2. SIGNIFICANT ACCOUNTING POLICIES, SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND
ASSUMPTIONS :
2.1 Statement of Compliance
The Financial statement comply in all material aspects with Indian accounting standards guidelines issued by the
Securities and Exchange Board of India (SEBI). The Ind AS are prescribed under Section 133 of the Act read with
Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and relevant amendment rules issued
thereafter.
2.2 Basis of preparation of financial statements
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards
(Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 as amended and other relevant
provisions of the Act.
The financial statements have been prepared on a historical cost basis, except for the following assets and
liabilities which have been measured at fair value:- Certain financial assets and liabilities measured at fair value
(refer accounting policy regarding financial instruments)
2.3 Functional and Presentation Currency- The functional currency of company is Indian rupee. These financial
statements are presented in indian rupees.
2.4 Use of Estimates And Judgements
The preparation of the financial statements in conformity with Ind AS requires management to make estimates,
judgements and assumptions. These estimates, judgements and assumptions affect the application of accounting
policies and the reported amounts of the assets and liabilities, the disclosures of contingent assets and liabilities at
the date of the financial statements and reported amounts of revenues and expenses during the period.
Accordingly estimates could change from period to period. Actual results could differ from those estimates.
Appropriate changes in estimates are made as management becomes aware of changes in circumstances
surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which
changes are made. Differences between actual results and estimates are recognized in the period in which the
results are known. The areas involving significant estimates and judgement include determination of useful life of
property, plant and equipment (Refer note 3), measurement of Defined Benefit Obligations (Refer note 32),
recognition and Recognition of Deffered tax asset/liabilities (refer note 35).
2.5 Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for returns,
discounts, value added taxes and amounts collected on behalf of third parties.The effect on adoption of Ind AS 115
was insignificant as the revenue is of short term nature and performance obligations are satisfied upon delivery of
services.
(i) Rental Income
The company policy for recognizing of revenue from operating lease is described below in part no 2.20.
(ii) Interest
Income from interest is recognized using the effective interest rate (EIR). EIR is the rate that exactly discounts the
estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period,
where appropriate, to the gross carrying amount of the financial assets. When calculating the effective interest rate,
the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument
but does not consider the expected credit losses.
2.6 Employees Benefits
(i) Short term employee Benefits :
Short term Employee Benefits are recognized as an expense on an undiscounted basis in the statement of profit
and loss of the year in which the related service is rendered. These benefits include performance incentive and
compensated absences which are expected to occur within twelve months after the end of the period in which the
employee renders the related services.
(ii) Post Employment Benefits
(a) Defined Contribution Plans:
Provident Fund
Benefits to employees are provided for by contribution to Provident Fund and other funds in accordance with
provisions of Employee Provident Fund and Miscellaneous Provisions Act, 1952 , the payment of which are
accounted for on accrual basis. Retirement benefit in the form of provident fund is a defined contribution scheme.
The Company has no obligation, other than the contribution payable to the provident fund. The Company
recognizes contribution payable to the provident fund scheme as an expense when an employee renders the
related service.
(b) Defined Benefit Plans
Gratuity
The Company provides for gratuity, a defined benefit retirement plan (“the Gratuity Plan”) covering eligible
employees of the Company. The Gratuity Plan provides a lump-sum payment to vested employees at retirement,
death, incapacitation or termination of employment of an amount based on the respective employee's salary and
the tenure of employment of the Company. Liabilities with regard to the Gratuity Plan are determined by actuarial
valuation, performed by an independent actuary, at each balance sheet date using the projected unit credit
method.
The Company recognizes the net obligation of a defined benefit plan in its balance sheet as an asset or liability.
Remeasurements comprising of actuarial gains and losses are recognized in Other Comprehensive income which
are not reclassified to profit or loss in subsequent periods.
(iii) Long- term employee benefits (Leave Encashment)
The liability of accumulating compensated absences is determined by actuarial valuation performed by an
independent actuary at each balance sheet date using projected unit credit method.
2.7 Property, Plant and Equipment
Freehold land is carried at cost. All other items of Property, plant and equipment are stated at cost, less
accumulated depreciation. The cost of an item of Property, Plant and Equipment comprises:
i) Its purchase price including import duties and non-refundable purchase taxes after deducting trade discounts
and rebates.
ii) Any attributable expenditure directly attributable for bringing an asset to the location and the working condition
for its intended use and
iii) 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 purposes other than to produce inventories during that period.
iv) The company depreciates property, plant and equipment over their estimated useful lives using the straight-line
method. The estimated useful lives of assets as prescribed under Part C of Schedule II of the Companies Act
2013 except the assets costing' 5000/- or below on which deprecation is charged @ 100% per annum on
proportionate basis, are as follows:
Plant and Machinery - 10-25 years.
Office Equipment - 5 years.
Computer Equipment - 3 years.
Furniture and fittings - 10 years
Vehicles excluding Motor cycles - 08 years
Motor cycles - 10 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 assets and the resultant gains or losses are recognized in the statement of profit and loss.
Assets to be disposed off are reported at the lower of the carrying value or the fair value less cost to sell.
2.8 Investment Property
(i) Property which is held for long-term rental yields or for capital appreciation or both, is classified as Investment
Property. Investment properties are measured initially at cost, including transaction costs. Subsequent to
initial recognition, policies with respect to depreciation, useful life and derecognition are followed on the same
basis as stated for Property, Plant & Equipment.
(ii) Reclassification to/from Investment Property
Transfers to (or from) investment property are made only when there is a change in use. Transfers between
investment property, owner-occupied property and inventories do not change the carrying amount of the
property transferred and they do not change the cost of that property for measurement or disclosure purposes.
