Material Accounting policies
These notes provides a list of the significant accounting policies adopted in the preparation of these standalone financial statements. Thease policies have been identified as material accouting policies and have been consistantly applied to all the years presented, unless otherwise stated.
2 Basis for preparation of financial statements
2.1 Statement of compliance
These financial statements are prepared under the historical cost convention on the accrual basis except for certain financial instruments which are measured at fair values. These financial statements comply with Indian Accounting Standard (Ind AS), as prescribed under Section 133 of the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and relevant amendment rules issued there after.
All amounts are in Indian ? lakhs except share data, unless otherwise stated.
All assets and liabilities have been classified as current and non-current as per the Company's normal operating cycle and other criteria set out in Schedule III of the Companies Act,2013.
Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as
twelve months for the purpose of current and noncurrent classification of assets and liabilities.
Prior year comparatives
Figures have been rounded off to nearest lakhs and previous year figures have been regrouped wherever necessary, to correspond with the current period classification/disclosure. The regrouping/ reclassifications are not material to these financial statements.
2.2 Basis of measurement
These financial statements have been prepared on the historical cost convention and on an accrual basis, except for the following:
◊ certain financial assets and liabilities are measured at fair value;
◊ long term borrowings are measured at amortized cost using the effective interest rate method.
◊ defined benefits plans and plan assets measured at fair value.
2.3 Critical accounting judgements and key sources of estimation
In the application of the Company's accounting policies, the management of the Company is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an on going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
The following are the areas of estimation uncertainty and critical judgements that the management has made in the process of applying the Company's accounting policies and that have the most significant effect on the amounts recognised in the financial
statements:
Provision and contingent liabilities
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an out flow of resources will be required to settle the obligation and the amount can be readily estimated.
Contingent liabilities are disclosed when there is a possible obligation arising from the past events, the existence of which will be confirmed only by occurrence or non-occurrence of one or more uncertain further events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount can not be made.
Where the likelihood of outflow of resources is remote, no provision or disclosure as specified in Ind AS 37 "Provision, Contingent liabilities and contingent assets" is made.
Useful lives of depreciable assets
Management reviews the useful lives of depreciable assets at each reporting. As at 31 March 2024 management assessed that the useful lives represent the expected utility of the assets to the Company. Further, there is no significant change in the useful lives as compared to previous year.
2.4 Measurement of fair values
A number of the Company's accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.
Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
- Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
3 Material accounting policies
3.1 Revenue recognition
Revenue from goods and services is recognized, when the Company satisfies a performance obligation by transferring a promised good or service to its customers. The Company considers the terms of the contract and its customary business practices to determine the transaction price. Performance obligations are satisfied at the point of time when the customer obtains controls of the asset.
Revenue is measured based on transaction price, which is the fair value of the consideration received or receivable, stated net of discounts, returns and Goods & services Tax. Transaction price is recognised based on the price specified in the contract, net of the estimated sales incentives/ discounts. Past trends are used to estimate and provide for the discounts/ right of return, using the expected value method.
3.2 Leases
As a lessee, the Company mainly has lease arrangement for buildings. The Company assesses whether a contract is or contains a lease at inception of the contract. The assessment involves the exercise of judgement about whether there is an identified asset, whether the Company has the right to direct the use of the asset and whether the Company obtains substantially all the economic benefits from use of that asset.
The Company recognise a right-of- use asset (ROU) and a corresponding lease liability at the lease commencement date. The lease liability is measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate can not be readily determined, the Company uses the incremental borrowing rate.
The ROU assets are initially recognised at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease initiatives. ROU assets are amortised from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying assets. ROU assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.
The lease liability is initially measured at amortised cost at the present value of future lease payments. The lease payments are discounted using the interest rate implicit in the lease or if nor readily determinable, using the incremental borrowing rate. Lease liabilities are remeasured with a corresponding adjustments to the related ROU asset if the Company changes its assessment of whether it will exercise an extension or a termination option.
3.3 Foreign currency transactions
Transaction in foreign currency are translated in functional currency using the exchange rates prevailing at the dates of the respective transactions. Foreign currency monetary items, outstanding at the balance sheet date are restated at year end rates. Non-monetary items are measured in terms of historical cost in foreign currency and exchange differences on non-monetary items if any, are recognised at prevailing rates on balance sheet date.
