2. Material accounting policy information
2.1. Basis of preparation
(a) Statement of compliance
The standalone financial statements of the
Company have been prepared in accordance
with the Indian Accounting Standards (ind AS) as
notified under the Companies (Indian Accounting
Standards) Rules 2015 (as amended) and
presentation requirements of Division II of Schedule
III to the Companies Act, 2013.
(b) Historical cost and Going Concern
The standalone financial statements have been
prepared on a historical cost basis, except for the
following assets and liabilities, which have been
measured at fair value:
• Defined benefit obligation measured at fair
value,
• Certain financial assets and liabilities measured
at fair value (refer accounting policy regarding
financial instruments)
The Company has prepared the standalone
financial statements on the basis that it will
continue to operate as a going concern.
(c) Consistency in preparation
The standalone financial statements provide
comparative information in respect of the
previous period. The accounting policies are
applied consistently to all the period presented
in the standalone financial statements, unless
stated otherwise.
(d) Presentation Currency
The standalone financial statements are presented
in Indian Rupees (g). All values are presented in
g Lakh and rounded off to the extent of two
decimals, except when otherwise indicated.
2.2. Current/non-current classification
The Company, as required by Ind AS 1, presents
assets and liabilities in the Balance Sheet based
on current/non-current classification.
(a) An asset shall be classified as current when it
satisfies any of the following criteria:
• it is expected to be realised in, or is intended
for sale or consumption in, the Company's
normal operating cycle;
• it is held primarily for the purpose of
being traded;
• it is expected to be realised within twelve
months after the reporting date; or
• it is cash or cash equivalent unless it is
restricted from being exchanged or used to
settle a liability for at least twelve months
after the reporting date.
(b) All assets other than current assets shall be
classified as non-current.
(c) A liability shall be classified as current when it
satisfies any of the following criteria:
• it is expected to be settled in the Company's
normal operating cycle;
• it is held primarily for the purpose of
being traded;
• it is due to be settled within twelve months
after the reporting date; or
• the Company does not have an
unconditional right to defer settlement of
the liability for at least twelve months after
the reporting date. Terms of a liability that
could, at the option of the counterparty,
result in its settlement by the issue of equity
instruments do not affect its classification.
(d) All liabilities other than current liabilities shall
be classified as non-current.
Deferred tax assets and liabilities are classified
as non-current assets and liabilities.
An operating cycle is the time between the
acquisition of assets for processing and their
realisation in cash or cash equivalents. The
Company has ascertained the operating
cycle as twelve months for the purpose of
current or non-current classification of assets
and liabilities.
2.3. Property, plant and equipment ("PPE")
(a) Recognition and initial measurement
Property, plant and equipment are stated at
cost net of accumulated depreciation and
accumulated impairment losses, if any.
Cost comprises of cost of acquisition or construction
inclusive of duties (net of tax) incidental expenses,
interest and erection/commissioning expenses
incurred up to the date asset is put to use.
Administrative and other general overhead
expenses that are specifically attributable to
construction or acquisition of PPE or bringing the PPE
to working condition are allocated and capitalised
as a part of cost of PPE. Cost includes borrowing
costs for long-term construction projects, if the
recognition criteria is met.
When significant parts of plant and equipment are
required to be replaced at intervals, the Company
depreciates them separately based on their
specific useful lives.
PPE which are not ready for the intended use
are disclosed as 'Capital work-in-progress'.
Capital work-in-progress is stated at cost net of
accumulated impairment losses, if any.
(b) Subsequent measurement (depreciation, useful
life and residual value)
Subsequent costs are included in the asset's
carrying amount or recognised as a separate
asset, as appropriate, only when it is probable that
future economic benefits associated with the item
will flow to the Company, and the cost of the item
can be measured reliably. The carrying amount of
any component accounted for as a separate asset
is de-recognised when replaced. All other repairs
and maintenance are charged to the Statement of
Profit and Loss, during the reporting period in which
they are incurred.
