j) Provisions, Contingent liabilities, Contingent assets and Commitments
Provisions are recognized 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. The expense
relating to a provision is presented in the statement of profit and loss. Provisions are not discounted to
their present value and are determined based on the best estimate required to settle the obligation at the
reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current
best estimate.
Disclosure of contingent liability is made when there is a possible obligation arising from past events, the
existence of which will be confirmed only by the occurrence or non-occurrence 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 an outflow of resources embodying economic benefits will be
required to settle or a reliable estimate of amount cannot be made.
A contingent asset is disclosed, where an inflow of economic benefits is probable.
k) Financial instruments:
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial
liability or equity instrument of another entity.
l) Foreign currency translation
Initial Recognition
On initial recognition, transactions in foreign currencies entered into by the Company are recorded in the
functional currency (i.e. Indian Rupees), by applying to the foreign currency amount, the spot exchange
rate between the functional currency and the foreign currency at the date of the transaction. Exchange
differences arising on foreign exchange transactions settled during the year are recognized in the
Statement of Profit and Loss.
Measurement of foreign currency items at reporting date
Foreign currency monetary items of the Company are translated at the closing exchange rates.
Nonmonetary items that are measured at historical cost in a foreign currency, are translated using the
exchange rate at the date of the transaction. Non-monetary items that are measured at fair value in a
foreign currency, are translated using the exchange rates at the date when the fair value is measured.
Exchange differences arising out of these translations are recognized in the Statement of Profit and Loss
m) Financial assets
Initial recognition and measurement
All financial assets are recognized initially at fair value plus, in the case of financial assets not recorded at
fair value through profit and loss, transaction costs that are attributable to the acquisition of the financial
asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in three broad categories:
• Financial assets at amortized cost
• Financial assets at fair value through OCI (FVTOCI)
• Financial assets at fair value through profit and loss (FVTPL)
Financial Assets measured at Amortised Cost (AC)
A Financial Asset is measured at Amortised Cost if it is held within a business model whose objective is to
hold the asset in order to collect contractual cash flows and the contractual terms of the Financial Asset
give rise on specified dates to cash flows that represent solely payments of principal and interest on the
principal amount outstanding
Financial Assets measured at Fair Value Through Other Comprehensive Income (FVTOCI)
A Financial Asset is measured at FVTOCI if it is held within a business model whose objective is achieved
by both collecting contractual cash flows and selling Financial Assets and the contractual terms of the
Financial Asset give rise on specified dates to cash flows that represents solely payments of principal and
interest on the principal amount outstanding.
Financial Assets measured at fair value through profit and loss (FVTPL)
A Financial Asset which is not classified in any of the above categories are measured at FVTPL. Financial
assets are reclassified subsequent to their recognition, if the Company changes its business model for
managing those financial assets. Changes in business model are made and applied prospectively from the
reclassification date which is the first day of immediately next reporting period following the changes in
business model in accordance with principles laid down under Ind AS 109 - Financial Instruments.
Impairment of financial assets
In accordance with Ind AS 109, the Company uses 'Expected Credit Loss' (ECL) model, for evaluating
impairment of Financial Assets other than those measured at Fair Value Through Profit and Loss (FVTPL).
Expected Credit Losses are measured through a loss allowance at an amount equal to:
• The 12-months expected credit losses (expected credit losses that result from those default events
on the financial instrument that are possible within 12 months after the reporting date); or
• Full lifetime expected credit losses (expected credit losses that result from all possible default
events over the life of the financial instrument).
ii. Financial liabilities
Initial recognition and measurement
All Financial Liabilities are recognised at fair value and in case of borrowings, net of directly attributable
cost. Fees of recurring nature are directly recognised in the Statement of Profit and Loss as finance cost
The Company's financial liabilities include trade payables.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at amortized cost
After initial recognition, interest-bearing loans and borrowings and other payables are subsequently
measured at amortized cost using the EIR method. Gains and losses are recognized in profit and loss
when the liabilities are derecognized as well as through the EIR amortization process.
Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or
costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the
statement of profit and loss.
For trade and other payables maturing within one year from the balance sheet date, the carrying amounts
approximate fair value due to the short maturity of these instruments.
Derecognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or
expires. When an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as the derecognition of the original liability and the recognition of a new liability.
The difference in the respective carrying amounts is recognized in the statement of profit and loss.
iii. Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if
there is a currently enforceable legal right to offset the recognized amounts and there is an intention to
settle on a net basis, to realize the assets and settle the liabilities simultaneously.
n) Employee Benefits
Short term employee benefits
All employee benefits payable wholly within twelve months of rendering the service are classified as
short term employee benefits and they are recognized in the period in which the employee renders the
related service. The Company recognizes the undiscounted amount of short term employee benefits
expected to be paid in exchange for services rendered as a liability (accrued expense) after deducting any
amount already paid.
Post Employment benefits
Defined Contribution Schemes
All the employees of the Company are entitled to receive benefits under the provident Fund and
employees State Insurance scheme, defined contribution plans in which both the employee and the
Company contribute monthly at a stipulated rate. The Company has no liability for future benefits other
than its annual contribution and recognises such contributions as an expense in the period in which
employee renders the related service. If the contribution payable to the scheme for service received
before the Balance Sheet date exceeds the contribution already paid, the deficit payable to the scheme is
recognised as a liability after deducting the contribution already paid. If the contribution already paid
exceeds the contribution due for services received before the Balance Sheet date, then excess is
recognised as an asset to the extent that the pre-payment will lead to, for example, a reduction in future
payment or a cash refund.
Defined Benefit Schemes
The Company provides for the gratuity, a defined benefit retirement plan covering all employees. The
plan provides for lump sum payments to employees upon death while in employment or on separation
from employment after serving for the stipulated years mentioned under 'The Payment of Gratuity Act,
1972'. The present value of the obligation under such defined benefit plan is determined based on
actuarial valuation, carried out by an independent actuary at each Balance Sheet date, using the Projected
Unit Credit Method.
The obligation is measured at the present value of the estimated future cash flows. Remeasurement gains
and losses arising from experience adjustments and changes in actuarial assumptions are recognized
directly in the other comprehensive income in the period in which they occur. They are included in
retained earnings in the statement of changes in equity and in the balance sheet. Remeasurements are not
reclassified to the statement of profit and loss in the subsequent periods.
o) Earnings per share
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to
equity shareholders by the weighted average number of equity shares outstanding during the period
adjusted for bonus elements and share split in equity shares, if any, issued during the year.
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