3.4 Taxation
Income tax expense consists of current and deferred tax. Income tax expense is recognized in the statement of Profit and loss except to the extent that it relates to items recognized in the other comprehensive income or directly in the equity, in which case the current and deferred taxes are also recognised in other comprehensive income or directly in equity.
Current tax
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax
Deferred tax is recognized using the balance sheet approach, providing for temporary differences
between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax assets and liabilities are recognised for deductible temporary differences arising between the tax base of the assets and liabilities and their carrying amounts, except when the deferred income tax arises from the initial recognition of an asset or liability is a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction.
Deferred tax are recognised to the extent that it is probable that taxable profit will be available, against which the deductible temporary differences can be utilised.
Deferred tax assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be resolved or settled.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same tax authority and the relevant entity intends to settle its current tax assets and liabilities on a net basis.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
3.5 Earnings per share
The Company presents basic and diluted earnings per share (“EPS”) data for its ordinary shares. The basic earnings per share is computed by dividing the net profit attributable to equity shareholders for the period by the weighted average number of equity shares outstanding during the year.
Diluted earnings per share is computed by dividing the net profit attributable to equity shareholders for the year relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share.
3.6 Property, plant and equipment (PPE)
Tangible assets and intangible assets
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, including relevant borrowing costs and any expected costs of decommissioning, less accumulated depreciation and accumulated impairment losses, if any. Free lands at is carried at historical costs less any accumulated impairment losses and is not depreciated. Expenditure incurred after the PPE have been put into operation, such as repairs and maintenance, are charged to the Statement of Profit and Loss in the period in which the costs are incurred.
If significant parts of an item of PPE have different useful lives, then they are accounted for as separate items (major components) of PPE.
Material items such as spare parts, stand-by equipment and service equipment are classified as PPE when they meet the definition of PPE as specified in Ind AS 16 - Property, Plant and Equipment.
Expenditure during construction period (including financing cost related to borrowed funds for construction or acquisition of qualifying PPE) is included under Capital Work-in-Progress, and the same is allocated to the respective PPE on the completion of their construction. Advances given towards acquisition or construction of PPE outstanding at each reporting date are disclosed as Capital advances under "Other non-current Assets”.
3.7 Depreciation and amortisation
Depreciation is the systematic allocation of the depreciable amount of PPE over its useful life and is provided on a straight-line basis over the useful lives as prescribed in Schedule II to the Act or as per technical assessment.
Depreciable amount for PPE is the cost of PPE less its estimated residual value. The useful life of PPE is the period over which PPE is expected to be available for use by the Company, or the number of production or similar units expected to be obtained from the asset by the Company.
The Company has componentised its PPE and has separately assessed the life of major components. In case of certain classes of PPE, the Company
uses different useful lives than those prescribed in Schedule II to the Act. 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.
Such classes of assets and their estimated useful lives are as under:
Depreciation on additions is provided on a pro-rata basis from the month of installation or acquisition and in case of Projects from the date of commencement of commercial production. Depreciation on deductions/ disposals is provided on a pro-rata basis up to the date of deduction/disposal.
3.8 Research and development
Expenditures on research activities undertaken with the prospect of gaining new scientific or technical knowledge and understanding are recognized in the statement of profit and loss as and when incurred.
Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditures are capitalized only if development costs can be measured reliably; the product or process is technically and commercially feasible; future economic benefits are probable; and the Company intends to and has sufficient resources to complete development and to use or sell the asset.
Expenditure on research and development eligible for capitalization are carried as tangible assets under development (capital work-in progress) where such assets are not yet ready for their intended use.
The expenditures to be capitalized include the cost of materials and other costs directly attributable
to preparing the asset for its intended use. Other development expenditures are recognized as expense in the statement of profit and loss as incurred.
Tangible assets relating to products in development are subject to impairment testing at each reporting date. All other tangible assets are tested for impairment when there are indications that the carrying value may not be recoverable. All impairment losses are recognized immediately in the statement of profit and loss.
The amortization period and the amortization method for tangible assets with a finite useful life are reviewed at each reporting date.