The residual values, useful lives and methods of
depreciation of property, plant and equipment
are reviewed at each reporting date and adjusted
prospectively, if appropriate.
Depreciation on property, plant and equipment is
calculated on a straight-line basis using the rates
arrived at, based on the useful lives estimated
by the management. The Company has used
the following rates to provide depreciation on its
tangible fixed assets:
The Company, based on technical assessment
made by technical expert and management
estimate, depreciates air conditioner over
estimated useful life, which is different from the
useful life as prescribed in Schedule II to the
Companies Act, 2013. The management believes
that such estimated useful life is realistic and
reflects fair approximation of the period over which
the assets are likely to be used.
Cost of the leasehold improvements are amortised
over the period of the lease.
(c) De-recognition
PPE are derecognised either when they have
been disposed of or when they are permanently
withdrawn from use and no future economic
benefit is expected from their disposal. The
difference between the net disposal proceeds and
the carrying amount of the asset is recognised in
the Statement of Profit and Loss in the period of
de-recognition.
2.4. Intangible assets
(a) Recognition and initial measurement
Intangible assets are stated at cost less
accumulated amortisation and impairment. The
cost of intangible assets acquired in a business
combination is their fair value at the date of
acquisition. Internally generated intangibles,
excluding capitalised development costs, are not
capitalised and the related expenditure is reflected
in the Statement of Profit and Loss, in the period in
which the expenditure is incurred.
(b) Subsequent measurement (amortisation and
useful life)
I ntangible assets with finite life are amortised
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 and changes if any, made on prospective
basis. The amortisation expense on intangible
assets with finite lives is recognised in the Statement
of Profit and Loss.
(c) De-recognition
Gains or losses arising from de-recognition of an
intangible asset are measured as the difference
between the net disposal proceeds and the
carrying amount of the asset and are recognised
in the Statement of Profit and Loss when the asset
is de-recognised.
2.5. Impairment of non-financial assets
At the end of each reporting period, The Company
reviews the carrying amounts of its assets to
determine whether there is any indication of
impairment based on internal/ external factors. An
impairment loss, if any, is charged to the Statement
of Profit and Loss in the year in which an asset is
identified as impaired. An asset's recoverable
amount is higher of an asset's or cash-generating
unit's (CGUs) fair value less costs of disposal
and its value in use. In assessing value in use,
the estimated future cash flows are discounted
to their present value using a pre-tax discount
rates, that reflects current market assessment of
the time value of money and the risks specific to
the asset for which estimates of future cash flows
have not been adjusted. Recoverable amount
is determined for an individual asset, unless the
asset does not generate cash inflows that are
largely independent of those from other assets or
groups of assets. When the carrying amount of an
asset or CGU exceeds its recoverable amount, the
asset is considered impaired and is written down
to its recoverable amount. Impairment losses of
continuing operations, including impairment on
inventories, are recognised in the Statement of
Profit and Loss.
A cash-generating unit to which goodwill has
been allocated is tested for impairment annually
as at reporting date. If the recoverable amount of
the cash- generating unit is less than its carrying
amount, the impairment loss is allocated first
to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets
of the unit pro-rata based on the carrying amount
of each asset in the unit. Any impairment loss for
goodwill is recognised directly in the Statement of
Profit and Loss.
Reversal of impairment losses except on goodwill
is recorded when there is an indication that the
impairment losses recognised for the assets no
longer exist or have decreased. An impairment
loss recognised for goodwill is not reversed in
subsequent periods.
!.6. Leases
Company as a lessee
The Company assesses at contract inception
whether a contract is, or contains, a lease. That
is, if the contract conveys the right to control the
use of an identified asset for a period in exchange
for consideration. To assess whether a contract
conveys the right to control the use of an identified
asset, the Company assesses:
(i) whether the contract involves the use of an
identified asset,
(ii) the Company has substantially all the
economic benefits from use of the asset
through the period of the lease, and
(iii) the Company has the right to direct the use of
the asset.
