2 Summary of Significant Accounting Policies
(a) Basis of Preparation & Presentation
The standalone financial statements are prepared on the accrual basis of accounting and in accordance with the Indian
Accounting Standards (hereinafter referred to as the Ind AS) as prescribed under Section 133 of the Companies Act,
2013 (the Act) (as amended) and other relevant provisions of the Act.
The Financial statements have been prepared as a going concern under the historical cost convention.
The Financial statements are presented in Indian Rupees (“INR”) and all values are rounded to the nearest lakhs, except
otherwise stated as per the requirement of Schedule III.
(b) Classification of Current and Non-Current
The Company presents assets and liabilities in the Balance Sheet based on Current/ Non-Current classification.
An asset is treated as current when it is:
i) Expected to be realized or intended to be sold or consumed in normal operating cycle,
ii) Held primarily for the purpose of trading,
iii) Expected to be realized within twelve months after the reporting period, or
iv) Cash or Cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve
months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
i) It is expected to be settled in normal operating cycle,
ii) It is held primarily for the purpose of trading,
iii) It is due to be settled within twelve months after the reporting period, or
iv) There is no unconditional right to determine the settlement of the liability for at least twelve months after the
reporting period.
The Company classifies all other liabilities as non - current.
(c) Property, plant and equipment.
Property, plant and equipment are stated at cost of acquisition or construction less accumulated depreciation and
impairment losses, if any. The cost comprises of the purchase price (net of GST credit wherever applicable) and any
attributable cost of bringing the property, plant and equipment to its working condition for its intended use.
Subsequent expenditure related to an item of property, plant and equipment are added to its gross book value only if it
increases the future benefits from the existing asset beyond its previously assessed standard of performance.
The Company identifies and determines separate useful life for each major component of property, plant and equipment,
if they have useful life that is materially different from that of the remaining asset.
Items such as Machinery spares is recognized in accordance with Ind AS 16 “Property, Plant and Equipment” when they
meet the definition of property, plant and equipment. Otherwise, such items are classified as inventories.
Property, plant and equipment not ready for the intended use on the date of Balance Sheet are disclosed as “Capital
work-in-progress”. Capital Work-In-Progress includes expenditure during construction period incurred on projects under
implementation treated as pre-operative expenses pending allocation to the assets. These expenses are apportioned to
the respective fixed assets on their completion / commencement of commercial production.
Losses arising from the retirement of, and gains and losses arising from disposal of property, plant and equipment
are measured as the difference between the net disposal proceeds and the carrying amount of the property, plant
and equipment and are recognized in the statement of profit and loss when the property, plant and equipment is
derecognized.
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.
(e) Intangible Assets and Amortization
Intangible assets are valued at cost less amortization and comprise mainly of computer software licenses. Amortization
takes place on a straight line basis over the assets anticipated useful life. The useful life is determined based on the
period over which the asset is expected to be used and generally does not exceed 5 years. The amortization period and
the amortization method for an intangible asset with a finite useful life are reviewed at the end of each reporting period.
Gains or losses arising from 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 derecognized.
(f) Investment in Joint Venture
Investments in joint venture is recognized at cost as per Ind AS 28.
(g) Inventories
Inventories are stated at cost or net realizable value whichever is lower. Cost include purchase price, non-refundable
taxes and delivery and handling cost and all costs incurred in bringing the inventory to its present location and condition.
Cost of raw materials, process chemicals, stores and spares, packing material, and other inventory is determined on
weighted average basis.
Work-in-progress and finished goods stock is valued at cost or net realizable value whichever is lower. Cost of work-in
progress and finished goods comprises direct materials, direct labour and an appropriate proportion of variable and
fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity.
(h) Retirement and other employee benefits
Defined Contribution plan
Provident fund
The Company makes contribution to statutory provident fund in accordance with Employees’ Provident Fund and
Miscellaneous Provisions Act, 1952. The plan is a defined contribution plan and contribution paid or payable is
recognized as an expense in the period in which services are rendered by the employee.
Superannuation fund
Superannuation is a post-employment benefit defined contribution plan under which the Company pays specified
contributions to the insurer. The Company makes specified monthly contributions to the superannuation fund. The
contribution paid or payable is recognized as an expense in the period in which the services are rendered by the
employee.
Defined benefit plans
The Company operates a defined benefit gratuity plan. The cost of providing benefits under the defined benefit plan
is determined on the basis of actuarial valuation using the projected unit credit method. Gratuity fund is administered
through Life Insurance Corporation of India.
