2. Significant accounting policies
The significant accounting policies applied by
the Company in the preparation of its financial
statements are listed below.
2.1 Basis of Preparation and Presentation
The consolidated financial statements have
been prepared on the historical cost basis and
on accrual basis, except for the following items
i) Borrowings: Amortised cost using
effective interest rate method
ii) employee defined benefit assets/(liability):
Present value of defined benefit
obligations less fair value of plan assets
The financial statements have been prepared
and presented in accordance with the Indian
Accounting Standards ('Ind AS') notified under
the Companies (Indian Accounting Standards)
Rules, 2015 and Companies (Indian Accounting
Standards) Amendment Rules, 2016. Up to the
year ended 31st Mar, 2017, the Company
prepared its financial statements in
accordance with accounting standards notified
under Section 133 of the Companies Act 2013,
read with Rule 7 of Companies (Accounts)
Rules, 2014 ('Previous GAAP’).
Company's financial statements are presented
in Indian Rupees, which is also its functional
currency.
2.2 Use of estimates and judgments
The preparation of financial statements in
conformity with Ind AS requires management
to make judgments, estimates and
assumptions that affect the application of
accounting policies and the reported amounts
of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
Estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the
period in which the estimates are revised and
in any future periods affected.
2.3 Measurement of fair values
Accounting polices and disclosures require
measurement of fair value for financial assets
and financial liabilities.
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:
i. In the principal market for the asset or
liability or
ii. 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 economic best interest.
The Company uses valuation techniques that
are appropriate in the circumstances and for
which sufficient data is available to measure
fair value, maximising the use of relevant
observable inputs and minimising the use of
unobservable inputs.
Fair values are categorised into different levels
in a fair value hierarchy based on the inputs
used in the valuation techniques as follows:
bevel 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 iiabiiity, 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 recognizes transfers between
levels of the fair value hierarchy at the end of
the reporting period during which the change
has occurred.
2.4 Current and non-current classification:
The Schedule III to the Act requires assets and
liabilities to be classified as either current or
non-current. The Company presents assets
and liabilities in the balance sheet based on
current / non-current classification.
Assets
An asset is classified as a current when it is:
i. it is expected to be realised in, or is
intended for sale or consumption in, the
Company's normal operating cycle;
ii. it is expected to be realised within twelve
months from the reporting date;
iii. it is held primarily for the purposes of
being traded; or
iv. 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. All other
assets are classified as non current.
Liabilities
A liability is classified as a current when:
i. it is expected to be settled in the
Company's normal operating cycle;
ii. it is due to be settled within twelve
months from the reporting date;
iii. it is held primarily for the purposes of
being traded;
iv. the Company does not have an
unconditional right to defer settlement of
liability for atleast twelve months from the
reporting date. All other liabilities are
classified as non-current.
Deferred tax assets/liabilities are classified as
non-current.
Operating Cycle
Operating cycle is the time between the
acquisition of assets for processing and
realisation in cash or cash equivalents. The
Company has ascertained its operating cycle
as 12 months for the purpose of current or
non-current classification of assets and
liabilities.
2.5 Property, plant and equipment
Property, plant and equipment are stated at
cost, net off recoverable taxes, trade discount
and rebates less accumulated depreciation and
impairment losses, if any. Such cost includes
purchase price and any cost directly
attributable to bringing the assets to its
working conditions for its intended use and
estimated costs of dismantling and removing
the item and restoring the site on which it is
located.
Subsequent costs are included in the asset's
carrying amount or recognized as a separate
asset, as appropriate, only when it is probable
that future economic benefits associated with
the item will flow to the entity and the cost can
be measured reliably.
When parts of an item of property, plant and
equipment have different useful lives, they are
accounted for as separate items (major
components) of property, plant and equipment.
Gains and losses upon disposal of an item of
property, plant and equipment are determined
as the difference between the net disposal
proceeds and the carrying amount of property,
plant and equipment and are recognised in the
statement of profit and loss.
Depreciation on property, plant and equipment
is provided using written down vale method.
Depreciation is provided based on useful life of
the assets as prescribed in schedule ii to the
companies Act, 2013.
The residual values, useful lives and methods
of depreciation of property, plant and
equipment are reviewed at each financial year
end and adjusted prospectively, if appropriate.
2.6 Capital Work In Progress
Cost incurred for property, plant and equipment
that are not ready for their intended use as on
the reporting date, is classified under capital
work- in-progress. The cost of self-constructed
assets includes the cost of materials, Salaries ,
direct labour, any other costs directly
attributable to bringing the assets to the
location and condition necessary for it to be
capable of operating in the manner intended by
management and the borrowing costs
attributable to the acquisition or construction
of qualifying asset.
2.7 Intangible assets
intangible assets that are acquired by the
company are stated at cost of acquisition net
of recoverable taxes, trade discount and
rebates less accumulated
amortization/depletion and impairment loss, if
any. Such cost includes purchase price, and
any cost directly attributable to brining the
asset to its working condition for the intended
use.
Subsequent expenditures are capitalised only
when they increase the future economic
benefits embodied in the specific asset to
which they relate.
