a) Material Accounting policies
1. Financial Instruments
Classification
A Financial instrument is any contract that gives rise to a financial asset of one entity and financial
liability or equity instruments of another entity.
Financial assets, other than equity, are classified into, Financial assets at fair value through other
comprehensive income (FVOCI) or fair value through profit and loss account (FVTPL) or at amortised
cost. Financial assets that are equity instruments are classified as FVTPL or FVOCI. Financial
liabilities are classified as amortised cost category and FVTPL.
Business Model assessment and Solely payments of principal and interest (SPPI) test:
Classification and measurement of financial assets depends on the business model and results of
SPPI test. The Company determines the business model at a level that reflects how groups of
financial assets are managed together to achieve a particular business objective. This assessment
includes judgement reflecting all relevant evidence including;
• How the performance of the business model and the financial assets held within that business
model are evaluated and reported to the entity's key management personnel
• The risks that affect the performance of the business model (and the financial assets held
within that business model) and, in particular, the way those risks are managed
• How managers of the business are compensated (for example, whether the compensation is
based on the fair value of the assets managed or on the contractual cash flows collected)
• The expected frequency, value and timing of sales are also important aspects of the
Company's assessment
If cash flows after initial recognition are realised in a way that is different from the Company's
original expectations, the Company does not change the classification of the remaining financial
assets held in that business model, but incorporates such information when assessing newly
originated or newly purchased financial assets going forward.
Initial recognition
The classification of financial instruments at initial recognition depends on their contractual terms
and the business model for managing the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that
are directly attributable to the acquisition or issue of financial assets and financial liabilities (other
than financial assets and financial liabilities at FVTPL) are added to or deducted from the fair value
of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs
directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are
recognised immediately in the Statement of profit or loss.
Financial assets and financial liabilities, with the exception of loans, debt securities and deposits
are recognised on the trade date i.e. when a Company becomes a party to the contractual provisions
of the instruments. Loans, debt securities and deposits are recognised when the funds are
transferred to the customer's account. Trade receivables are measured at the transaction price.
Subsequent measurement
Financial assets at amortised cost
Financial assets having contractual terms that give rise on specified dates to cash flows that are
solely payments of principal and interest on the principal outstanding and that are held within a
business model whose objective is to hold such assets in order to collect such contractual cash
flows are classified in this category. Subsequently these are measured at amortised cost using
effective interest method less any impairment losses.
Debt Instruments at FVOCI
Debt instruments that are measured at FVOCI have contractual terms that give rise on specified
dates to cash flows that are solely payments of principal and interest on principal outstanding and
that are held within a business model whose objective is achieved by both collecting contractual
cash flows and selling financial assets. These instruments largely comprise long-term investments
made by the Company. FVOCI debt instruments are subsequently measured at fair value with gains
and losses arising due to changes in fair value recognised in OCI. Interest income and gains and
losses are recognised in profit or loss in the same manner as for financial assets measured at
amortised cost. On de-recognition, cumulative gains or losses previously recognised in OCI are
reclassified from OCI to profit or loss.
Equity Instruments at FVOCI
These include financial assets that are equity instruments as defined in Ind AS 32 “Financial
Instruments: Presentation” and are not held for trading and where the Company's management has
elected to irrevocably designated the same as Equity instruments at FVOCI upon initial recognition.
Subsequently, these are measured at fair value and changes therein are recognised directly in other
comprehensive income, net of applicable income taxes.
Gains and losses on these equity instruments are never recycled to profit or loss.
Dividends from these equity investments are recognised in the statement of profit and loss when
the right to receive the payment has been established.
Fair value through Profit and loss account
Financial assets are measured at FVTPL unless it is measured at amortised cost or at FVOCI on
initial recognition. The transaction costs directly attributable to the acquisition of financial assets at
fair value through profit or loss are immediately recognised in profit or loss.
Financial Liabilities and equity instruments
Classification as debt or equity
Financial liabilities and equity instruments issued by the Company are classified according to the
substance of the contractual arrangements entered into and the definitions of a financial liability
and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company
after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of
direct issue costs.
Other Financial Liabilities
These are measured at amortised cost using effective interest rate.
