2.3 Material Accounting Policies
The material accounting policies adopted in preparation of standalone financial statements has been disclosed as below. All
accounting policies has been consistently applied to all the period presented in the standalone financial statements unless
otherwise stated.
a. Revenue from contract with customer
The Company derives revenue principally from sale of Plywood, Laminates, MDF, Particle boards, Decorative Veneers and
Flush Doors. The Company recognizes revenue when control of the goods are transferred to the customers and when it
satisfies a performance obligation in accordance with the provisions of contract with the customer at an amount that
reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. Sales
are recognised when control of the products has transferred. Once the products are dispatched to the dealer, the dealer
has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect
the dealer's acceptance of the products. Delivery occurs when the products have been shipped to the specific location,
the risk of obsolescence and loss have been transferred to the dealer, and either the dealer has accepted the products in
accordance with the sales contract, the acceptance provisions have lapsed, or the Company has objective evidence that
all criteria for acceptance have been satisfied.
The Company considers the terms of the contract in determining the transaction price.
Revenue is measured based on the transaction price, which is the consideration, adjusted for discounts, if any. Revenue
excludes taxes collected from customers. Revenue from these sales is recognised based on the price specified in the
contract, net of the estimated volume discounts. Revenue is only recognised to the extent that it is highly probable that a
significant reversal will not occur.
For incentives offered to customers/dealers, the Company makes estimates related to customer performance and sales
volume to determine the total amounts earned and to be recorded as deductions. The estimate is made in such a manner,
which ensures that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not
occur. The actual amounts may differ from these estimates and are accounted for prospectively. No element of significant
financing is deemed present as the sales are made with a credit term, which is consistent with market practice.
In case of related party transactions where related party meets the definition of customer (i.e. a party that has contracted
with the Company to obtain goods or services that are an output of the Company's ordinary activity in exchange for
consideration) and the transactions are within the scope of the standard then the revenue is recognised based on the
principles of Ind AS 115.
Export incentives and subsidies are recognized when there is reasonable assurance that the Company will comply with
the conditions and the incentive will be received.
A contract asset is initially recognised for revenue earned from installation services because the receipt of consideration
is conditional on successful completion of the installation. Upon completion of the installation and acceptance by the
customer, the amount recognised as contract assets is reclassified to trade receivables.
Contract assets are subject to impairment assessment. Refer to accounting policies on impairment of financial assets.
A receivable is recognised if an amount of consideration that is unconditional (i.e., only the passage of time is required
before payment of the consideration is due). Refer to accounting policies of financial assets.
A contract liability is recognised if a payment is received or a payment is due (whichever is earlier) from a customer before
the Company transfers the related goods or services. Contract liabilities are recognised as revenue when the Company
performs under the contract (i.e., transfers control of the related goods or services to the customer).
Export benefits are accounted on recognition of export sales. Revenue relating to insurance claims and interest on delated
or overdue payments from trade receivables is recognized when no significant uncertainty as to measurability or collection
exists.
b. Government grants
Government grants related to income under State Investment Promotion Scheme linked with GST payment, are recognised
in the Standalone Statement of Profit and Loss when there is reasonable assurance that the grant will be received, and all
attached conditions will be complied with.
c. Taxes
Tax expense is the aggregate amount included in determination of profit or loss for the period in respect of current tax &
deferred tax.
Current Tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted,
at the reporting date in the countries where the Company operates and generates taxable income.
Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other
comprehensive income or in equity). Current tax items are recognised in correlation to the underlying transaction either in
OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in
which applicable tax regulations are subject to interpretation and considers whether it is probable that a taxation authority
will accept an uncertain tax treatment. The company reflects the effect of uncertainty for each uncertain tax treatment by
using either most likely method or expected value method, depending on which method predicts better resolution of the
treatment
Deferred Tax
Deferred tax is provided on temporary differences between the tax bases of assets and liabilities and their carrying amounts
for financial reporting purposes at the reporting date. Deferred tax assets are recognised for all deductible temporary
differences to the extent that it is probable that taxable profits will be available against which those deductible temporary
differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each 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 relating to items recognised outside profit or loss is recognised outside profit or loss (either in other
comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either
in OCI or directly in equity.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is
realised, or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at
the reporting date.
d. Property, Plant and Equipment
Property, Plant and Equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if
any. Such cost includes the cost of replacing part of the plant and equipment and borrowing costs for long-term construction
projects if the recognition criteria are 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.