2.9 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 :-
(i) In case of stores and spares at weighted average cost plus direct expenses. The cost includes cost of
purchase and other costs incurred in bringing the inventories to their present location and condition.
2.10 Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are
capitalized as part of the cost of the asset. Other borrowing costs are recognized as an expense in the period in
which they are incurred. Borrowing costs consist of interest and other costs they an entity incurs in connection
with the borrowing of funds.
2.11 Earnings per Share
Basic earnings per equity share is computed by dividing the net profit attributable to the equity holders of the
company by the weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earning per share, the net profit or loss for the period attributable to equity
shareholder is divided by weighted average number of shares outstanding during the period after adjusting for the
effects of all dillutive potential equity shares, if any.
2.12 Income Taxes
Income tax expense comprises current tax and deferred tax. Income tax expense is recognized in net profit in the
statement of profit and loss except to the extent that it relates to items recognized directly in equity or other
comprehensive income, in which case it is also recognized in equity or other comprehensive income respectively.
Current income tax for current and prior periods is recognized at the amount expected to be paid to or recovered
from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the
balance sheet date. Deferred income tax assets and liabilities are recognized for all temporary differences arising
between the tax base of assets and liabilities and their carrying amounts in the financial statements. Deferred tax
assets and liabilities are reviewed at each reporting date and the reduced to the extent that it is no longer probable
that the related tax benefit will be realized.
Deferred income tax assets and liabilities are measured using tax rates and tax laws that have been enacted or
substantively enacted by the balance sheet date and are expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect of changes in tax rates on
deferred income tax assets and liabilities is recognized as income or expense in the period that includes the
enactment or the substantive enactment date. A deferred income tax asset is recognized to the extent that it is
probable that future taxable profit will be available against which the deductible temporary differences and tax
losses can be utilized. The Company offsets current tax assets and current tax liabilities, where it has a legally
enforceable right to set off the recognized amounts and where it intends either to settle on a net basis, or to
realize the assets and settle the liability simultaneously.
2.13 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.
2.14 Initial Recognition and measurement
On initial recognition, all the financial assets and liabilities are recognized at its fair value plus or minus transaction
costs that are directly attributable to the acquisition or issue of the financial asset or financial liability except
financial asset or financial liability measured at fair value through profit or loss. Transaction costs of financial
assets and liabilities carried at fair value through the profit and loss are immediately recognized in the Statements
of Profit and Loss.
(i) Subsequent measurement
(a) Non-derivative financial instruments
- Financial assets carried at amortised cost
A financial asset is subsequently 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 are solely payments of principal and interest on the
principal amount outstanding.
- Financial assets at fair value through other comprehensive income (FVTOCI)
A financial asset is subsequently measured at fair value through other comprehensive income 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 are solely
payments of principal and interest on the principal amount outstanding.
- Financial assets at fair value through profit or loss (FVTPL)
A financial asset is measured at fair value through profit and loss unless it is measured at amortised cost or at
fair value through other comprehensive income.
- Financial liabilities
The financial liabilities are subsequently carried at amortised cost using the effective interest method. 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 of financial instruments
A financial asset is derecognized when the contractual rights to the cash flows from the financial asset expire or
it transfers the financial asset and the transfer qualifies for derecognition under Ind AS 109. A financial liability is
derecognized when the obligation specified in the contract is discharged or cancelled or expired.
- Fair value measurement of financial instruments
The fair value of financial instruments is determined using the valuation techniques that are appropriate in the
circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant
observable inputs and minimizing the use of unobservable inputs.
Based on the three level fair value hierarchy, the methods used to determine the fair value of financial assets
and liabilities include quoted market price, discounted cash flow analysis and valuation certified by the external
valuer.
In case of financial instruments where the carrying amount approximates fair value due to the short maturity of
those instruments, carrying amount is considered as fair value.
(b) Ordinary Shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary
shares and share options are recognized as a deduction from equity, net of any tax effects.
2.15 Impairment of assets
(i) Financial assets
The company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets
which are not fair valued through profit or loss.
Loss allowance for trade receivable with no significant financing component is measured at an amount equal to
lifetime ECL. For all other financial assets, expected credit losses are measured at an amount equal to the 12
month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those
are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss
allowance at the reporting date to the amount that is required to be recognized is recognized as an impairment
gain or loss in statement of profit or loss.
(ii) Non-financial assets
Intangible assets and property, plant and equipment
Intangible assets and property, plant and equipment are evaluated for recoverability whenever events or changes
in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment
testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is
determined on an individual asset basis unless the asset does not generate cash flows that they are largely
independent of those from other assets. In such cases, the recoverable amount is determined for the Cash
Generating Unit to which the asset belongs.
If such assets are considered to be impaired, the impairment to be recognized in the statement of profit and loss is
measured by the amount by which the carrying value of the assets exceeds the estimated recoverable amount of
the asset. An impairment loss is reversed in the statement of profit and loss if there has been a change in the
estimates used to determine the recoverable amount. The carrying amount of the asset is increased to its revised
recoverable amount, provided that this amount does not exceed the carrying amount that would have been
determined (net of any accumulated amortization or depreciation) had no impairment loss been recognized for
the asset in prior years. Impairment is reviewed periodically, including at each financial year end.
2.16 Cash flow statement
The cash flow statement is prepared in accordance with the Indian Accounting Standard (Ind AS) - 7 “Statement
of Cash flows” using the indirect method for operating activities.
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