De-recognition of Financial assets and financial liabilities
The Company derecognizes a financial asset only when the contractual rights to the cash flows from
the asset expires or it transfers the financial asset and substantially all the risks and rewards of
ownership of the asset to another entity.
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or
expires.
Impairment of financial assets
The Company recognizes a loss allowance for expected credit losses on a financial asset that is at
amortized cost or fair value through OCI. Loss allowance in respect of financial assets is measured
at an amount equal to life time expected credit losses and is calculated as the difference between
their carrying amount and the present value of the expected future cash flows discounted at the
original effective interest rate.
Reclassification of Financial assets
The company does not re-classify its financial assets subsequent to their initial recognition, apart
from the exceptional circumstances when the company changes its business model for managing
such financial assets. The company does not re-classify its financial liabilities.
2. Determination of fair value
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.
The fair value of a financial instrument on initial recognition is normally the transaction price (fair
value of the consideration given or received). Subsequent to initial recognition, the Company
determines the fair value of financial instruments that are quoted in active markets using the
quoted bid prices (financial assets held) or quoted ask prices (financial liabilities held) and using
valuation techniques for other instruments. Valuation techniques include discounted cash flow
method and other valuation models.
3. Investment in subsidiaries and associates
The company does not have any investments in associates and subsidiaries.
4. Foreign currency transactions and translation
The financial statements of the Company are presented in Indian rupees ('), which is the functional
currency of the Company and the presentation currency for the financial statements.
In preparing the financial statements, Company has no transactions in currencies other than the
company's functional currencies.
5. Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term
deposits with an original maturity of three months or less, that are readily convertible into known
amounts of cash and which are subject to an insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and
short-term deposits, as defined above, as they are considered an integral part of the Company's
cash management.
6. Property Plant and Equipment and Intangible Assets
Property, plant and equipment and intangible assets are stated at cost of acquisition less
accumulated depreciation / amortisation. Cost includes all expenses incidental to the acquisition of
the Property, plant and equipment and intangible assets and any attributable cost of bringing the
asset to its working condition for its intended use.
7. Capital work in progress and Capital advances
Cost of assets not ready for intended use, as on the Balance Sheet date, is shown as capital work in
progress. Advances given towards acquisition of property, plant and equipment outstanding at each
Balance Sheet date are disclosed in Other Non-Financial Assets.
8. Depreciation and amortisation of property, plant and equipment and intangible assets
Depreciation on following tangible fixed assets has been provided on the straight-line method as per
the useful life prescribed in Schedule II to the Companies Act, 2013.
The residual values, useful lives and method of Depreciation of property, plant and equipment are
reviewed at each financial year end. Changes in the expected useful life are accounted by changing
the amortisation period or methodology, as appropriate, and treated as changes in accounting
estimates.
Property plant and equipment is derecognised on disposal or when no future economic benefits are
expected from its use. Any gain or loss arising on derecognition of the asset (calculated as the
difference between the net disposal proceeds and the carrying amount of the asset) is recognised in
other income / expense in the statement of profit and loss in the year the asset is derecognised.
The date of disposal of an item of property, plant and equipment is the date the recipient obtains
control of that item in accordance with the requirements for determining when a performance
obligation is satisfied in Ind AS 115.
9. Impairment of non - financial assets
The carrying amounts of the Company's property, plant & equipment and intangible assets are
reviewed at each reporting period to determine whether there is any indication of impairment. If any
such indication exists, the asset's recoverable amounts are estimated in order to determine the
extent of impairment loss, if any. An impairment loss is recognised whenever the carrying amount of
an asset exceeds its recoverable amount. The impairment loss, if any, is recognised in the
statement of profit and loss in the period in which impairment takes place.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset for which the estimates of future cash flows have not been adjusted.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to
the revised estimate of its recoverable amount, however subject to the increased carrying amount
not exceeding the carrying amount that would have been determined (net of amortisation or
depreciation) had no impairment loss been recognised for the asset in prior accounting periods. A
reversal of an impairment loss is recognised immediately in profit or loss.
10. 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. Benefits such as salaries, performance incentives, etc., are
recognised as an expense at the undiscounted amount in the Statement of Profit and Loss for the
year in which the employee renders the related service.
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