumption in, the Company's normal operating
cycle; or (b) it is held primarily for the purpose of
being traded; or (c) it is expected to be realised
within twelve months after the reporting date; or
(d) it is cash or cash equivalent unless it is restricted
from being exchanged or used to settle a liability for
at least twelve months after the reporting date. All
other assets have been classified as non-current.
A liability has been classified as current when (a) it
is expected to be settled in the Company's normal
operating cycle; or (b) it is held primarily for the
purpose of being traded; or (c) it is due to be settled
within twelve months after the reporting date;
or (d) the Company does not have right to defer
settlement of the liability for at least twelve months
after the reporting date. All other liabilities have
been classified as non-current.
Deferred tax assets and liabilities are classified as
non-current assets and liabilities.
An operating cycle is the time between the
acquisition of assets for processing and their
realization in cash or cash equivalents.
b. Property, Plant and Equipment ("PPE”)
The cost of an item of PPE is recognised as an asset
if, and only if:
a) it is probable that future economic benefits
associated with the item will flow to
the entity; and
b) the cost of the item can be measured reliably.
PPE are stated at cost, net of accumulated
depreciation and accumulated impairment
losses, if any.
Cost comprises the purchase price and any directly
attributable cost of bringing the asset to its working
condition for the intended use. Such cost includes
the cost of replacing part of the plant and equipment
and borrowing costs for long-term construction
projects if the recognition criteria are met. Any trade
discounts and rebates are deducted in arriving at the
purchase price.
Subsequent expenditure related to an item of PPE
is added to its book value only if it increases the
future benefits from the existing asset beyond its
previously assessed standard of performance. All
other expenses on existing assets, including day-to¬
day repair and maintenance expenditure and cost
of replacing parts, are charged to the Statement
of Profit and Loss for the year during which such
expenses are incurred.
The cost and related accumulated depreciation and
impairment losses, if any, are derecognised from
the Standalone financial statements upon sale or
when no future economic benefits are expected
to arise from the use of the asset, and the resultant
gains or losses are recognised in the Statement of
Profit and Loss.
Depreciation on property, plant and equipment
Depreciation on property, plant and equipment is
calculated on a straight-line basis using the rates
arrived at based on the useful lives estimated by
the management.
Freehold land is measured at cost and is not
depreciated. The Company, based on technical
estimate, has used the following rates to provide
depreciation on its property, plant and equipment.
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.
c. Capital work-in-progress / Intangible assets under
development
Capital work-in-progress represents expenditure
incurred in respect of capital projects and are carried
at cost. Cost comprises of purchase cost, related
acquisition expenses, development / construction
costs, borrowing costs and other direct expenditure.
Intangible assets under development represent
expenditure incurred in respect of acquisition,
implementation and development of intangible
assets that are not yet ready for their intended use.
Such expenditure is carried at cost comprising
purchase cost, implementation costs, directly
attributable employee costs, professional fees and
other directly attributable expenditure incurred
in bringing the asset to the condition necessary
for it to be capable of operating in the manner
intended by management.
d. Intangible assets
The costs of intangible asset are recognised as an
asset if, and only if:
• it is probable that future economic benefits
associated with the item will flow to
the entity; and
• The cost of the item can be measured reliably.
Intangible assets purchased are measured at cost
on initial recognition. Following initial recognition,
intangible assets are carried at cost less accumulated
amortization and impairment losses, if any.
The useful lives of intangible assets are assessed as
either finite or indefinite.
Intangible assets with finite lives are amortised
over the useful economic life and assessed for
impairment, whenever there is an indication that the
intangible asset may be impaired. The amortisation
period and the amortisation method for an intangible
asset with a finite useful life are reviewed at each
financial year end and adjusted prospectively, if
appropriate treating them as changes in accounting
estimates. The maintenance expenses on intangible
assets with finite lives is recognised in the statement
of profit and loss, unless such expenditure forms
part of carrying value of an asset and satisfies
recognition criteria.
Gains/(losses) arising from de-recognition of an
intangible asset 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 or loss when the asset
is de-recognised.
Intangibles representing computer software are
amortised using the straight-line method over their
estimated useful lives of three years.
e. Government grants
Government grants are recognised at their fair
value where there is reasonable assurance that the
grant will be received and all attached conditions
are complied with.
When the grant relates to an expense item, it is
recognised as income on a systematic basis over
the periods that the related costs, for which it is
intended to compensate, are expensed.
When the grant relates to an asset, it is recognised
as income over the expected useful life of
the related asset.
When loans or similar assistance are provided by
governments or related institutions, with an interest
rate below the current applicable market rate,
the effect of this favourable interest is regarded
as a government grant. The loan or assistance
is initially recognised and measured at fair value
(based upon the level of inputs available) and the
government grant is measured as the difference
between the initial carrying value of the loan and
the proceeds received. The loan is subsequently
measured as per the accounting policy applicable
to financial liabilities.
f. Leases
The Company, at the inception of a contract,
assesses whether the contract is a lease or not a
lease. A contract is, or contains, a lease if the contract
conveys the right to control the use of an identified
asset for a time in exchange for a consideration.
Company as a lessee
The Company's lease asset primarily consists of
leases for building. The Company recognises a
right-of-use asset and a lease liability at the lease
commencement date.
Right-of-use assets are measured at cost, less
any accumulated depreciation and impairment
losses, and adjusted for any remeasurement of
lease liabilities. The cost of right-of-use assets
includes the amount of lease liabilities recognised
and initial direct costs incurred. Right-of-use
assets are depreciated on a straight-line basis over
the lease term.