The Company's lease asset classes primarily
comprise of lease for stores, warehouse, office
premises and plant and machinery and office
equipment. The Company applies a single
recognition and measurement approach for all
leases, except for short-term leases and leases
of low-value assets. The Company recognises
lease liabilities to make lease payments and right-
of-use assets representing the right to use the
underlying assets.
Right-of-use assets
The Company recognises right-of-use assets at
the commencement date of the lease (i.e., the date
the underlying asset is available for use) except
for leases existing as on the date of transition
to IND AS 116 i.e. April 1, 2019. Right-of-use assets
are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted
for any remeasurement of lease liabilities. The
cost of right-of-use assets includes the amount
of lease liabilities recognised, initial direct costs
incurred, and lease payments made at or before
the commencement date less any lease incentives
received. Right-of-use assets are depreciated on
a straight- line basis over the shorter of the lease
term and the estimated useful lives of the assets.
The lease term for buildings (stores, warehouse and
office premises) ranges from 3 years to 20 years.
I f ownership of the leased asset transfers to the
Company at the end of the lease term or the
cost reflects the exercise of a purchase option,
depreciation is calculated using the estimated
useful life of the asset. The right-of-use assets
are also subject to impairment. Refer note 2.5 in
the accounting policies for Impairment of non¬
financial assets.
Lease Liabilities
The Company recognises lease liabilities measured
at the present value of lease payments to be
made over the lease term effective April 1, 2019.
The lease payments include fixed payments less
any lease incentives receivable, variable lease
payments that depend on an index or a rate, and
amounts expected to be paid under residual value
guarantees. The lease payments also include the
exercise price of a purchase option reasonably
certain to be exercised by the Company and
payments of penalties for terminating the lease,
if the lease term reflects the Company exercising
the option to terminate.
In calculating the present value of lease payments,
the Company uses its incremental borrowing rate
because the interest rate implicit in the lease is not
readily determinable. After the commencement
date, the amount of lease liabilities is increased
to reflect the accretion of interest and reduced for
the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there
is a modification, a change in the lease term, a
change in the lease payments (e.g., changes
to future payments resulting from a change in
an index or rate used to determine such lease
payments) or a change in the assessment of an
option to purchase the underlying asset.
As a practical expedient, IND AS 116 permits a lessee
not to separate lease and non-lease components,
and instead account for any lease and associated
non-lease components as a single arrangement.
The Company has used this practical expedient
and has recognised single ROU for entire lease and
non-lease components.
Variable lease payments
Variable rents that do not depend on an index
or rate are not included in the measurement of
the lease liability and the right-of-use asset. The
related payments are recognised as an expense
in the period in which the event or condition that
triggers those payments occurs and are included
in the line "Other expenses" in profit or loss.
Short-term leases and leases of low-value
assets
The Company applies the short-term lease
recognition exemption to its short-term leases of
rented premises, Plant and machinery and office
equipment (i.e., those leases that have a lease
term of 12 months or less from the commencement
date and do not contain a purchase option). It also
applies the lease of low-value assets recognition
exemption to leases of office equipment that are
considered to be low value. Lease payments on
short-term leases and leases of low-value assets
are recognised as expense on a straight-line basis
over the lease term.
2.7. Investments
Investments that are readily realisable and intended
to be held for not more than a year are classified
as current investments. All other investments
are classified as non-current investments. All
investments are carried at fair value.
2.8. Fair value measurement
The Company measures financial instruments, at
fair value at each reporting date.
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 measurement
is based on the presumption that the transaction
to sell the asset or transfer the liability takes
place either:
(a) In the principal market for the asset or
liability; or
(b) In the absence of a principal market, in the
most advantageous market for the asset
or liability.
