I. Corporate Information
i) Choksi Laboratories Limited (the Company), incorporated on 29/01/1993 under the Companies Act, 1956 provides contract testing and analytical services. The Company analyses, for its clients, or as a regulatory requirement pharmaceuticals, food and agricultural products, construction materials, chemicals, Calibration and environment monitoring services.
The company is a public limited company incorporated and domiciled in India. The address of its registered and corporate office is Survey No 9/1, Near Tulsiyana Industrial Park, Gram Kumedi, Indore - 452010, Madhya Pradesh, India. The Company’s equity shares are listed at BSE. The Company is classified under “Medium” category, Major Activity “Services” since 21/06/2021 vide MSME UDYAM Registration No.UDHYAM-MP-23-0018547.
ii) The company is certified by BIS (Bureau of Indian Standards), FDA (Food and Drugs control Administration), U.S. Food & Drug administer. MOEF (Ministry of Environment & Forests), State Pollution Control Boards, Department of Health (Madhya Pradesh), Agricultural Marketing Advisor (AGMARK - Government of India), FSSAI (Food Safety and Standard Authority of India), APEDA and several other regulatory bodies.
iii. ) The company has also been accredited by NABL (National Accreditation Board for testing & calibration Laboratories). This is
internationally recognized through ILAC (International Laboratories Accreditation Committee) and is based on ISO/IEC 17025 guidelines.
iv. ) Since its incorporation, the company has led the industry with innovative business practices. The company is first in Central
India:
i. To develop Vendor Assessment program in the Edible Oil extraction industry,
ii. To start water and soil analysis, and
iii. To start instrument calibration services for organizations that were targeting ISO certification or had already achieved it.
II. Basis Of Preparation Of Financial Statements
A. Statement of Compliance:
The financial statements comply, in all material aspects, with Indian Accounting Standards ('Ind AS') notified under Section 133 ofthe Companies Act, 2013 (“Act”) read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 (as amended) and other relevant provisions of the Act to the extent applicable and applicable guidelines issued by the Securities and Exchange Board of India ('SEBI').
The financial statements have been prepared by the Company as a going concern on the basis of relevant Ind AS that are effective at the Company’s annual reporting date, 31 March 2024. These financial statements were authorized for issuance by the Company’s Board of Directors on 29th May 2024.
B. Basis Of Measurement
The financial statements have been prepared on historical cost basis, except for the following material items in the balance sheet:
• financial assets are measured either at fair value or at amortized cost depending on the classification;
• Derivative financial instruments
• Defined benefit plans- plan assets measured at fair value less cost to sell.
• Right-to-use the assets are recognized at the present value of lease payments that are not paid at that date. This amount is adjusted for any lease payments made at or before the commencement date, lease incentives received and initial direct costs, incurred, if any.
• Historical cost is generally based on the fair value ofthe consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an ordinary transaction between market participants at the measurement date.
C. Functional and presentation currency:
The financial statements are presented in Lakhs of Indian Rupees (‘INR’ or ‘Rupees’ or ‘?’) which is the functional currency for the Company and all values are rounded to the nearest lakhs, except when otherwise stated.
D. Use of Accounting estimates and Professional judgments:
The preparation of the financial statements in conformity with the Ind AS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities and disclosures as at date of the financial statements and the reported amounts of the revenues and expenses for the years presented. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates under different assumptions and conditions. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
III. MATERIAL ACCOUNTING POLICIES INFORMATION:
A. Property, plant and equipment (PPE)
i) Recognition and measurement
Items of property, plant and equipment are stated at cost of acquisition, net of recoverable taxes, trade discount and rebates less accumulated depreciation/ amortization (other than land) and impairment losses. Such costs includes purchase price, borrowing cost, taxes (other than those subsequently recoverable from tax authorities), duties, freight and any cost directly attributable to bringing the assets to its working condition for its intended use net of charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the assets.
ii) Subsequent expenditure
Subsequent expenditure incurred such as repairs and maintenance, are normally charged to the statement of profit and loss in the period in which the costs are incurred. Major inspection and overhauling expenditure is capitalized, if the recognition criteria are met. The policy of the company is that subsequent costs are included in the asset’s carrying amount or recognized as separate asset, as appropriate, only when it is probable that the future economic benefits associated with the items will flow to the entity and the cost of the same can be measured reliably.
iii) Replacement of significant part of assets
When significant parts of property, plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied.
iv) Disposal of Property, Plant or Equipment
Gains and losses on disposal of an item of property, plant and equipments are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognized net within other income/other expenses in statement ofprofit and loss.
