3. Significant Accounting Policies: -
3.1 Basis of accounting
All the significant accounting policies adopted in the preparation and presentation of financial statements have been
disclosed, at one place & forms part of the financial statements. The accounting policies, in all material respects, have
been consistently applied by the Company. The change in the accounting policies - if any - which has a material effect
in the current period has been disclosed. In the case of a change in accounting policies which has a material effect in
the current period or later period, the amount by which any item in the financial statements is affected by such change
has been ascertained and disclosed in Notes to Financial statements. Where such amount is not ascertainable, wholly
or in part, such fact has been indicated.
The fundamental accounting assumption of’ ‘going concern’, ‘consistency’, & ‘accrual’, has been followed.
3.2 Use of Estimates -
The preparation of financial statements requires the management of the Company to make an estimate & assumptions
that affect the reported balances of Assets & Liabilities and disclosure relating to Contingent liabilities as at the date of
financial statements & reported amounts of Income & Expenses during the year. Estimates & assumptions used in the
preparation of the financial statements are based upon management’s evaluation of the relevant facts & circumstances
as of the date of the financial statements, which may differ from the actual results at a subsequent date. Difference
between the actuals & estimates are recognised in the period in which the results are known/materialised. Change in
estimates is disclosed wherever required.
3.3 Cash Flow Statement -
The Cash Flow Statement discloses the cash flows during the period classified by operating, investing and financing
activities in a manner which is most appropriate to the business of the company for each period for which financial
statements are presented. Reporting of cash flows from operating activities has been made by indirect method.
Extraordinary items: The cash flows associated with extraordinary items have been appropriately classified as arising
from operating, investing, or financing activities and separately disclosed.
Interests and Dividends: Separate disclosure of cash flows from interest and dividends received and paid has been
made.
Taxes on income: Cash flows arising from taxes on income are separately disclosed & classified as cash flows from
operating activities unless they can be specifically identified with financing and investing activities.
The enterprise has disclosed the components of cash and cash equivalents together with a commentary by management,
the amount of significant cash and cash equivalent balances held by the enterprise that are not available for use by it.
3.4 Revenue Recognition -
Revenue is recognised 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 and services are recognized net of duties, taxes & Sales Returns. Expenditure & income are accounted on
accrual basis including provisions/adjustments for committed obligations & amounts determined payable or receivable
during the year.
Sales of goods are recognised when property in goods has been transferred to the buyer for a price or all significant
risks and rewards of ownership have been transferred to the buyer and the seller retains no effective control of the
goods transferred to a degree usually associated with ownership.
The revenue from service is recognised as and when the services are rendered, based on the agreements/ arrangements
with the concerned parties net of duties, taxes. Unearned revenue’ included in other current liabilities represent billing in
excess of revenue recognized. Rental Income is recognized on time proportionate basis over the period of the rent.
Interest is recognized on a time proportion basis considering the amount outstanding and the applicable interest rate.
Dividend is recognised when the Company’s right to receive dividend is established.
In case of any pending resolution of significant uncertainties, the revenue recognition is postponed & is disclosed
separately in the notes.
3.5 Property, Plant & Equipment -
For each class of property, plant and equipment, the company has opted for cost model. Property, Plant & Equipment
are stated at cost less depreciation less impairment losses. Cost comprises purchase price, capitalised borrowing cost
and subsequent expenditure if it increases the future benefits from the existing asset. Cost has been adjusted to the
extent of gSt credit available and exchange difference arising on translation / settlement of foreign currency monetary
items pertaining to the acquisition of depreciable asset.
In case of derecognition of Property, Plant & Equipment, the difference between the carrying amount and disposal
proceeds is accounted as gain / loss in the Statement of Profit & Loss.
Advances paid towards the acquisition of property, plant & equipment, outstanding at each balance sheet date are
shown under capital advances. The cost of property, plant & equipment nor ready for its intended use on such date, is
disclosed under CWIP.
3.6 Depreciation on Property, Plant & Equipment -
The carrying amount of Property, Plant & equipment as on 31st March 2014 is depreciated over remaining useful life
of the assets after reassessing the useful life of the asset. The assets acquired on or after 01.04.2014 are depreciated
according to the useful life of such asset as specified in Schedule II of Companies Act, 2013. A residual value of 5% of
the cost of acquisition is considered while calculating the depreciation.
While accounting the Property, Plant & Equipment, the principle of component accounting is followed in case of
significant components of Property, Plant & Equipment and for depreciating the significant components, the useful life of
each significant component is considered separately apart from the remaining parts of the Property, Plant & Equipment.
3.7 Intangible Assets -
Intangible Assets acquired separately & also internally generated are recognised at cost less accumulated amortisation
and impairment. Amortisation is done on straight line basis over estimated useful economic life and the amortisation
period and method are reviewed at the end of each financial year.