Remeasurements, comprising of actuarial gains and losses, excluding amounts included in net interest on the net defined
benefit liability are recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings
through OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent
periods.
Other short term benefits
Expense in respect of other short-term benefits is recognized on the basis of amount paid or payable for the year during
which services are rendered by the employees.
(i) Foreign Currencies Transactions and Translation
The Company’s financial statements are presented in INR, which is also the Company’s Functional Currency.
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the
transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency
closing rates of exchange at the reporting date.
Exchange differences arising on settlement or translation of monetary items are recognised in Statement of Profit and
Loss and costs that are directly attributable to the acquisition assets, are capitalized as cost of assets. Non-monetary
items that are measured in terms of historical cost in a foreign currency are recorded using the exchange rates at the
date of the transaction. Exchange differences arising out of these transactions are charged to the Statement of Profit and
Loss.In case of an asset, expense or income where a non-monetary advance is paid/received, the date of transaction is
the date on which the advance was initially recognised.
(j) Derivatives
Derivatives are taken as the hedging instrument by the Company.
For derivatives taken against underlying asset/liability or that are used to hedge forecast transactions, the Company
generally designates only the change in fair value of the forward contract related to the spot component and aligned
forward element on reporting date.
Gains or losses relating to the effective portion of the change in the spot component and aligned forward element of the
forward contracts are recognized in Statement of profit and loss.
(k) Taxes on Income
Income Tax
Income tax expense represents the sum of current tax and deferred tax and includes any adjustments related to past
periods in current and /or deferred tax adjustments that may become necessary due to certain developments or reviews
during the relevant year. Current income tax is based on the taxable income and calculated using the applicable tax
rates.
Deferred Tax
Deferred tax is provided using the Balance sheet method on temporary differences between the tax bases of assets and
liabilities and their carrying amounts for the financial reporting purposes at the reporting date. The carrying amount of
deferred tax assets is reviewed at the end of reporting date and reduced to the extent that it is no longer probable that
sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is
realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the
reporting date. Current and deferred tax is recognised in Statement of profit or loss except to the extent that it relates
to items recognised in other Comprehensive income or directly in Equity. In this case the tax is also recognised in other
Comprehensive income or directly in Equity, respectively.
Deferred tax assets and liabilities are offset if a legally enforceable right exists to set off current tax assets against current
tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
(l) Revenue Recognition
Revenue from contracts with customers are recognised as per Ind AS 115 when control of the goods or services are
transferred to the customers at the fair value of consideration received or receivable. The Company recognizes revenue
when the same can be reliably measured, it is probable that future economic benefits will flow to the Company and
specific criteria have been met for each of the Company’s activities as described below. Revenue is measured at
the value of the consideration received or receivable, taking into account contractually defined terms of payment and
excluding taxes or duties collected on behalf of the government.
Amounts disclosed as revenue are exclusive of GST and net of returns, trade allowances, rebates, discounts, and
amounts collected on behalf of third parties.
i) Sale of goods
Sales are recognized when substantial risk and rewards of ownership are transferred to customer, In case of
domestic customers, sales generally take place when the material is shipped to the customer or delivery is handed
over to the transporter. In case of export customers, sales generally take place when goods are shipped on-board
based on bill of lading.
ii) Interest & Dividend Income
Interest income is recognised on time proportion basis taking into account the amount invested and rate of
interest. For all financial instruments measured at amortised cost, interest income is recorded using the Effective
interest rate method to the net carrying amount of the financial assets. Dividend income is recognized when the
Company’s right to receive dividend is established by the Balance Sheet date.
iii) Revenue in respect of other claims in recognised on accrual basis to the extent the ultimate realisation is reasonably
certain.
(m) Leases
The Company recognizes a right-of-use asset (“ROU”) and a corresponding lease liability for all lease arrangements
in which it is a lessee, except for leases with a term of twelve months or less (short-term leases), low value leases and
leases having termination clause of less than 2 months. For these leases, the Company recognizes the lease payments
as an operating expense on a straight-line basis over the term of the lease.
Lease payments to be made under reasonably certain extension option are also included in the measurement of the
liability. The lease payments are discounted using the lessee’s incremental borrowing rate, being the rate that lessee
would have to pay to borrow the fund necessary to obtain an asset of similar value to the right-of-use asset in a similar
economic environment with similar term, security and conditions.
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