NOTE -2 Significant accounting policies
(a) Basis of accounting and preparation of financial statements
These financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles (GAAP) under the historical cost convention on the accrual basis except for certain financial instruments
which are measured at fair values. GAAP comprises mandatory accounting standards as prescribed under Section 133 of the Companies Act, 2013 (‘Act’) read with Rule 7 of the Companies (Accounts) Rules, 2014,
the provisions of the Act (to the extent notified). The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year. All assets and liabilities have been
classified as current and Non-current as per the Company's normal operating cycle and other criteria set out in Schedule-III to the Companies Act,2013.
(b) Use of estimates
The preparation of the financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the year. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognized in the
periods in which the results are known / materialize.
(c) Inventories
(i) Raw Material
At cost or net realizable value (on FIFO basis) whichever is lower (Rejected raw material at cost Less claim received thereon). Cost includes cost of purchase and other costs incurred in bringing the inventories to their
present condition and location. The costs of purchase consist of the purchase price including duties and taxes (other than those subsequently recoverable by the enterprise from the taxing authorities), freight inwards
and other expenditure directly attributable to the acquisition.
ii) Work in Progress
Cost of inputs plus overhead upto stage of the completion
iii) Finished Goods
At cost or net realizable value, whichever is lower (on FIFO basis). For arriving at the cost for this purpose, the cost includes material purchase cost and cost of conversion of inventories including allocation of fixed and
variable prodution overheads.
iv) Packing Material / Consumables
At cost or net realizable value whichever is lower.
(d) Revenue Recognition
Revenue from sale of goods is recognized when all the significant risks and rewards of ownership in the goods are transferred to the buyer as per the terms of the contract, the Company retains no effective control of
Income/Compensation/Interest/Delay Payment Charges where there are uncertainties are recognized on receipt basis.
(e) Depreciation & amortisation
Depreciation on Property, Plant and Equipment is provided to the extent of depreciable amount on the written down value method . Depreciation is provided based on useful life of the assets as prescribed in Schedule II
Asset Head U seful life
Plant & Machinery 15 Years
Vehicles 8 Years
Furniture & Fixtures 10 Years
Computers 6/3 Years
Office Equipments 5 Years
Intangibles 5 Years
The residual value and the useful life of an asset is reviewed at each financial year end.
(f) Property, Plant & Equipment
Items of Property, plant and equipment are measured at its cost less any accumulated depreciation and any accumulated impairment losses. The cost comprises its purchase price including import duties and non¬
refundable purchase taxes after deducting trade discounts and rebates and any cost directly attributable to bringing the assets to its working condition for its intended use.
Subsequent expenditures related to an item of Tangible asset are added to its book value only if they increase the future benefits from the existing asset beyond its previously assessed standards of performance.
Items of property, plant and equipment retired from active use and held for disposal is stated at the lower of their carrying amount and net realisable value. Any write-down in this regard is recognised immediately in the
statement of profit and loss.
(g) Intangible Assets
An intangible asset is recognised only when it is probable that the future economic benefits that are attributable to the asset will flow to the enterprise and the cost of the asset can be measured reliably. Subsequent
expenditure on an intangible asset after its purchase or its completion recognised as an intanglble asset it is probable that the expenditure will enable the asset to generate future economic benefits in excess of its
originally assessed standard of performance and the expenditure can be measured and attributed to the asset reliably.
Intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any. An intangible asset is derecognised (eliminated from the balance sheet) on disposal or when no future
economic benefits are expected from its use and subsequent disposal. The depreciable amount of an intangible asset is allocated on a systematic basis over the best estimate of its useful life.
Intangible assets are carried at cost less accumulated amortization and impairment losses, if any. The company has capitalized all costs relating to acquisition and installation of intangible fixed assets.
(h) Cash flow statement
Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future
cash receipts or payments. Cash flow statement classifies cash flows during the period from operating, investing and financing activities of the Company.
(i) Cash and Cash equivalent
Cash and cash equivalent in the balance sheet comprise cash at banks and cash on hand and short-term deposits with an original maturity of three months or less, which are subject to insignificant risk of change in
value.
(j) Foreign currency transactions
Foreign Currency Transactions related to purchase and sales are recorded at the exchange rates prevailing under Customs Act on the date of the transactions. Gains and losses arising out of subsequent fluctuations
are accounted for on actual payments or realisations as the case may be. Monetary assets and liabilities denominated in foreign currency as on Balance Sheet date are translated into functional currency at the
exchange rates prevailing on that date and Exchange differences arising out of such conversion are recognised in the Statement of Profit and Loss.Other foreign currency transactions are recorded at prevailing RBI
rates.
