2. SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Preparation
These financial statements have been prepared in accordance with
the Generally Accepted Accounting Principles in India (‘Indian GAAP’)
to comply with the Accounting Standards specified under Section 133
of the Companies Act. 2013. as applicable. The financial statements
have been prepared under the historical cost convention on accrual
basis, except for certain financial instruments which are measured at
fair value.
b. Use of Estimates
The preparation of financial statements requires the management
of the Company to make estimates and assumptions that affect the
reported balances of assets and liabilities and disclosures relating to
the contingent liabilities as at the date of the financial statements and
reported amounts of income and expense during the year. Examples
of such estimates include provisions for doubtful receivables, provision
for income taxes, the useful lives of depreciable Property. Plant and
Equipment and provision for impairment. Future results could differ
due to changes in these estimates and the difference between the
actual result and the estimates are recognised in the period in which
the results are known / materialise.
c. Current-non-current classification
"An asset is classified as current when it satisfies any of the following criteria:
a. it is expected to be realised in. or is intended for sale or con¬
sumption in. the company’s normal operating cycle;
b. it is held primarily for the purposes of being traded;
c. it is expected to be realised within 12 months after the reporting
date;
d. it is cash or cash equivalent unless it is restricted from being
exchanged or used to settle a liability for at least 12 months after
the reporting date; or
Current assets include the current portion of non-current financial
assets. All other assets are classified as non-current."
“A liability is classified as current when it satisfies any of the fol¬
lowing criteria:
a. it is expected to be settled in the company's normal operating
cycle:
b. it is held primarily for the purposes of being traded;
c. it is due to be settled within 12 months after the reporting date: or
d. the company does not have an unconditional right to defer settle¬
ment of the liability for at least 12 months after the reporting date:
Current liabilities include the current portion of non-current financial
liabilities. All other liabilities are classified as non-current."
d. Property, Plant and Equipment
Property, plant and equipment (PPE) are carried at the cost of acqui¬
sition or construction less accumulated depreciation. The cost of PPE
comprises its purchase price net of any trade discounts and rebates,
any import duties and other taxes (other than those subsequently
recoverable from the tax authorities), any directly attributable expend¬
iture on making the asset ready for its intended use. other incidental
expenses and interest on borrowings attributable to acquisition of
qualifying PPE up to the date it is ready for its intended use.
e. Depreciation and amortization
In respect of Property. Plant and Equipment (other than freehold land
and capital work-in-progress) acquired during the year, depreciation/
amortisation is provided on 'Written Down Value Method' in accord¬
ance with the rates and other conditions laid down in Schedule- II of
the Companies Act. 2013. Technology Assets (intangibles) are amor¬
tised over a period of five years on a straight- line basis.
The calculation of deprecation is made on annual basis including in
case of additions or sale of property, plant & equipment during the
year. Following are the useful lives of certain assets which are taken
into consideration for the purpose of charging depreciation: -
f. Impairment of assets
At each balance sheet date, the management reviews the carrying
amounts of its assets included in each cash generating unit to deter¬
mine whether there is any indication that those assets were impaired.
If any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of impairment. Recoverable
amount is the higher of an asset's net selling price and value in use. In
assessing value in use. the estimated future cash flows expected from
the continuing use of the asset and from its disposal are discounted to
their present value using a pre-tax discount rate that reflects the cur¬
rent market assessments of time value of money and the risks specific
to the asset. Reversal of impairment loss is recognised as income in
the statement of profit and loss.
g. Investment
Long-term investments and current maturities of long-term invest¬
ments are stated at cost, less provision for other than temporary
diminution in value. Current investments, except for current maturities
of long-term investments, comprising investments in mutual funds,
government securities and bonds are stated at the lower of cost and
fair value.
h. Inventories
Inventories are stated at the lower of cost of net realisable value. Net
realisable value means the estimated selling price in the ordinary
course of business less the estimated costs of completion and the
estimated costs necessary to make the sale.
I. Cash and cash equivalents
The Company considers all short term, highly liquid investments that
are readily convertible into known amounts of cash and which are
subject to an insignificant risk of changes in value, to be cash equiva¬
lents.
j. Revenue recognition
Revenue from sale of goods is recognised at the time of delivery of
goods. Service revenue is recognised after performance of the ser¬
vice contract is completed. Recognition of revenue is based upon the
condition that there is no significant uncertainty exist regarding the
amount of consideration that will be derived from sale or services.
Revenue is reported net of trade discounts, if any.
Dividend is recorded when the right to receive payment is established.
Interest income is recognised on time proportion basis taking into
account the amount outstanding and the rate applicable.
k. Employee Benefits
Post-employment benefit plans
Short term benefits such as salary, bonus, leave salary and other
benefits are accounted on accrual basis. Defined contribution plans
includes company's contributions towards state plans for the employ¬
ees. such as EPF. ESI etc. where contributions made towards such
plans are charged to revenue as and when they become due to the
company.
Defined benefit plans includes gratuity, liability of which is provided in
the books of account on the basis of actuarial valuation made at the
end of year.
l. Borrowing Cost
As per AS 16. borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets, which are assets that
necessarily take a substantial period of time to get ready for their
intended use or sale, are added to the cost of those assets, until such
time as the assets are substantially ready for their intended use or
sale.
m. Foreign currency transactions
Income and expense in foreign currencies are converted at exchange
rates prevailing on the date of the transaction. Foreign currency mone¬
tary assets and liabilities other than net investments in non-integral
foreign operations are translated at the exchange rate prevailing on
the balance sheet date and exchange gains and losses are recognised
in the statement of profit and loss. Exchange difference arising on a
monetary item that, in substance, forms part of an enterprise's net
investments in a non-integral foreign operation are accumulated in a
foreign currency translation reserve.
n. Taxation
Current tax comprises taxes on income and measured at the amount
expected to be paid to the tax authorities, using the applicable tax
rates.
Deferred tax expense or benefit is recognised on timing differences
being the difference between taxable income and accounting income
that originate in one period and is likely to reverse in one or more
subsequent periods. Deferred tax assets and liabilities are measured
using the tax rates and tax laws that have been enacted or substan¬
tively enacted by the balance sheet date.
Advance taxes and provisions for current income taxes are presented
in the balance sheet after off-setting advance tax paid and income tax
provision arising in the same tax jurisdiction for relevant tax paying
units and where the Company is able to and intends to settle the as¬
set and liability on a net basis.
The Company offsets deferred tax assets and deferred tax liabilities if
it has a legally enforceable right and these relate to taxes on income
levied by the same governing taxation laws.
o. Earnings per Share
Basic Earnings per Share is computed by dividing the net profit after
tax by weighted average number of equity shares outstanding during
the year. Diluted Earnings per Share is computed by dividing net profit
after tax by the weighted average number of equity shares considered
for deriving basic earnings per share and also the weighted average
number of equity shares that could have been issued upon conversion
of all dilutive potential equity shares.
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