1. Significant accounting policies
a) Basis of preparation
The financial statements of the Company have been prepared under the historical cost convention on an accrual basis of accounting in accordance with the Generally Accepted Accounting Principles in India, including the Accounting Standards specified under section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 as amended. All assets and liabilities have been classified as current or non-current, wherever applicable as per the operating cycle of the Company as per the guidance as set out in Schedule III to the Companies Act, 2O13.
b) Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported amount of revenue and expenses during the period reported. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods. Management believes that the estimates made in the preparation of the financial statements are prudent and reasonable.
c) Fixed assets
Fixed assets are recorded at cost of acquisition less accumulated depreciation. Cost of acquisition comprises purchase price and any attributable costs of bringing the assets to their working condition for their intended use.
Capital work-in-progress comprises the cost of fixed assets that are not yet ready for their intended use at the reporting date.
d) Depreciation
Depreciation is provided on written down value method based on useful life of the assets as prescribed in Schedule II to the Companies Act, 2013 or the management estimate of the useful life of the asset.
Depreciation on additions is being provided on pro-rata basis from the date of such additions. Similarly, depreciation on assets sold/disposed off during the period is being provided up to the date on which such assets are sold/disposed off.
Leasehold improvements are being depreciated under the straight line method over the primary period of lease or the useful life as estimated by management, whichever is lower.
e) 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 long term investments.
Long-term investments are carried at cost, however, provision for diminution in value is made to record other than temporary diminution in the value of such investments.
f) Inventories
Inventories are valued at lower of average cost and net realizable value.
Inventories are valued as follows:
Raw materials, stores and spares and packing materials
Lower of cost or net realisable value. Cost is determined on Average basis and includes all the cost incurred in bringing the goods to be their present location and condition.
Finished goods
Lower of cost and net realisable value. Cost includes cost of raw materials, direct overheads which are incurred to bring the inventories to their present location and condition.
g) Revenue recognition
Revenue is recognised to the extent that it can be reliably measured and is probable that the economic benefits will flow to the Company.
Sale of goods:
Revenue from sale of goods is recognised when the significant risks and rewards associated with the ownership of the goods are transferred to the customer and is stated net of sales returns, trade discounts and indirect taxes.
Interest:
Income is recognised on a time proportion basis taking into account the amount outstanding and the applicable rate of interest.
Income from services
The Company derives its other operating revenue primarily from service charges and processing charges and the revenue from these services are recognised as revenue when the related services are rendered.
h) Foreign currency transactions
Transactions in foreign currency are recorded at the exchange rates prevailing at the date of the transaction. Exchange differences arising on settlement of foreign currency transactions are recognised in the Profit and Loss Account.
Monetary assets and liabilities denominated in foreign currencies and remaining unsettled as at the balance sheet date are translated using the closing exchange rates on that date and the resultant net exchange difference is recognised in the Profit and Loss Account.
i) Retirement and other employee benefits
Short term 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, bonus etc. are recognised in the Profit and Loss Account in the period in which the employee renders the related service.
Provident fund: The Company makes contribution to statutory provident fund in accordance with Employees Provident Fund and Miscellaneous Provisions Act, 1952 which is a defined contribution plan. Contribution paid/ payable is recognized as an expense in the period in which the services are rendered by the employee.
Gratuity: Gratuity is a post-employment benefit and is in the nature of defined benefit plan. The liability recognised in the balance sheet in respect of gratuity is the present value of the defined benefit obligation as at the balance sheet date. The defined benefit/obligations calculated at the balance sheet date in line with AS 50 and any gains or losses are recognised immediately in the statement of profit and loss.
j) Borrowing costs
Borrowing costs directly attributable to acquisition or construction of qualifying assets, which necessarily take a substantial period of time to get ready for their intended use are capitalised.
Borrowing cost which are not relatable to qualifying asset are recognised as an expense in the period in which they are incurred.
k) Income taxes
Provision for current income tax is made on the assessable income at the tax rate applicable to the relevant assessment year. Deferred income taxes are recognised for the future tax consequences attributable to timing differences between the financial statement determination of income and their recognition for tax purposes. The effect on deferred tax assets and liabilities of change in tax rates is recognised in income using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.
Deferred tax assets are recognised and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. However, deferred tax arising from brought forward losses and depreciation are recognised only when there is virtual certainty supported by convincing evidence that such assets will be realized.
l) Earnings per share
Basic earnings per share is computed by dividing the net profit/ (loss) attribute to equity share holders for the year by the weighted average number of equity shares outstanding during the year.
For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.
m) Provisions and contingencies
The Company creates a provision when there is a present obligation as a result of past events that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible but not probable obligation or a present obligation that may, but probably will not, entail an outflow of resources. When there is an obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
n) Impairment
The Company on an annual basis makes an assessment of any indicator that may lead to impairment of assets. If any such indication exists, the Company estimates the recoverable amount of the assets. If such recoverable amount is less than the carrying amount, then the carrying amount is reduced to its recoverable amount by treating the difference between them as impairment loss and is charged to the statement of profit and loss. If at the balance sheet date there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost.
o) Leases
Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased assets are classified as operating leases. Lease rentals in respect of assets taken on operating lease are charged to the statement of profit and loss on a straight line basis over the lease term.
p) Government grant
Grants and subsidies from the government are recognised when there is reasonable assurance that (i) the Company will comply with the conditions attached to them, and (ii) it is certain that the ultimate collection will be made. Where the government grants are of the nature of promoters' contribution, i.e., they are given with reference to the total investment in an undertaking or by way of contribution towards its total capital outlay, it is recognised as capital reserve which can be neither distributed as dividend nor considered as deferred income
q) Cash and cash equivalents
Cash and cash equivalents for the purpose of cash flow statement comprise cash at bank, cash on hand and short term investments with an original maturity of three months or less.
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