2. SIGNIFICANT ACCOUNTING POLICES, SIGNIFICANT ACCOUNTING
JUDGEMENTS, ESTIMATES AND ASSUMPTIONS AND APPLICABILITY OF NEW AND REVISED IND AS
2.1 Statement of Compliance
These financial statements have been prepared on a going concern basis following the accrual basis of accounting in accordance with the Generally accepted Accounting Principles (GAAP) in India (Indian Accounting Standards referred to as “IndAS”) as specified under the section 133 of the Companies Act, 2013 read with Rule 3 of Companies (Indian Accounting Standard) Rules, 2015 and relevant amendments rules issued thereafter.
These financial statements are the Company's first Ind AS financial statements and are covered by Ind AS 101, First time adoption of Indian Accounting Standards (Ind AS 101). The transition 1o Ind AS has been carried out from the accounting principles generally accepted in India ("Indian GAAP") which is considered as the "Previous GAAP” for the purpose of Ind AS 101. Under previous GAAP financial statements were prepared in accordance with the Accounting Standards notified under section 133 of the Act read together with paragraph 7 of the Companies (Accounts) Rules 2014 (“Indian GAAP”) and other relevant provisions of the Act as applicable.
2.2. Basis of preparation and presentation
The financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at fair value at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. Preparation of the standalone financial statements requires the use of certain critical accounting judgments, estimates and assumptions. It also requires the management to exercise judgment in the process of applying the Company's accounting policies. The areas involving a higher degree of judgment of complexity, or areas where assumptions and estimates are significant to the standalone financial statements.
The financial statements are presented in Indian Rupees in Lacs, the national currency of India which the Company has selected as its functional currency.
CASH FLOW STATEMENT
Cash flow statement is prepared segregating the cash flows from operating, investing and financing activities. Cash Row from operating activities is reported using indirect method as set out in Indian Accounting Standard (INDAS)-7 "Statement of Cash Flows”.
a) Transactions of a non -cash nature
b) Any deferrals or accruals of past or future operating cash receipts or payment and
Items of income or expense associated with investing or financing cash flows
Cash and cash equivalents comprise cash at bank and in hand and demand deposits with banks and are reflected as such in the cash flow statement. Cash equivalents are short term balances ( with an original maturity of three months or less from the date of acquisition ), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
2.3 Property, Plant and equipments (PPE)
Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses. Land is not depreciated.
The Cost of an item of Property, plant and equipment comprises:
a. Its purchase price including import duties and non-refundable purchase taxes after deducting trade discount and rebates.
b. Any attributable expenditure directly attributable for bringing an asset to the location and the working condition for its intended use and
c. the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired or as a consequence of having used the item during a particular period for purpose other than to produce inventories during that period.
The Company has elected to continue with the carrying value of all its PPE recognized as on April 1, 2015 measured as per the previous GAAP and use that carrying value as its deemed cost as on transition date.
Depreciation is provided on Written down value Method on the basis of useful lives of such assets specified in Schedule-ll fo the Companies Act, 2013.
The estimated useful life of the assets have been assessed based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufactures warranties and maintenance support etc and are as under: Building 30-60 Y ears
Plant & eguipment 15 Years
Furniture and Fixtures & Office Equipment 10 Years
Vehicles 8Years
Computer and Others 3-5 Years
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is classified as capital advances under other non-current assets and the cost of assets not put to use before such date are disclosed under Capital work-in-progress'. Subsequent expenditures relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably. Repairs and maintenance costs are recognized in net profit in the statement of profit and loss when incurred. The cost and related accumulated depreciation are eliminated from the financial statements upon sale or retirement of the asset and the resultant gains or losses are recognized in the statement of profit & loss. Assets to be disposed off are reported at the lower of the carrying value or the fair value less cost to sell.
Depreciation is recognized so as to write off the cost of assets (other than freehold land and properties under construction ) less their residual values over their useful lives, using the Written down value method. The estimated useful lives, residual value and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate for on a prospective basis.
For items produced during testing/ trail phase, clarification added that revenue generated out of the same shall not be recognized in Statement of Profit and Loss and considered as part of cost of PPE in line with amended Ind AS16.
2.4. Intangible assets
There are no intangible assets.
Current and non-current Classification
Ind AS requires that an entity shall present current and non-current assets, and current and non-curTent liabilities, as separate classification in its balance sheet.
Any asset or liability is classified as current of it satisfies any of the following conditions:
a) it is expected to be realized or settled or is intended for sale or consumption in the Company's normal operating cycle which is ascertained by the Company as 12 month;
b) It is expected to be realized or settled within twelve months from the reporting date.
c) In the case of an asset.
• it is held primarily for the purpose of providing services; or
• it is cash equivalent unless it is restricted from being exchange or used; to settle a liability for at least twelve months after the reporting date;
d) in the case of a liability, the company does not have an unconditional right to defer settlement of liability for at least twelve month from the reporting date.
All other assets and liabilities are classified as non-current.
2.5 Financial Instruments
Financial assets include cash and cash equivalents, trade receivables, employees and other advances and eligible current and non current assets.
Subsequent to initial recognition, financial assets are measured as described below:
Trade Receivables
Trade receivables that do not contain a significant financing component are initially recognized at transaction price. They are subsequently measured at amortised cost less any Impairment losses. Due to their short term maturity, the carrying amount approximate fair value.
2.6 Other Financial Assets
Other financial assets, cash and cash equivalents and other assets. They are presented and current assets, expect for those maturing later that 12 months after the reporting date which are presented as non current assets.
2.7 Inventories
Inventories are valued at cost or net realizable value, whichever is lower. The cost in respect of the various items of inventory is computed as under:
In case of raw material at cost plus direct expenses. The cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition.
In case of stores and spares at cost plus direct expenses. The cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition.
In case of work in progress at raw material cost plus conversion costs depending upon the stage of completion.
In case of finished goods at raw material cost plus conversion costs, packing cost, non recoverable indirect taxes ( if applicable) and other overheads incurred to bring the goods to their present location and condition.
In case of by-products at estimated realizable value.
Net realizable value is the estimated selling price in ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
Financial Liabilities
Financial liabilities include long and short term borrowings, bank overdrafts, trade payables, eligible current and non current liabilities.
Trade Payable
Trade Payable, which consist of trade Creditors, other current liabilities and borrowings are recognized initially at fair value.
Cash & Cash Equivalents
Cash & Cash equivalents comprise of cash on hand , cash at banks, short term deposits and short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
2.7. Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessary take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.
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