The principal or the most advantageous market
must be accessible by the Company. The fair
value of an asset or a liability is measured using
the assumptions that market participants would
use when pricing the asset or liability, assuming
that market participants act in their best
economic interest.
A fair value measurement of a non-financial asset
takes into account a market participant's ability to
generate economic benefits by using the asset in
its highest and best use, or by selling it to another
market participant that would use the asset in
its highest and best use. The Company uses
valuation techniques that are appropriate in the
circumstances, and for which sufficient data are
available to measure the fair value, maximising the
use of relevant observable inputs and minimising
the use of unobservable inputs.
2.9. Financial instruments and Equity
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.
Financial assets
The Company classifies its financial assets in the
following measurement categories:
• Those to be measured subsequently at fair
value (either through other comprehensive
income, or through profit or loss).
• Those measured at amortised cost.
(a) Initial recognition and measurement
All financial assets are recognised initially at
fair value plus, in the case of financial assets
not recorded at fair value through profit or loss,
transaction costs that are attributable to the
acquisition of the financial asset.
(b) Subsequent measurement
For purposes of subsequent measurement,
financial assets are classified in four categories:
• Debt instruments at amortised cost.
• Debt instruments at fair value through
other comprehensive income (FVTOCI).
• Debt instruments, derivatives and equity
instruments at fair value through profit or
loss (FVTPL).
• Equity instruments measured at fair value
through other comprehensive income
(fvtoci).
Where assets are measured at fair value, gains
and losses are either recognised entirely in
the statement of profit and loss (i.e. fair value
through profit or loss) or recognised in other
comprehensive income (i.e., fair value through
other comprehensive income)
Debt instruments at amortised cost
A 'debt instrument' is measured at the amortised
cost if both the following conditions are met:
• The asset is held within a business model
whose objective is to hold assets for collecting
contractual cash flows, and
• Contractual terms of the asset give rise on
specified dates to cash flows that are solely
payments of principal and interest (SPPl) on the
principal amount outstanding.
Cash flow characteristics test:
The contractual terms of the Debt instrument give
rise on specific dates to cash flows that are solely
payments of principal and interest on principal
amount outstanding. After initial measurement,
financial assets are subsequently measured at
amortised cost using the effective interest rate
(eir) method. Amortised cost is calculated by
taking into account any discount or premium on
acquisition and fees or costs that are an integral
part of EIR. The EIR amortisation is included in
finance income in the profit or loss. The losses
arising from impairment are recognised in the
profit or loss. This category generally applies to
trade and other receivables.
Debt instrument at FVTOCI
A 'debt instrument' is classified as at the FVTOCI if
both of the following criteria are met:
• The objective of the business model is achieved
both by collecting contractual cash flows and
selling the financial assets, and
• The asset's contractual cash flows
represent SPPI.
Debt instruments included within the FVTOCI
category are measured initially as well as at each
reporting date at fair value. Fair value movements
are recognised in the other comprehensive income
(OCI). However, the Company recognises interest
income, impairment losses & reversals and foreign
exchange gain or loss in the P&L. On derecognition
of the asset, cumulative gain or loss previously
recognised in OCI is reclassified from the equity
to P&L. Interest earned whilst holding FVTOCI debt
instrument is reported as interest income using the
EIR method.
Debt instrument at FVTPL
FVTPL is a residual category for debt instruments.
Any debt instrument, which does not meet the
criteria for categorisation as at amortised cost
or as FVTOCI, is classified as at FVTPL. In addition,
the Company may elect to designate a debt
instrument, which otherwise meets amortised
cost or FVTOCI criteria, as at FVTPL. However,
such election is allowed only if doing so reduces
or eliminates a measurement or recognition
inconsistency (referred to as 'accounting
mismatch'). The Company has not designated
any debt instrument as at FVTPL. Debt instruments
included within the FVTPL category are measured
at fair value with all changes recognised in the P&L.