Expenditure directly attributable to expansion projects are capitalised. Administrative, general overheads and other
indirect expenditure (including borrowing costs) incurred during the project period which are not related to the project nor
are incidental thereto, are charged to Statement of Profit and Loss.
Depreciation on property, plant and equipment is provided under Straight Line method at the rates determined based
on useful lives of the respective assets and residual values which is in line with those indicated in Schedule II of The
Companies Act, 2013.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at the end of
each financial year and adjusted prospectively, if appropriate.
Assets in the course of construction for production or/and supply of goods or services or administrative purposes, or for
purposes not yet determined, which are not ready for intended use as on the date of Balance Sheet are disclosed as Capital
work-in-progress and are carried at cost, less any recognised impairment loss, if any.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal
or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition
of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is
included in the statement of profit and loss when the asset is derecognised. 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.
The Company, based on technical assessment made by technical expert and management estimate, depreciates certain
items of building, plant and equipment and furniture and fixtures over estimated useful lives which are different from the
useful life prescribed in Schedule II to the Companies Act, 2013. The management believes that these estimated useful
lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.
e. Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible
assets are carried at cost less any accumulated amortisation and accumulated loss, if any. The Company has intangible
assets with finite useful lives.
Intangible assets with finite lives 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. Changes in the expected
useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered
to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The
amortisation expense on intangible assets with finite lives is recognised in the statement of profit and loss unless such
expenditure forms part of carrying value of another asset.
An intangible asset is derecognised upon disposal (i.e., at the date the recipient obtains control) or when no future economic
benefits are expected from its use or disposal. Any gain or loss arising upon derecognition of the asset (calculated as the
difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit
and loss. when the asset is derecognised.
f. Borrowing Costs
Borrowing cost includes interest expense as per effective interest rate (EIR) and exchange differences arising from foreign
currency borrowings to the extent they are regarded as an adjustment to the interest cost.
Borrowing costs directly relating to the acquisition, construction or production of a qualifying capital project under
construction are capitalised and added to the project cost during construction until such time that the assets are
substantially ready for their intended use i.e. when they are capable of commercial production. Borrowing costs relating
to the construction phase of a service concession arrangement is capitalised as part of the cost of the intangible asset.
Where funds are borrowed specifically to finance a qualifying capital project, the amount capitalised represents the actual
borrowing costs incurred. Where surplus funds are available out of money borrowed specifically to finance a qualifying
capital project, the income generated from such short-term investments is deducted from the total capitalized borrowing
cost. If any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing
then becomes part of general borrowing. Where the funds used to finance a project form part of general borrowings,
the amount capitalised is calculated using a weighted average of rates applicable to relevant general borrowings of the
Company during the year.
All other borrowing costs are recognised in the statement of profit and loss in the year in which they are incurred.
EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial
liability or a shorter period, where appropriate, to the amortised cost of a financial liability. When calculating the effective
interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial
instrument (for example, prepayment, extension, call and similar options).
g. Leases
The Company as lessee
The Company assesses whether a contract is or contains a lease, at inception of the contract. The Company recognises a
right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except
for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets. For these
leases, the Company recognises the lease payments on a straight-line basis over the lease term, unless another systematic
basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.
Contingent and variable rentals are recognized as expense in the periods in which they are incurred.
Lease Liabilities
The lease payments that are not paid at the commencement date are discounted using the interest rate implicit in the
lease. If that rate cannot be readily determined, which is generally the case for leases in the Company, the lessee's
incremental borrowing rate is used.
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.
Right of Use (ROU) Assets
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. They are subsequently measured
at cost less accumulated depreciation and impairment losses.
ROU assets are depreciated over the shorter period of the lease term and useful life of the underlying asset. If the Company
is reasonably certain to exercise a purchase option, the ROU asset is depreciated over the underlying asset's useful life.
The depreciation starts at the commencement date of the lease.
The ROU assets are not presented as a separate line in the Balance Sheet but presented below similar owned assets as a
separate line in the PPE note under “Notes forming part of the Financial Statement”.
h. Inventories
Inventories are valued at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and conditions are accounted for as follows:
(i) Raw materials, Stores and Spares: These are valued at lower of cost and net realisable value. However, material and
other items held for use in production of inventories are not written down below cost if the finished products in which
they will be incorporated are expected to be sold at or above cost. Cost is determined on moving average basis.
(ii) Finished goods and work in progress: These are valued at lower of cost and net realisable value. Cost includes cost
of direct materials and labour and a proportion of manufacturing overheads based on the normal operating capacity.
