(r) Provisions and contingent liabilities
Provisions are recognized when the Company has a present legal or constructive obligation as
a result of past events, it is probable that an outflow of resources will be required to settle
the obligation and the amount can be reliably estimated. Provisions are not recognized for
future operating losses.
Provisions are measured at the present value of management's best estimate of the
expenditure required to settle the present obligation at the end of the reporting period. The
discount rate used to determine the present value is a pre tax rate that reflects current
market assessments of the time value of money and the risks specific to the liability. The
increase in the provision due to the passage of time is recognized as interest expense.
Contingent Liabilities are disclosed in respect of possible obligations that arise from past
events but their existence will be confirmed by the occurrence or non occurrence of one or
more uncertain future events not wholly within the control of the Company or where any
present obligation cannot be measured in terms of future outflow of resources or where a
reliable estimate of the obligation cannot be made.
(s) Revenue recognition
Revenue is measured at the value of the consideration received or receivable. Amounts
disclosed as revenue are inclusive of excise duty and net of returns, trade allowances,
rebates, discounts, loyalty discount, value added taxes and amounts collected on behalf of
third parties.
The Company recognizes revenue when the amount of revenue can be reliably measured, it is
probable that future economic benefits will flow to the Company and specific criteria have
been met for each of the Company's activities as described below.
Sale of goods
Sales are recognized when substantial risk and rewards of ownership are transferred to
customer, In case of domestic customer, generally sales take place when goods are
dispatched or delivery is handed over to transporter, in case of export customers, generally
sales take place when goods are shipped onboard based on bill of lading.
Sales Return
The Company recognizes provision for sales return, based on the historical results, measured
on net basis of the margin of the sale.
Revenue from services
Revenue from services is recognized in the accounting period in which the services are
rendered.
Other operating revenue
Interest on investments and deposits is booked on a time-proportion basis taking into
account the amounts invested and the rate of interest.
Revenue in respect of other types of income is recognised when no significant uncertainty
exists regarding realisation of such income.
Other operating revenue - Export incentives
"Export Incentives under various schemes are accounted in the year of export.
(t) Employee benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits that are expected to be
settled wholly within 12 months after the end of the period in which the employees
render the related service are recognised in respect of employees' services up to the end
of the reporting period and are measured at the amounts expected to be paid when the
liabilities are settled.
(ii) Other long-term employee benefit obligations
The liabilities for earned leave and sick leave that are not expected to be settled wholly
within 12 months are measured as the present value of expected future payments to be
made in respect of services provided by employees up to the end of the reporting period
using the projected unit credit method. The benefits are discounted using the
Government Securities (G-Sec) at the end of the reporting period that have terms
approximating to the terms of the related obligation. Remeasurements as a result of
experience adjustments and changes in actuarial assumptions are recognized in the
Statement of Profit and Loss.
(iii) Post-employment obligations
The Company operates the following post-employment schemes:
(a) defined benefit plans such as gratuity; and
(b) Defined contribution plans such as provident fund.
Gratuity obligations
The liability or asset recognized in the balance sheet in respect of defined benefit gratuity
plans is the present value of the defined benefit obligation at the end of the reporting
period less the fair value of plan assets. The defined benefit obligation is calculated
annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation is determined by discounting the
estimated future cash outflows by reference to market yields at the end of the reporting
period on government bonds that have terms approximating to the terms of the related
obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the
defined benefit obligation and the fair value of plan assets. This cost is included in
employee benefit expense in the Statement of Profit and Loss.
Remeasurement gains and losses arising from experience adjustments and changes in
actuarial assumptions are recognized in the period in which they occur, directly in other
comprehensive income. They are included in retained earnings in the statement of
changes in equity and in the balance sheet.
Defined Contribution Plans
Defined Contribution Plans such as Provident Fund etc., are charged to the Statement of
Profit and Loss as incurred. The Company has an obligation to make good the shortfall, if
any.
Termination benefits
Termination benefits are payable when employment is terminated by the Company
before the normal retirement date, or when an employee accepts voluntary redundancy
in exchange for these benefits. The Company recognizes termination benefits at the
earlier of the following dates: (a) when the Company can no longer withdraw the offer of
those benefits; and (b) when the Company recognizes costs for a restructuring that is
within the scope of Ind AS 37 and involves the payment of terminations benefits. In the
case of an offer made to encourage voluntary redundancy, the termination benefits
are measured based on the number of employees expected to accept the offer. Benefits
falling due more than 12 months after the end of the reporting period are discounted to
present value.