In case of derecognition of Intangible Assets, the difference between the carrying amount and disposal proceeds is
accounted as gain / loss in the Statement of Profit & Loss.
3.8 Impairment of Property, Plant & Equipment & Intangible Assets -
The company assesses at each reporting date an indication about impairment of an asset. If any indication exists,
the company estimates the asset’s recoverable amount. The recoverable amount is determined for individual asset.
The recoverable amount is higher of the selling price & value in use of the asset. The value in use is estimated on the
basis of estimated future cash flows for next 5 years discounted to the present value by using pre-tax discount rate that
reflects time value of the money and the risk specific to the asset. Where the carrying amount of the asset exceeds the
recoverable amount, the asset is impaired & is written down to its recoverable value.
Impairment losses are recognised in the Statement of Profit & Loss and the depreciation is provided on the revised
carrying amount of the asset after impairment. If the previously recognised impairment losses do not exist or have
decreased, the same are reversed and the reversible is limited so that carrying amount does not exceed the recoverable
amount.
3.9 Inventories -
Raw materials and Stores & Spares valued at lower of cost or net realizable value. However, these items are considered
to be realisable at replacement cost if the finished goods, in which they will be used, are expected to be sold below cost.
Cost of Inventories is computed on a Weighted Average basis. Cost includes purchase price, (excluding those
subsequently recoverable by the enterprise from the concerned revenue authorities), freight inwards and other
expenditure incurred in bringing such inventories to their present location and condition.
Work in progress and manufactured finished goods are valued at the lower of cost and net realisable value. Cost
of work in progress and manufactured finished goods is determined on the weighted average basis and comprises
direct material, Cost of conversion and other costs incurred in bringing these inventories to their present location and
condition. Cost of traded goods is determined on a weighted average basis.
Provision of obsolescence on inventories is considered on the basis of management’s estimate based on demand and
market of the inventories.
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion
and the estimated costs necessary to make the sale. The comparison of cost and net realizable value is made on item-
by-item basis.
3.10 Current assets, loans & advances -
Current Assets, Loans and Advances are approximately of the value stated, if realized in the ordinary course of business.
3.11 Foreign currency transactions -
Foreign Currency transactions are recorded in reporting currency at the exchange rate prevailing on the date of transaction.
On the reporting date monetary items are retranslated by using the exchange rate prevailing on the reporting date.
Foreign exchange difference related to acquisition of Fixed Assets and loans related to it is adjusted in the carrying
amount of Fixed Asset and the loan amount.
Income or expenditure arising out of exchange fluctuation other than Fixed Assets and loans on such assets is accounted
for in the Statement of Profit and Loss.
3.12 Government Grants & Subsidies -
Grants and subsidies from the Government are recognised only when there is reasonable assurance that it will be
received. When the grant or subsidy relates to the revenue, it is recognised as income in the Statement of Profit
and Loss and where the Grant relates to an asset, the same is reduced from the cost of the asset before charging
depreciation & when the subsidy is of capital nature but not attributable to any particular asset or group of assets, the
same is recognised as Capital reserve.
3.13 Investments -
Investments which are readily realisable and intended to be held for not more than 1 year from the date on which
such investments are made are classified as current investments. All other investments are classified as Long-term
Investments.
On initial recognition, all investments are measured at cost. The cost comprises Purchase price and directly attributable
acquisition charges such as brokerage, fees and duties.
Current investments are carried in the financial statements at lower of cost or fair value determined on an individual
investment basis. Long term investments are carried at cost. However, provision for diminution in value is made to
recognise a decline other than temporary in the value of investments.
On disposal of investment, the difference between its carrying amount and net disposal proceeds is charged or credited
to the Statement of Profit and Loss. TDS on income from Investment is included in Advance taxes paid.
3.14 Investment Property -
Investment in Land or Building which is not intended to be occupied substantially for use in the operations of the
company is classified as Investment Property. Investment properties are stated at cost less accumulated depreciation
and impairment losses. Depreciation and impairment loss policy as stated above is followed for calculation. On disposal
of the Investment Property, the difference between its carrying amount and the net disposal proceeds is charged /
credited to Statement of Profit and Loss.
3.15 Employee benefits -
Employee benefits include provident fund, employee state insurance, gratuity and leave encashment & bonus.
The Company provides for retirement benefits in the form of gratuity. Benefits payable to eligible employees with
respect to gratuity, a defined benefit plan, is accounted for on the basis of an actuarial valuation as at the Balance Sheet
date. Leave encashment due is provided on the basis of actuarial valuation.
Contributions made to approved scheme of provident fund is a defined contribution plan and is charged to Statement of
Profit and Loss on accrual basis. Bonus is provided in the books of accounts as per the provisions of Code on Wages
2019.
