3 MATERIAL ACCOUNTING POLICIES
3.1 Classification of Current versus NonCurrent:
All assets and liabilities In the financial statements have been classified as current or non-current as per the Company's normal operating cycle of up to twelve months.
For the purpose of Balance Sheet, an asset is classified as current if:
(i) It is expected to be realised, or is intended to be sold or consumed, in the normal operating cycle; or
(II) It Is held primarily for the purpose of trading; or
(III) It Is expected to realise the asset within twelve months after the reporting period; or
(Iv) The asset Is a 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 perIod
All other assets are classified as non-current.
Similarly, a liability Is classified as current If:
(I) It Is expected to be settled In the normal operating cycle; or
(II) It Is held primarily for the purpose of trading; or
(III) I t Is due to be settled within twelve months after the reporting period; or
(Iv) The Company does not have an unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could result In Its settlement by the Issue of equity Instruments at the option of the counterparty does not affect this classification
All other liabilities are classified as non-current.
3.2 Property, Plant and Equipment (PPE)
PPE Is recognised when It Is probable that future economic benefits associated with the Item will flow to the company and the cost of the Item can be measured reliably. The Initial cost of PPE comprises Its purchase price, Including Import duties and non-refundable purchase taxes, and any directly attributable costs of bringing an asset to working condition and location for Its Intended use less accumulated depreciation and accumulated Impairment losses, If any Cost Includes professional fees related to the acquisition of PPE and for qualifying assets, borrowing costs Is capitalised In accordance with the company's accounting policy.
Subsequent costs are Included In the asset's carrying amount or recognized as a separate asset, as appropriate, only when It Is probable that
future economic benefits associated with the Item will flow to the Company and the cost of the Item can be measured reliably. All other repairs and maintenance cost are charged to the Statement of Profit and Loss during the period In which they were incurred.
Long term lease arrangements of land are treated as PPE, In case such arrangements result In transfer of control and the present value of the lease payments Is likely to represent substantially all of the fair value of the land.
An Item of PPE and any significant part Initially recognised Is derecognised upon disposal or when no future economic benefits are expected with the carrying amount of any component accounted for as a separate asset Is derecognised when replaced. Gains or losses arising from de-recognition of a PPE 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 asset Is derecognised.
Depreciation methods, estimated useful lives and residual value:
Depreciation Is the systematic allocation of the depreciable amount of PPE over Its useful life and Is provided using straight line method, so as to write off the cost of the assets (other than freehold land and capital work-in-progress) less their residual values over their useful lives specified In Schedule II to the Companies Act, 2013, or In the case of assets where the useful life was determined by technical evaluation, over the useful life so determined. Depreciation method Is reviewed at each financial year end to reflect the expected pattern of consumption of the future economic benefits embodied In the asset. The estimated useful life and residual values are also reviewed at each financial year end and the effect of any change In the estimates of useful life/residual value Is accounted on prospective basis. Depreciation on additions/ disposals Is provided on a pro-rata basis I.e. from/ upto the date on which asset Is ready for use/ disposed.
The Company uses different useful lives than those prescribed In Schedule II to the Act for some of the assets. The useful lives have been assessed based
on technical advice, taking into account the nature of the PPE and the estimated usage of the asset on the basis of management's best estimation of obtaining economic benefits from those classes of assets. The estimated useful life is reviewed periodically, with the effect of any changes in estimate being accounted for on a prospective basis.
The company has used the following useful lives to provide depreciation on the following assets:
3.3 Capital Work-in-Progress
Capital Work-in-Progress represents expenditure incurred on capital assets that are under construction or are pending capitalisation and includes project expenses pending allocation. The same is carried at cost, comprising of direct costs, related incidental expenses and attributable borrowing costs. Project expenses pending allocation are apportioned to the PPE of the project proportionately on capitalisation.
3.4 Intangible assets
Intangible assets are recognised when it is probable that the future economic benefits that are attributable to the asset will flow to the Company and the cost of the asset can be measured reliably. Intangible assets re stated at original cost net of tax/duty credits availed,if any, less accumulated amortisation and cumulative impairment. Administrative and other general overhead expenses that are specifically attributable to acquisition of intangible assets are allocated and capitalised as a part of the cost of the
intangible assets. Intangible development costs are capitalised as and when technical and commercial feasibility of the asset is demonstrated and future economic benefits are probable.
The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period.
Gains or 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 and Loss when the asset is derecognised.
Amortisation:
I ntangible 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 least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the assets are considered to modify the amortisation period or method, as appropriate, and are treated as change in accounting estimates. Amortisation expense on intangible assets with finite lives is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of another assets.