Cost is determined on weighted average basis.
(iii) Traded goods: These are valued at lower of cost and net realisable value. Cost includes cost of purchase and other
costs incurred in bringing the inventories to their present location and condition. Cost is determined on moving
average basis.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion
and the estimated costs necessary to make the sale.
i. Impairment of Non-Financial Assets
The Company assesses at each reporting date, whether there is an indication that an asset may be impaired. If any
indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset's
recoverable amount. Non-Financial Assets that suffered impairment are reviewed for possible reversal of the impairment
at the end of each reporting period.
Impairment losses of continuing operations, including impairment on inventories, are recognised in the statement of profit
and loss, except for properties previously revalued with the revaluation surplus taken to OCI. For such properties, the
impairment is recognised in OCI up to the amount of any previous revaluation surplus.
The Company assesses whether climate risks, including physical risks and transition risks could have a significant impact.
If so, these risks are included in the cash-flow forecasts in assessing value-in-use amounts.
j. Retirement and other Employee Benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service
is provided. A liability is recognised for the amount expected to be paid e.g., under short-term cash bonus, if the Company
has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and
the amount of obligation can be estimated reliably.
Retirement benefit in the form of Provident Fund is a defined contribution scheme and the Company recognizes contribution
payable to the provident fund scheme as expenditure when an employee renders the related service.
Gratuity liability, being a defined benefit obligation, is provided for on the basis of an actuarial valuation made at the end
of each financial year by a qualified actuary using projected unit credit method.
Re-measurements, comprising of actuarial gains and losses, excluding amounts included in net interest on the net defined
benefit liability (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately
in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they
occur. Re-measurements are not reclassified to profit or loss in subsequent periods.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises
the following changes in the net defined benefit obligation as an expense in the standalone statement of profit and loss:
• Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine
settlements; and
• Net interest expense or income
The Company treats accumulated leaves expected to be carried forward beyond twelve months as long term employee
benefit for measurement purposes. Such long term compensated absences are provided for based on the actuarial valuation
using the projected unit credit method at the end of each financial year. The Company does not have an unconditional right
to defer the settlement for the period beyond 12 months and accordingly entire leave liability is shown as current liability.
k. Financial instruments
Financial Assets
Initial recognition and derecognition
All financial assets are recognised on trade date when the purchase of a financial asset is under a contract whose term
requires delivery of the financial asset within the timeframe established by the market concerned. Financial assets are
initially measured at fair value, plus transaction costs, except for those financial assets which are classified at initial
recognition, and subsequently measured at amortised cost, fair value through other comprehensive income (OCI), and fair
value through profit or loss.
The Company derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or
when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.
Classification of financial assets
Financial assets are classified as ‘equity instrument' if it is a non-derivative and meets the definition of ‘equity' for the issuer
(under Ind AS 32 Financial Instruments: Presentation). All other non-derivative financial assets are ‘debt instruments'.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give
rise to cash flows that are ‘solely payments of principal and interest (SPPI)' on the principal amount outstanding. This
assessment is referred to as the SPPI test and is performed at an instrument level. Financial assets with cash flows that
are not SPPI are classified and measured at fair value through profit or loss, irrespective of the business model.
(i) Subsequent Measurement
(a) Debt Instruments at Amortised Cost
Such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method.
This category generally applies to trade receivables, cash and bank balances, loans and other financial assets of
the company.
(b) Equity Instruments at Fair Value through Other Comprehensive Income (FVTOCI)
If the Company decides to classify an equity instrument as at Fair Value through Other Comprehensive Income
(“FVTOCI”), then all fair value changes on the instrument, excluding dividends, are recognized in the OCI. There
is no recycling of the amounts from OCI to statement of profit and loss, even on sale of investment. However, the
Company may transfer the cumulative gain or loss within equity.
(c) Equity instruments at fair value through profit or loss (FVTPL)
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized
in the statement of profit and loss.
(d) Equity Investments in subsidiaries
Equity investments in Subsidiaries are carried at Cost, in accordance with option available in Ind AS 27 “Separate
Financial Statements”. Investment carried at cost are subject to impairment test as per Ind AS 36 when indication
of potential impairment exists.
Impairment of Financial Assets-
Impairment Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each
reporting period. Ind AS 109 requires expected credit losses to be measured through a loss allowance.
ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the
cash flows that the Company expects to receive, discounted at an approximation of the original effective interest rate. The
expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral
to the contractual terms.