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(k) Investment
Investments are classified as long term investments and current investments. The carrying amount for current investments is the lower of cost and fair value.For current investments, any reduction to fair value and any
reversals of such reductions are included in the profit and loss statement.Long-term investments are usually carried at cost. Any decline, other than temporary, in the value of a long term investment, the carrying
amount is reduced to recognise the decline. On disposal of an investment, the difference between the carrying amount and the disposal proceeds, net of expenses, is recognised in the profit and loss statement.
(l) Employee benefits
(i) Short-term employee benefits are recognized as an expense at the undiscounted amount in the profit and loss account of the year in which the related service is rendered.
(ii) Defined Benefit Plans:
Gratuity and Leave encashment are defined benefit plan payable at the end of the employment and is provided for on the basis of actuarial valuation at each year-end using the projected unit credit method. Actuarial
gain and loss for defined benefit plan is recognized in full in the period in which it occur in the statement of profit and loss.
(iii) Defined Contribution Plans:
Defined contribution plans are those plans in which the company pays fixed contribution into separate entities and will have no legal or constructive obligation to pay further amounts. Provident Fund and Employee State
Insurance are Defined Contribution Plans in which company pays a fixed contribution and will have no further obligation beyond the monthly contributions and are recognised as an expenses in Statement of Profit &
Loss.
(m) Borrowing cost
Borrowing costs include interest, amortisation of ancillary costs incurred and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Costs in
connection with the borrowing of funds to the extent not directly related to the acquisition of qualifying assets are charged to the Statement of Profit and Loss over the tenure of the loan. Borrowing costs, allocated to and
utilised for qualifying assets, pertaining to the period from commencement of activities relating to construction / development of the qualifying asset upto the date of capitalisation of such asset is added to the cost of the
assets. Capitalisation of borrowing costs is suspended and charged to the Statement of Profit and Loss during extended periods when active development activity on the qualifying assets is interrupted.
(n) Segment Reporting
A business segment is a distinguishable component of an enterprise that is engaged in providing an individual product or service or a group of related products or services and that is subject to risks and returns that are
different from those of other business segments.
Internal organisation and management structure of an enterprise and its system of internal financial reporting to the board of directors and the chief executive officer should normally be the basis for identifying the
predominant source and nature of risks and differing rates of return facing the enterprise and, therefore, for determining which reporting format is primary and which is secondary.
Reportable Segments
A business segment or geographical segment should be identified as a reportable segment if
(a) its revenue from sales to external customers and from transactions with other segments is 10 per cent or more of the total revenue, external and internal, of all segments; or
(b) its segment result, whether profit or loss, is 10 per cent or more of :
(i) the combined result of all segments in profit, or
(ii) the combined result of all segments in loss,
(iii) its segment assets are 10 per cent or more of the total assets of all segments.
(o) Earning per share
Basic Earning Per Share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, net profit after tax during the year and the weighted average number of shares outstanding during the year are adjusted for the effect of all dilutive potential
equity shares.
(p) Accounting for taxes on income
Tax expense comprises current and deferred tax. Current income-tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income-tax Act,1961. Deferred income taxes reflect the
impact of timing differences between taxable income and accounting income originating during the current year and reversal of timing differences for the earlier years. Deferred tax is measured using the tax rates and
the tax laws enacted or substantively enacted by the end of the reporting period.
Minimum alternative tax (MAT) paid in accordance with the tax laws, which gives rise to future economic benefits in the form of adjustment of future income tax liability, is considered as an asset if there is convincing
evidence that the Company will pay normal income tax in future years. Accordingly, MAT paid over and above the normal income tax liability for the period is recognized as an asset in the balance sheet when it is
probable that the future economic benefit associated with it will flow to the Company and the asset can be measured reliably.
Deferred tax liabilities are recognized for all taxable timing differences. Deferred tax assets are recognized for deductible timing differences only to the extent that there is reasonable certainty that sufficient future taxable
income will be available against which such deferred tax assets can be realized. In situations where the Company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognized only if
there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.
The carrying amount of deferred tax assets are reviewed at each balance sheet date. The Company writes-down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually
certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or
virtually certain, as the case may be, that sufficient future taxable income will be available.
(q) Impairment of Assets
An asset is treated as impaired when the carrying cost of asset exceeds its recoverable value. An impairment loss is charged to the Profit and Loss Account in the year in which an asset is identified as impaired. The
impairment loss recognised in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.
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