Gains and Losses arising from de-recognition
of an intangible assets are recorded in the
statement of profit and loss, and are measured
as the difference between the net disposal
proceeds, if any, and the carrying amount of
respective intangible assets as on the date of
de-recognition.
2.8 Financial 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
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. Purchase and
sale of financial assets are recognised on the
trade date, i.e., the date that the Company
commits to purchase or sell the asset.
Subsequent measurement
/. Financial assets carried at amortised cost
(AC)
A financial asset is measured at amortised
cost if it is held within a business model whose
objective is to hold the asset in order to collect
contractual cash flows and the contractual
terms of the financial asset give rise on
specified dates to cash flows that are solely
payments of principal and interest on the
principal amount outstanding.
ii. Financial assets at fair value through other
comprehensive income (FVTOCI)
A financial asset is measured at FVTOCI if it is
held within a business model whose objective
is achieved by both collecting contractual cash
flows and selling financial assets and the
contractual terms of the financial asset give
rise on specified dates to cash flows that are
solely payments of principal and interest on the
principal amount outstanding.
iii. Financial assets at fair value through profit
or loss (FVTPL)
A financial asset which is not classified in any
of the above categories are measured at
FVTPL.
Investment in subsidiaries
The Company has accounted for its
investment in subsidiary at cost.
Impairment of financial assets
in accordance with ind AS 109, the Company
uses ‘Expected Credit Loss' (ECL) model, for
evaluating impairment of financial assets other
than those measured at fair value through
profit and loss (FVTPL).
For trade receivables, Company applies
'simplified approach' for recognition of
impairment loss allowance on the trade
receivable balances. The application of
simplified approach require the Company to
recognises impairment loss allowance based
on lifetime ECLs at each reporting date, right
from its initial recognition. The Company uses
historical default rates to determine
impairment loss on the portfolio of trade
receivables. At ever/ reporting date these
historical default rates are reviewed and
changes in the forward looking estimates are
analysed.
Financial Liabilities
Initial recognition and measurement
All financial liabilities are recognized at fair
value and in case of loans, net of directly
attributable transaction costs. Fees of
recurring nature are directly recognised in the
Statement of Profit and Loss as finance cost.
Subsequent measurement
Financial liabilities are carried at amortized
cost using the effective interest method. For
trade and other payables maturing within one
year from the balance sheet date, the carrying
amounts approximate fair value due to the
short maturity of these instruments.
Derecognition of financial instruments
A financial asset (or a part of the financial
asset) is derecognized from the Company's
balance sheet when the contractual rights to
the cash flows from the financial asset expire
or it transfers the financial asset and the
transfer qualifies for derecognition under ind
AS 109. A financial liability (or a part of the
financial liability) is derecognized from the
Company's balance sheet when the obligation
under the liability is discharged or cancelled or
expires.
Impairment test of investments in Associate
Companies
The recoverable amount of investment in
Associate companies is based on estimates
and assumptions regarding in particular the
future cash flows associated with the
operations of the investee Company.
Any changes in these assumptions may have a
material impact on the measurement of the
recoverable amount and could result in
imnairment.
2.9 Inventories
inventories consist of raw materials, stores and
spares, work-in-progress and finished goods
are measured at the lower of cost and net
realisable value after providing for
obsolescence.
The cost of ail categories of inventories is
based on the weighted average method. Cost
includes expenditures incurred in acquiring the
inventories, production or conversion costs
and other costs incurred in bringing them to
their existing location and condition, in the
case of finished goods and work-in-progress,
cost includes an appropriate share of
overheads based on normal operating
capacity.
Net realisable value is the estimated selling
price in the ordinary course of business, less
the estimated costs of completion and selling
expenses.
2.10 Cash and cash equivalents
Cash and cash equivalents consist of cash at
banks and on hand, demand deposits and
other short term deposits that are readily
convertible into known amounts of cash, are
subject to insignificant risk of changes in value
and have a maturity of three months or less.
2.11 Impairment of non-financial assets
The carr/ing amounts of the Company's non-
financiai assets, other than inventories and
deferred tax assets are reviewed at each
reporting date to determine whether there is
any indication of impairment, if any such
indication exists, then the asset's recoverable
amount is estimated to determine the extent of
impairment if any.
The recoverable amount of an asset or cash¬
generating unit (as defined below) is the
greater of its value in use and its fair value less
costs to sell, in assessing value in use, the
estimated future cash flows are discounted to
their present value using a pre-tax discount
rate that reflects current market assessments
of the time value of money and the risks
specific to the asset or the cash-generating
unit. For the purpose of impairment testing,
assets are grouped together into the smallest
group of assets that generates cash inflows
from continuing use that are largely
independent of the cash inflows of other
assets or groups of assets (the “cash-
qeneratinq unit").
An impairment loss is recognised in the
statement of profit and loss to the extent, the
carr/ing amount of an asset or its cash¬
generating unit exceeds its estimted
recoverable amount.
The impairment loss recognised in prior
accounting period is reversed if there has been
a change in the estimate of recoverable
amount.
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