3.9 Intangible assets
Intangible assets including software licenses of enduring nature and contractual rights acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses, if any. Cost comprises the purchase price and any directly attributable cost of bringing the asset to its working condition for its intended use.
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 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 asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The 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 asset.
Gains or losses arising upon derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is disposed.
3.10 Inventories
Inventories are valued as follows:
◊ Raw materials, fuel, stores & spare parts and packing materials:
Valued at lower of cost and net realisable value (NRV). However, these items are considered to be realisable at cost, if the finished products, in which they will be used, are expected to be sold at or above cost. Cost is determined on weighted average basis.
◊ Work-in- progress (WIP), finished goods and stock-in-trade:
Valued at lower of cost and NRV. Cost of finished goods and WIP includes cost of raw materials, cost of conversion and other costs incurred in bringing the inventories to their present location and condition. Cost of inventories is computed on weighted average basis.
3.11 Cash and cash equivalents
Cash and cash equivalents in the Balance Sheet comprise cash at bank and in hand and short-term deposits with banks that are readily convertible into cash which are subject to insignificant risk of changes in value and are held for the purpose of meeting short-term cash commitments.
3.12 Impairment of financial and non financial assets
(i) Impairment of financial assets
Non-financial assets other than inventories, deferred tax asset and non-current asset classified as held for sale are reviewed at Balance sheet date to determine whether there is any indication of impairment. If any such indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset recoverable amount. The recoverable amount is higher of the asset's or Cash-Generating Unit' (CGU) fair value is less cost of disposal and its value in use. Recoverable amount is determined for individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets.
When carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
(ii) Impairment of non- financial assets:
In accordance with IND-AS 109, the Company applies expected credit loss ("ECL") model for measurement and recognition of impairment loss on the financial assets measured at amortized cost and debt instrument measured at FVPTL.
Loss allowances on receivable from customers are measured following the 'simplified approach' at an amount equal to the life time ECL, at each reporting date. In respect of other financial assets such as debt securities and bank balances, the loss allowance is measured at 12 month ECL only if there is no significant deterioration in the credit risk since initial recognition of the asset or asset is determined is have a low credit risk at the reporting date.
The Company has carried out annual review of impairment of fixed assets, based on the report of the technical executives it is observed there is no necessity for any impairment.
3.13 Employee benefits
Short-term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
i) Defined contribution plans
A defined contribution plan is a post employment benefit plan which an entity pays fixed contribution into a Separate entity and will have no legal or Constructive obligation to pay further amounts. The Company makes specified monthly contribution towards Government administered provident Fund scheme and other funds obligation for contribution plans recognized as an employee benefit expense in statement of profit and loss in the period during which the related service are rendered by employees.
(ii ) Defined benefit plans
For defined benefits plans, the cost of providing benefits is actually valued used by the projected unit credit method at the end of each annual reporting period re- measurement comprising actuarial gains and losses the effect of changes to the asset ceiling (if applicable) and return on plan Assets (excluding net interest ) is reflected immediately in balance sheet with a change or credit recognized in the compressive income (or) in the period in which they occur. Remeasurements recognized in OCI is reflected immediately in retained earnings and will not be reclasified to statement of profit and loss. Past service cost is recognosed in the statement of profit and loss in the period of plan amendment. Net interests is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset.
A defined benefit plan is a post employment benefits plan others than a defined contribution plan The liability or asset recognized in the balance sheet is respect of defined benefit plan is the present value of defined benefits obligation at the end of reporting period less the fair value of plan asset.
The present value of the defined benefit obligation to determine by the discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation.
Remeasurement gain and losses arising from experience adjustment and changes in actuarial assumptions or recognized in the period in which they occur ,directly in the other comprehensive income they are included in retained earnings in the statement of changes in equity and in the balance sheet.
A liability for a termination benefit is recognized at the earlier of when the entity can no longer withdraw the offer of the termination benefits and when the entity recognizes any related restructuring costs.
Change in the present value of the defined benefit obligation resulting from plan amendment or curtailments are recognized immediately in profit or loss as past service costs.
iii) compensated absence
Provision for compensated absence is made on the basis of actuarial valuation using the projected unit credit method the net interest on compensated absence which reflect the change in net liability that arises from the passage of time is included as 'finance cost'
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