For trade receivables and contract assets, the Company applies a simplified approach in calculating ECLs. Therefore, the
Company does not track changes in credit risk but instead recognises a loss allowance based on lifetime ECLs at each
reporting date. The Company has established a provision matrix that is based on its historical credit loss experience,
adjusted for forward-looking factors specific to the debtors and the economic environment.
A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.
Financial liabilities
Initial recognition and derecognition
Financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument.
Financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition
of financial liabilities (other than financial liabilities at fair value through profit or loss) are deducted from the fair value
measured on initial recognition of financial liability. They are measured at amortised cost using the effective interest
method.
The Company derecognises financial liabilities when, and only when, the Company's obligations are discharged, cancelled,
or have expired.
For disclosure related to Fair value measurement of financial instruments Refer Note No.39
For buyers credit, the Company derecognises its original liability toward the supplier and recognise a new liability toward
the bank which is classified as bank borrowing, depending on factors such as whether the Company (i) has obligation
toward bank, (ii) is getting extended credit period such that obligation is no longer part of its working capital cycle, (iii)
is paying interest directly or indirectly, (iv) has provided guarantee or security, and/ or (v) is recognized as borrower in the
bank books.
In cases, where the Company has derecognised its original liability toward the supplier and recognise a new liability
toward the bank, the Company has assessed that the bank is acting as its agent in making payment to the supplier.
Accordingly, the Company presents operating cash outflow and financing cash inflow, when bank made payment to the
supplier. The payment made by the Company to the bank toward interest, if any, as well as on settlement is presented as
financing cash outflow.
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse
the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the
terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for
transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured
at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount
recognised less, when appropriate, the cumulative amount of income recognised in accordance with the principles of Ind
AS 115.
Offsetting of Financial Instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently
enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the
assets and settle the liabilities simultaneously.
l. Fair Value Measurement
The Company measures financial instruments, such as, quoted investments at fair value at each balance sheet date.
For assets and liabilities that are recognised in the financial statements at fair value on recurring basis the company
determines whenever transfers have occurred between levels in the hierarchy by reassessing categorisation at the end of
each reporting period and discloses the same.
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, regardless of whether that price is directly observable or estimated using
another valuation technique.
The Company has an established control framework with respect to the measurement of fair values. In estimating the
fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market
participants would take those characteristics into account when pricing the asset or liability at the measurement date.
The management has overall responsibility for overseeing all significant fair value measurements and it regularly reviews
significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing
services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties
to support the conclusion that these valuations meet the requirements of Ind AS, including the level in the fair value
hierarchy in which the valuations should be classified. Fair value for measurement and/or disclosure purposes in the
financial statement is determined on such a basis, except for leasing transactions and measurements that have some
similarities to fair value but are not fair value, such as net realisable value in Inventories or value in use in Impairment of
Assets.
The estimated fair value of the Company's financial instruments is based on market prices and valuation techniques.
Valuations are made with the objective to include relevant factors that market participants would consider in setting a
price, and to apply accepted economic and financial methodologies for the pricing of financial instruments. References for
less active markets are carefully reviewed to establish relevant and comparable data.
The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged
in a current transaction between willing parties, other than in forced or liquidation sale.
m. Cash and cash equivalents
The Company considers all highly liquid investments, which are readily convertible into known amounts of cash that are
subject to an insignificant risk of change in value, and have original maturities of less than 3 months from the date of such
deposits, to be cash equivalents. Cash and cash equivalents consist of balances with banks which are unrestricted for
withdrawal and usage.
n. Earnings per equity share (EPS)
Basic earnings per share is computed by dividing profit or loss attributable to equity shareholders of the Company 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.
o. Equity share capital
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.
p. Earnings per share
The Company presents basic and diluted earnings per share (“EPS”) data for its equity shares. Basic EPS is calculated by
dividing the profit or loss attributable to equity shareholders of the Company by the weighted average number of equity
shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to equity
shareholders and the weighted average number of equity shares outstanding for the effects of all dilutive potential equity
shares.
q. Operating Segment
The Company's operating business segments are organized and managed separately according to the nature of products
and services provided, with each segment representing a strategic business unit that offers different products and serves
different markets. All operating segments operating results are reviewed regularly by the Chief Operating Decision Maker
(CODM) (Managing Director & CEO) to make decisions about resources to be allocated to the segments and assess their
performance. The analysis of geographical segments is based on the areas in which major operating divisions of the
Company operate.
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