3.16 Borrowing cost -
Borrowing cost includes interest, amortisation of ancillary costs incurred in connection with the arrangement of borrowing
& exchange differences arriving from foreign currency borrowing to the extent they are regarded as an adjustment to the
interest cost.
Borrowing costs that are directly attributable to the acquisition, construction or production of an asset that takes a
substantial period of time to get ready for its intended use are capitalised. All other borrowing costs are recognised as
expenditure in the period in which they are incurred.
3.17 Segment Reporting
The segment reporting is done assuming two segments - Business segment as primary segment & geographical
segment as secondary segment. The segment reporting includes segment-wise revenue, expenses, assets & liabilities
& accounting policies. Unallocated items include general corporate income and expense items, which are not allocated
to any business segment.
The disclosures are given as per AS 17.
3.18 Related Party Disclosure
All related party transactions are reported irrespective of the fact whether such transactions have adversely affected
financial position and operating results of the company. The related parties are reported even when there are no
transactions with such parties.
Related parties include -
• Enterprises that are under common control - Directly or indirectly.
• Associates and JVs.
• Individuals having interest in voting power of the enterprise that gives them control and significant influence over
the enterprise and relatives of such individuals.
• Key management personnel (KMP) and their relatives having significant influence over the enterprise.
The transactions include -
• Sale and purchase of goods and fixed assets and services
• Agency arrangements
• Leased and hire purchase transactions.
• Transfer of R & D
• License agreements
• Financial transactions - Loans, equity, guarantee, collaterals
• Management contracts including deputation of employees.
The disclosures are given as per AS 18.
3.19 Leases
As a Lessee: -
Finance leases, which effectively transfers to the Company substantially all the risks and benefits incidental to
ownership of the leased item, are capitalized at the inception of the lease term at the lower of the fair value of the
leased property and present value of minimum lease payments. Lease payments are apportioned between the finance
charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the
liability. Finance charges are recognized as finance costs in the Profit and Loss Account. Lease management fees, legal
charges and other initial direct costs of lease are capitalized.
A leased asset is depreciated on a straight-line basis over the useful life of the asset assessed by the management.
However, if there is no reasonable certainty that the Company will obtain the ownership by the end of the lease term,
the capitalized asset is depreciated on a straight-line basis over the shorter of the estimated useful life of the asset.
Leases, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item, are
classified as operating leases. Operating lease payments are recognized as an expense in the Profit and Loss Account
on a straight-line basis over the lease term.
As a Lessor: -
Leases in which the Company transfers substantially all the risks and benefits of ownership of the asset are classified
as finance leases. Assets given under finance lease are recognized as a receivable at an amount equal to the net
investment in the lease. After initial recognition, the Company apportions lease rentals between the principal repayment
and interest income so as to achieve a constant periodic rate of return on the net investment outstanding in respect of
the finance lease. The interest income is recognized in the Profit and Loss Account. Initial direct costs such as legal
costs, brokerage costs, etc. are recognized immediately in the Profit and Loss Account.
Leases in which the Company does not transfer substantially all the risks and benefits of ownership of the asset are
classified as operating leases. Assets subject to operating leases are included in property, plant and equipment assets.
Lease income on an operating lease is recognized in the Profit and Loss Account on a straight-line basis over the lease
term. Costs, including depreciation, are recognized as an expense in the Profit and Loss Account. Initial direct costs
such as legal costs, brokerage costs, etc. are recognized immediately in the Profit and Loss Account.
3.20 Earnings per share -
The earnings considered in ascertaining the Company’s earnings per share are net profit after tax. The number of
shares is considered on weighted average basis. Partly paid equity shares are treated as fraction of equity share to the
extent they are entitled to participate in dividends. For the purpose of calculating dilutive EPS, the net profit attributable
to equity shareholders and weighted average number of shares are adjusted for the effect of Dilutive Potential Equity
shares.
3.21 Taxes on Income -
Provision for current Income Tax is determined in accordance with the provisions of Income Tax Act 1961. Minimum
Alternate Tax (MAT) paid / provided in the year is charged to the Statement of Profit and Loss as current Tax. Deferred
Tax - subject to materiality - is recognized on timing differences, being the difference between the taxable income & the
accounting income that originate in one period & are capable of reversal in one or more subsequent periods. Deferred
tax asset is recognized & carried forward only to the extent that there is a virtual certainty that the asset will be realized
in future.
3.22 Indirect Taxes -
The amounts of output liability & amounts claimed by the company as eligible input tax credit under the CGST Act,
SGST Act, IGST Act, as per the books of account of the company is subject to reconciliation & correction - if any -
which will be done while filing of the GST Annual return in Form gStr 9 - to be filed before due date.
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