At the commencement date of lease, the Company
recognises lease liabilities measured at the present
value of lease payments to be made over the lease
term. In calculating the present value of lease
payments, the Company uses its incremental
borrowing rate at the lease commencement date
because the interest rate implicit in the lease is not
readily determinable. After the commencement
date, the amount of lease liabilities is increased to
reflect the accretion of interest and reduced for the
lease payments made.
Short-term leases and leases of low-value assets
The Company applies the short-term lease
recognition exemption to its short-term leases i.e.,
those leases that have a lease term of 12 months
or less from the commencement date and do not
contain a purchase option. Lease payments on
short-term leases and leases of low-value assets are
recognised as expense on a straight-line basis over
the lease term.
Company as a lessor
At the inception of a lease, the lease arrangement
is classified as either a finance lease or an operating
lease, based on contractual terms and substance of
the lease arrangement. Whenever the terms of the
lease transfer substantially all the risks and rewards
of ownership to the lessee, the contract is classified
as a finance lease. All other leases are classified as
operating leases. Rental income from operating
leases is recognised on a straight-line basis over
the lease terms and is included in revenue in the
statement of profit or loss due to its operating nature.
g. Impairment of long-lived assets
The long-lived assets of the Company consist of
property, plant & equipment, investment properties,
other intangible assets and investments (in
subsidiaries and joint ventures) measured at cost
in accordance with Ind AS 27- Separate Financial
Statements. At the end of each reporting period, the
Company reviews the carrying amounts of its long-
lived assets of a "Cash Generating Unit” (CGU) to
determine whether there is any indication that those
assets have suffered an impairment loss. Individual
assets are grouped for impairment assessment
purposes at the lowest level at which there are
identifiable cash flows that are largely independent
of the cash flows of other groups of assets. If any
such indication exists, the recoverable amount of
the asset is estimated in order to determine the
extent of the impairment loss (if any). When it is
not possible to estimate the recoverable amount
of an individual asset, the Company estimates the
recoverable amount of the cash-generating unit to
which the asset belongs.
Recoverable amount is the higher of fair value less
costs of disposal and value in use. In assessing value
in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate
that reflects current market assessments of the time
value of money and the risks specific to the asset
for which the estimates of future cash flows have
not been adjusted.
If the recoverable amount of an asset (or cash¬
generating unit) is estimated to be less than its
carrying amount, the carrying amount of the asset (or
cash- generating unit) is reduced to its recoverable
amount. An impairment loss is recognised
immediately in statement of profit and loss.
When an impairment loss subsequently reverses, the
carrying amount of the asset (or a cash-generating
unit) is increased to the revised estimate of its
recoverable amount. The increased carrying amount
does not exceed the carrying amount that would
have been determined had no impairment loss
been recognised for the asset (or cash-generating
unit) in prior years. A reversal of an impairment
loss is recognised immediately in the statement of
profit and loss.
h. Borrowing costs
General and specific borrowing costs directly
attributed to the acquisition, construction or
production of a qualifying asset are capitalised up
to the period of time that is required to complete
and prepare the asset for its intended use or sale.
Qualifying assets are assets that necessarily take
a substantial period of time to get ready for their
intended use or sale.
AH other borrowing costs are expensed in the period
in which they occur or accrue. Borrowing costs
consist of interest and other costs that an entity
incurs in connection with the borrowing of funds.
Transaction costs in respect of long-term borrowing
are amortised over the tenure of respective loans
using Effective Interest Rate (EIR) method.
Investment income earned on the temporary
investment of specific borrowings pending their
expenditure on qualifying assets is deducted from
the borrowing costs eligible for capitalisation.
i. Foreign currency transactions and translations
Transactions in foreign currencies are recorded in
the functional currency, by applying the prevailing
spot exchange rate on the date, the transaction first
qualifies for recognition.
Monetary assets and liabilities related to foreign
currency transactions remaining outstanding on the
balance sheet date are translated at the exchange
rate prevailing on the balance sheet date. Any gain
or loss arising on foreign exchange difference either
on settlement or on translation is recognised in the
Statement of Profit and Loss.
Non-monetary items carried at historical cost
denominated in a foreign currency are translated
using the exchange rate at the date of the
initial transaction.
j. Investments
Investment in subsidiaries and joint ventures are
accounted for at cost less impairment loss, if any
in standalone financial statements. Investment in
associates is accounted for at fair value through OCI.
Quoted investments of the Company are accounted
for at fair value through OCI at the reporting date.
k. Inventories
The cost of inventories shall comprise all costs
of purchase, costs of conversion and other costs
incurred in bringing the inventories to their present
location and condition.
Raw materials, stores and spares are valued at lower
of cost and net realizable value. However, these
items are considered to be realizable at cost if the
finished products, in which they will be used, are
expected to be sold at or above cost.
Work in progress and finished goods are valued at
lower of cost and net realizable value.
Finished goods and goods under process include
cost of conversion and other costs incurred in
bringing the inventories to their present location
and condition based on normal operating
capacity. Cost of inventories is computed on a
weighted average basis.
By products and saleable scraps, whose cost is not
identifiable, are valued by management at estimated
net realizable value.
Net Realizable Value is the estimated selling price in
the ordinary course of business, less the estimated
costs of completion and the estimated costs
necessary to make the sale.
Land and plots other than area transferred to
constructed properties at the commencement of
construction are valued at lower of cost and net
realisable value.
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