2. SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Preparation
These financial statements have been prepared in accordance with the
Generally Accepted Accounting Principles in India ('Indian GAAP') to comply
with the Accounting Standards specified under Section 133 of the Companies
Act, 2013, as applicable. The financial statements have been prepared under
the historical cost convention on accrual basis.The accounting policies have
been framed, keeping in view the fundamental accounting assumptions of
Going Concern, Consistency and Accrual, as also basic considerations of
Prudence, Substance over form, and Materiality. These have been applied
consistently, except where a newly issued accounting standard is initially
adopted or a revision in the existing accounting standards require a revision in
the accounting policy so far in use. The need for such a revision is evaluated on
an ongoing basis.
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.
The Management believes that the estimates used in preparation of the
financial statements are prudent and reasonable. Future results could differ
due to these estimates and the differences between the actual results and the
estimates are recognised in the periods in which the results are known /
materialise.
c. Accounting Convention
The company follows the mercantile system of accounting, recognizing
income and expenditure on accrual basis.
The Financial Statements have been prepared on a going concern basis, in as
much as the management neither intends to liquidate the
company nor to cease operations. Accordingly, assets, liabilities, income and
expenses are recorded on a Going Concern basis.
Accounting policies not referred to specifically otherwise, are consistent with
the generally accepted accounting principles. The accounting P o l i c i e s
adopted in the preparation of the financial statements are consistent with
those followed in the previous year.
d. Property, Plant and Equipment
Property, Plant & Equipment are stated at as per Cost Model i.e., at cost less
accumulated depreciation and impairment, if any. Costs directly attributable to
acquisition are capitalised until the property, plant and equipment are ready for
use, as intended by the management. Cost comprises the purchase price and
any attributable cost of bringing the asset to its working condition for its
intended use. Input tax credit of GST, Grants on capital goods are accounted for
by reducing the cost of Capital Goods. Subsequent expenditures relating to
property, plant and equipment are capitalised only when it is probable that
future economic benefits associated with them will flow to the Company and
the cost of the expenditure can be measured reliably. Repairs and Maintenance
costs are recognized in the Statement of Profit and Loss when they are
incurred. When assets are disposed or retired, their cost is removed from the
financial statements. The gain or loss arising on the disposal or retirement of an
asset is determined as the difference between sales proceeds and the carrying
amount of the asset and is recognized in Statement of Profit and Loss for the
relevant financial year.
e. Depreciation and amortization
Depreciation has been provided on the Fixed Asset on the Written Down Value
(WDV) method and in accordance with the useful life of the Asset as prescribed
under Schedule II of the Companies Act, 2013.Depreciation on additions during
the year is provided on prorata time basis.Depreciation method, useful life &
residual value are reviewed periodically.
f. Impairment of assets
At each balance sheet date, the management reviews the carrying amounts of
its assets included in each cash generating unit to determine whether there is
any indication that those assets were impaired. If any such indication exists,
the recoverable amount of the asset is estimated in order to determine the
extent of impairment. Recoverable amount is the higher of an asset's net selling
price and value in use. In assessing value in use, the estimated future cash
flows expected from the continuing use of the asset and from its disposal are
discounted to their present value using a pre-tax discount rate that reflects the
current market assessments of time value of money and the risks specific to
the asset.
-Reversal of impairment loss is recognised as income in the statement of profit
and loss. An impairment loss is charged off to profit and loss account as and
when asset is identified for impairment.
g. Inventories
Raw Materials & Consumables have been valued at lower of cost and net
realizable value. Cost is determined on a first-in-firstout basis. Work-in¬
progress is carried at the lower of cost and net realisable value. Stores and
spare parts are carried at lower of cost and net realisable value. Finished goods
produced or purchased by the Company are carried at lower of cost and net
realisable value. Cost includes direct material and labour cost and a proportion
of manufacturing overheads.
Cost of Finished Goods and Work in Progress includes all Costs of Purchases,
Conversion Cost and other cost Incurred in bringing the inventories to their
present location and Condition. The Management estimates the work in
progress according to stage of completion. The Net realizable value is
estimated selling price in the ordinary course of business less the estimated
costs of Completion and estimated cost necessary to make the finished
goods/product ready for sale.
h. Cash and cash equivalents
The Company considers all highly liquid Investments, which are readily
convertible into known amount of cash that are subject to an insignificant risk
of change in value and having original maturities of three months or less from
the date of purchase, to be cash equivalents.
I. 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. The cash flows from operating, investing and financing activities of
the Company are segregated based on the available information.
j. Capital work-in-progress:
Projects under which assets are not ready for their intended use and other
capital work-in-progress are carried at cost, comprising direct cost, related
incidental expenses and attributable interest.
k. Revenue recognition
Revenue is recognized to the extent that it is probable that the economic
benefits will flow to the Company and the revenue can be reliably measured.
- Sale of goods:
Sales are recognised, net of returns and trade discounts, on transfer of
significant risks and rewards of ownership to the buyer, which generally
coincides with the delivery of goods to customers.
- Income from services:
Revenue from services is recognized when services have been rendered and
there should be no uncertainty regarding consideration and its u l t i m a t e
collection.
- Other income:
Interest income is recognised on Accrual basis taking into account the amount
outstanding and the rate applicable. All other income is recognised on accrual
basis.