(c) De-recognition
A financial asset (or, where applicable, a part of
a financial asset or part of a Company of similar
financials assets) is primarily derecognised
(i.e., removed from the Company's balance
sheet) when:
• The rights to receive cash flows from the
assets have expired, or
• The Company has transferred its rights
to receive cash flows from the asset or
has assumed an obligation to pay the
received cash flows in full without material
delay to a third party under a 'pass
through' arrangement; and either a) the
Company has transferred substantially
all the risks and rewards of the asset, or
(b) the Company has neither transferred
nor retained substantially all the risks and
rewards of the asset, but has transferred
control of the asset.
Where the Company has transferred an
asset, the Company evaluates whether it
has transferred substantially all the risks and
rewards of the ownership of the financial
assets. In such cases, the financial asset
is derecognised. Where the entity has not
transferred substantially all the risks and
rewards of the ownership of the financial
assets, the financial asset is not derecognised.
Where the Company has neither transferred
a financial asset nor retains substantially all
risks and rewards of ownership of the financial
asset, the financial asset is derecognised if
the Company has not retained control of the
financial asset. Where the Company retains
control of the financial asset, the asset is
continued to be recognised to the extent of
continuing involvement in the financial asset.
Classification as Debt or Equity:
Debt or equity instruments issued by the Company,
are classified as either financial liabilities or as
equity in accordance with the substance of the
contractual arrangements 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
issued by the Company are recognised at the
proceeds received, net of direct issue costs.
Financial liabilities
(a) Initial recognition and measurement
Financial liabilities are classified, at initial
recognition, as financial liabilities at fair value
through profit or loss. All financial liabilities are
recognised initially at fair value and, in the
case of payables, net of directly attributable
transaction costs.
All financial liabilities are recognised initially
at fair value and, in the case of loans and
borrowings and payables, net of directly
attributable transaction costs. The Company's
financial liabilities include trade and other
payables, loans and borrowings including
bank overdrafts.
(b) Subsequent measurement
The measurement of financial liabilities
depends on their classification, as
described below:
Financial liabilities at fair value through profit
or loss financial liabilities at fair value through
profit or loss include financial liabilities held
for trading and financial liabilities designated
upon initial recognition as at fair value through
profit or loss. Financial liabilities are classified
as held for trading if they are incurred for the
purpose of repurchasing in the near term.
Gains or losses on liabilities held for trading
are recognised in the profit or loss.
Financial liabilities designated upon initial
recognition at fair value through profit or loss
are designated as such at the initial date of
recognition, and only if the criteria in Ind AS 109
are satisfied. For liabilities designated as FVTPL,
fair value gains/ losses attributable to changes
in own credit risk are recognised in OCI. These
gains/ losses are not subsequently transferred
to P&L. However, the Company may transfer
the cumulative gain or loss within equity. All
other changes in fair value of such liability
are recognised in the statement of profit or
loss. The Company has not designated any
financial liability as at fair value through profit
and loss.
(c) De-recognition
A financial liability is derecognised when the
obligation under the liability is discharged or
cancelled or expires. When an existing financial
liability is replaced by another from the same
lender on substantially different terms, or the
terms of an existing liability are substantially
modified, such an exchange or modification
is treated as the derecognition of the original
liability and the recognition of a new liability.
The difference in the respective carrying
amounts is recognised in the statement of
profit or loss.
2.10. Inventories
Stock-in-trade: Valued at lower of cost and net
realisable value. Cost of inventories comprises all
costs of purchase price and other incidental costs
incurred in bringing the inventories to their present
location and condition. Cost is determined based
on first in first out method. Net realisable value is
the estimated selling price in the ordinary course of
business, less estimated costs of completion and
to make the sale.
Packing materials and consumables: Cost
represents purchase price and other direct costs
and is determined on a "first in, first out" basis.
2.11. Cash and cash equivalents
Cash and cash equivalent in the balance sheet
comprise cash at banks and on hand, cheques
on hand and short-term deposits with an original
maturity of three months or less, 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.
|