I ntangible Assets without finite life are tested for impairment at each Balance sheet date and impairment provision, if any are debited to profit and loss.
The estimated useful lives of the amortisable intangible assets are as follows:
3.5 Impairment of Non-Financial Assets:
The Company assesses at each reporting date, whether there is an indication that a non-financial asset may be impaired. if any indication exists, or when annual impairment testing for such asset is required, the Company estimates the asset's recoverable amount 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. Goodwill and the intangible assets with indefinite life are tested for impairment each year.
impairment loss is recognised when the carrying amount of an asset (or cash generating unit) exceeds its recoverable amount which is higher of asset's (or cash generating unit's) net selling price or the value in use. The amount of value in use is determined as the present value of estimated future cash flows from the continuing use of an asset (or cash generating unit) and from its disposal at the end of its useful life. For this purpose, the discount rate (pre-tax) is determined based on the weighted average cost of capital of the company suitably adjusted for risks specified to the estimated cash flows of the asset (or cash generating units).
If recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying amount, such deficit is recognised immediately in the Statement of Profit and Loss as impairment loss and the carrying amount of the asset (or cash generating unit) is reduced to its recoverable amount.
When an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss is recognised for the asset (or cash generating unit). A reversal of an impairment loss is recognised immediately in the Statement of Profit and Loss.
3.7 Inventories:
inventories are valued, after providing for obsolescence as given below:
Raw Materials, Packing Materials and Stores and Spares:
(i) Raw Materials, Packing Materials and Stores and Spares:
Raw materials, packing materials and stores and spares are valued at lower of Cost or net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Costs are determined on Weighted Average Basis method.
(ii) Work-in-process:
Work-in-process is valued at the lower of cost and net realizable value. The cost is computed on Weighted Average Basis method.
(iii) Finished Goods, Semi-Finished Goods and Traded Goods:
Finished goods, Semi-finished goods and traded goods are valued at lower of cost and net realisable value. The cost is computed on Weighted Average Basis method.
Cost is determined on First in First out basis which includes expenditure incurred for acquiring inventories like purchase price, import duties, taxes (net of tax credit), cost of conversion and other costs incurred in acquiring the inventories to their present location and condition.
Net realisable 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.
3.8 Cash and Cash Equivalents
Cash and cash equivalents in the balance sheet comprise cash at banks and on hand and highly liquid financial instruments, which are readily convertible into known amounts of cash, that are subject to an insignificant risk of change in value with an original maturity of three months or less.
3.9 Employee Benefits:
(i) Short-term employee benefits:
All employee benefits payable wholly within twelve months of rendering the services are classified as short-term employee benefits. Benefits such as salaries, wages short-term compensated absences, expected cost of bonus, etc. are recognised in the period in which the employee renders the related services.
(ii) Post-employment benefits:
(a) Defined Contribution Plan:
The Company makes defined contribution to Employee Provident Fund, Employee Pension Fund, Employee Deposit Linked Insurance, and Superannuation Schemes. The contribution paid/payable under these schemes is recognised during the period in which the employee renders the related service which are recognised in the Statement of Profit and Loss on accrual basis during the period in which the employee renders the services.
(b) Defined Benefit Plan
The gratuity liability of the company is funded through a Group Gratuity Scheme with Life Insurance Corporation of India (LIC) under which the annual contribution is paid to LIC. The Company's liability under Payment of Gratuity Act is determined on the basis of actuarial valuation made at the end of each financial year using the projected unit credit method. The obligation is measured at the present value of the estimated future cash flows using a discount rate based on the market yield on government securities where the terms of government securities are consistent with the estimated terms of the defined benefit obligations at the Balance Sheet date. The Company recognizes the net obligation of a defined benefit plan in its Balance Sheet as an asset or liability. Gains and losses through re-measurements of the net defined benefit liability / (asset) are recognized in other comprehensive income and are not reclassified to profit or loss in subsequent periods.
(iii) Long term employee benefits:
Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee
renders the related services are recognised as a liability. The cost of providing benefits is actuarially determined using the projected unit credit method, actuarial valuations being carried out at each Balance Sheet date.
(iv) Share Based Payment:
The grant date fair value of options granted to employees is recognized as an employee expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the options. The expense is recorded for each separately vesting portion of the award as if the award was, in substance, multiple awards. The increase in Other Equity recognized in connection with share based payment transaction is presented as a separate component in equity under "Employee Stock Options Outstanding Reserve". The amount recognized as an expense is adjusted to reflect the actual number of stock options that vest.
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