Export benefits are accounted for in the year of exports based on eligibility and
when there is no uncertainty in receiving the same.
l. Employee Benefits
Post-employment benefit plans
Defined contribution plans : The Company's contribution to provident fund is
considered as defined contribution plans and is charged as an expense as they fall
due based on the amount of contribution required to be made. Defined benefit
schemes (i.e Gratuity), the cost of providing benefits is determined using the
Projected Unit Credit Method, with actuarial valuations being carried out at each
balance sheet date. Actuarial gains and losses are recognised in full in the statement
of profit and loss for the period in which they occur. Past service cost is recognised
immediately to the extent that the benefits are already vested, or amortised on a
straight-line basis over the average period until the benefits become vested.
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, wages,
and short term compensated absences, etc. are recognized in the period in which the
employee renders the related services.
m. Borrowing Cost
Borrowing costs that are directly attributable to the acquisition or construction of
qualifying assets are capitalized as part of the cost of such assets till such time the
asset is ready for its intended use. A qualifying asset is one that necessarily takes
substantial period of time to get eady for intended use.All other borrowing costs are
charged to profit and loss account.
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. Research and Development Expenses
Revenue expenditure pertaining to research is charged to the Statement of Profit and
Loss. Development costs of products are also charged to the Statement of Profit
and Loss unless a product's technological feasibility has been established, in which
case such expenditure is capitalised. The amount capitalised comprises
expenditure that can be directly attributed or allocated on a reasonable and
consistent basis to creating, producing and making the asset ready for its intended
use. Fixed assets utilised for research and development are capitalised and
depreciated in accordance with the policies stated for Tangible Fixed Assets and
Intangible Assets.
o. Foreign currency transactions
Initial Recognition : Foreign currency transactions are recorded in the reporting
currency, by applying to the foreign currency amount the exchange rate between the
reporting currency and the foreign currency at the date of the transaction.
Conversion : Monetary foreign currency assets and liabilities remaining unsettled at
the balance sheet date are translated at the rates of
exchange prevailing on that date. Gains/losses arising on account of
realisation/settlement of foreign exchange transactions and on
translation of foreign currency assets and liabilities are recognised in the Profit and
Loss Account.
Forward Exchange Contracts not intended for trading or speculation purposes : The
premium or discount arising at the inception of forward exchange contracts is
amortised as expense or income over the life of the contract. Exchange differences
on such contracts are recognised in the statement of profit and loss in the year in
which the exchange rates change. Any profit or loss arising on cancellation or
renewal of forward exchange contract is recognised as income or as expense for the
year.
p. Taxation
The accounting treatment for the Income Tax in respect of the Company's income is
based on the Accounting Standard on 'Accounting for Taxes on Income' (AS-22). The
provision made for Income Tax in Accounts comprises both, the current tax and
deferred tax.
Provision for Current Tax is made on the assessable Income Tax rate applicable to
the relevant assessment year after considering various deductions available under
the Income Tax Act, 1961.
Deferred tax expense or benefit is recognised on timing differences being the
difference between taxable income and accounting income that originate in one
period and is likely to reverse in one or more subsequent periods. Deferred tax assets
and liabilities are measured using the tax rates and tax laws that have been enacted
or substantively enacted by the balance sheet date.
Advance taxes and provisions for current income taxes are presented in the balance
sheet after off-setting advance tax paid and income tax provision arising in the same
tax jurisdiction for relevant tax paying units and where the Company is able to and
intends to settle the asset and liability on a net basis.
The Company offsets deferred tax assets and deferred tax liabilities if it has a legally
enforceable right and these relate to taxes on income
levied by the same governing taxation laws.
q. Segment accounting
As per Accounting Standard 17 on "Segment Reporting" (AS 17), the company has
only one Primary reportable segment viz Fiber Glass Reinforced Polymer Plastic
products (i.e. manufacturing & Supplying of FRP Products). However, the
Company is having revenue from its customers which are located outside India of
more than 10% of its total revenue. Accordingly, as per AS-17 Segment Reporting,
the company has identified geographic segment as its secondary reportable
segment.
r. Government Grants
Government Grants are recognized when there is reasonable assurance that the
company will comply with the conditions attached to them and the grants will be
received.
Government grants whose primary conditions that company should purchase,
construct or otherwise acquired capital assets are presented by deducting them
from carrying value of assets. The grant is recognised as i ncome over the life of a
depreciable asset by way of a reduced depreciation charge.
When the grant or subsidy relates to an expense item, it is recognized as income
over the periods necessary to match them on a systematic basis to the costs,
which it is intended to compensate.
s. Earnings Per Shares
Basic earning per share is computed by dividing the net profit or loss for the period
attributable to equity shareholders by the weighted average number of equity
shares outstanding during the period. Diluted earning per share is computed by
taking into account the weighted average number of equity shares outstanding
during the period and the weighted average number of equity shares which would
be issued on conversion of all dilutive potential equity shares into equity shares.
In case of bonus issue the weighted average number of equity shares outstanding
during the period and for all periods presented should be adjusted for events,
other than the conversion of potential equity shares, that have changed the
number of equity shares outstanding, without a corresponding change in
resources.
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