(u) Foreign currency translation
(i) Functional and presentation currency
The financial statements are presented in Indian rupee (INR), which is Company's
functional and presentation currency.
(ii) Transactions and balances
Transactions in foreign currencies are recognized at the prevailing exchange rates on the
transaction dates. Realized gains and losses on settlement of foreign currency
transactions are recognized in the Statement of Profit and Loss.
Monetary foreign currency assets and liabilities at the year-end are translated at the
year-end exchange rates and the resultant exchange differences are recognized in the
Statement of Profit and Loss.
(v) Income tax
The income tax expense or credit for the period is the tax payable on the current period's
taxable income based on the applicable income tax rate adjusted by changes in deferred tax
assets and liabilities attributable to temporary differences and to unused tax losses.
Deferred income tax is provided in full, using the liability method on temporary differences
arising between the tax bases of assets and liabilities and their carrying amount in the
financial statement. Deferred income tax is determined using tax rates (and laws) that have
been enacted or substantially enacted by the end of the reporting period and are excepted
to apply when the related deferred income tax assets is realized or the deferred income tax
liability is settled.
Deferred tax assets are recognized for all deductible temporary differences and unused tax
losses, only if, it is probable that future taxable amounts will be available to utilize those
temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset
current tax assets and liabilities and when the deferred tax balances relate to the same
taxation authority. Current tax assets and tax liabilities are off set where the Company has a
legally enforceable right to offset and intends either to settle on a net basis, or to realize the
asset and settle the liability simultaneously.
Current and deferred tax is recognized in the Statement of Profit and Loss, except to the extent
that it relates to items recognized in other comprehensive income or directly in equity. In this
case, the tax is also recognized in other comprehensive income or directly in equity respectively
(w) Earnings Per Share
Basic earnings per share
Basic earnings per share are calculated by dividing:
- the profit attributable to owners of the Company by the weighted average number of
equity shares outstanding during the financial year, adjusted for bonus elements in equity
shares issued during the year and excluding treasury shares.
Diluted earnings per share
A diluted earnings per share adjusts the figures used in the determination of basic earnings
per share to take into account:
-the after income tax effect of interest and other financing costs associated with dilutive
potential equity shares, and
-the weighted average number of additional equity shares that would have been
outstanding assuming the conversion of all dilutive potential equity shares.
(x) Government Grants
Grants from the government are recognized at their fair value where there is reasonable
assurance that the grant will be received and the Company will comply with all attached
conditions.
Government grants relating to the purchase of property, plant and equipment are included
in non-current liabilities as deferred income and are credited to Profit and Loss on a straight -
line basis over the expected lives of related assets and presented within other income.
(y) Manufacturing and Operating Expenses
The Company classifies separately manufacturing and operating expenses which are
directly linked to manufacturing and service activities of the group.
Amendments to Ind AS 7, 'Statement of cash flows' on disclosure initiative:
The amendment to Ind AS 7 introduces an additional disclosure that will enable users of
financial statements to evaluate changes in liabilities arising from financing activities. This
includes changes arising from cash flows (e.g. draw downs and repayments of borrowings) and
non-cash changes (i.e. changes in fair values), Changes resulting from acquisitions and
disposals and effect of foreign exchange differences. Changes in financial assets must be
included in this disclosure if the cash flows were, or will be, included in cash flows from
financing activities. This could be the case, for example, for assets that hedge liabilities arising
from financing liabilities. The Company has currently assessed the potential impact of this
amendment.
(z) Critical estimates and judgments
The preparation of financial statements requires the use of accounting estimates which by
definition will seldom equal the actual results. Management also need to exercise judgment
in applying the Group's accounting policies.
This note provides an overview of the areas that involved a higher degree of judgment or
complexity, and items which are more likely to be materially adjusted due to estimates and
assumptions turning out to be different than those originally assessed. Detailed information
about each of these estimates and judgments is included in relevant notes together with
information about the basis of calculation for each affected line item in the financial
statements.
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