An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition ofthe 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 derecognized.
v) Expenses incurred relating to a project; net of income earned during the project development stage prior to its intended use, are considered as pre-operative expenses and disclosed under Capital Work- in-Progress.
vi) Provision of decommissioning & restoration & other liabilities are not made.
vii) Property plant and equipment has been shown at gross value in the books of accounts since depreciation has been separately credited to Depreciation Reserve account and in the financial statement; Property, plant and equipment shown at Gross Value along with accumulated depreciation and Net Written Down Value for the current financial year in comparison with previous financial year.
viii) Government Grants and subsidies: The Company recognises government grants only when there is reasonable assurance that the conditions attached to them will be complied with, and the grants will be received.
The Government grants in the form of subsidy are presented in the balance sheet by deducting it from carrying amount of the eligible assets on a pro rata basis. The grant is recognized in the Statement of Profit and loss over the life of a depreciable asset as a reduced depreciation expense.
ix) Depreciation:
Depreciation on Property, plant & equipment is provided on the straight-line method based on useful life of the assets as prescribed in Part C of Schedule II to the Companies Act, 2013 or based on estimated useful lives of the assets determined by the management as per historical practices. Each part of an item of Property, Plant & Equipment with a cost that is significant in relation to total cost of the Machine is depreciated separately, if its useful life is different than the life of the Machine.
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.
Depreciation is not recorded on capital work-in-progress until construction and installation is complete and the asset is ready for its intended use.
B. Revenue Recognition
The Company earns revenue primarily from providing contract testing and analytical services. Revenue is recognized applying the 5 step approach.
a. Identifying contract with customer as a first step.
b. Having identified a contract, the entity next identifies the performance obligations with that contract. A performance obligation is a promise in a contract with a customer to transfer either a good or service or a bundle of goods or services that are distinct.
c. Third step in the model is to determine the transaction price and then as fourth step, such transaction price needs to be allocated to the performance obligation identified in step 2.
d. In accordance with this Standard, entity is required to recognize revenue when the entity satisfies the performance obligation.
Revenue is recognized upon transfer of control of promised services to customers in an amount that reflects the consideration which the Company expects to receive in exchange for those services. Revenue is measured based on the transaction price, which is the consideration, adjusted for volume discounts, service level credits, performance bonuses, price concessions and incentives, if any, as specified in the contract with the customer. Revenue also excludes taxes collected from customers. Invoices are payable within contractually agreed credit period.
Dividend income is recorded when the right to receive payment is established. Interest income is recognized using the effective interest method.
C. FINANCIAL INSTRUMENTS
i. ) Derivative financial instruments and Hedge Accounting
The Company uses various derivative financial instruments such as currency swaps, forwards & options to mitigate the risk of changes in exchange rates. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are also subsequently measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. Any gains or losses arising from changes in the fair value of derivatives are taken directly to Statement of Profit and Loss, except for the effective portion of cash flow hedges which is recognised in Other Comprehensive Income and later to Statement of Profit and Loss when the hedged item affects profit or loss or treated as basis adjustment if a hedged forecast transaction subsequently results in the recognition of a non-financial assets or non-financial liability.
ii. ) Hedges that meet the criteria for hedge accounting are accounted for as follows
Cash Flow Hedge
The Company designates derivative contracts or non-derivative financial assets / liabilities as hedging instruments to mitigate the risk of movement in interest rates and foreign exchange rates for foreign exchange exposure on highly probable future cash flows attributable to a recognised asset or liability or forecast cash transactions. When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognized in the cash flow hedging reserve being part of other comprehensive income. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in the Statement of Profit and Loss. If the hedging relationship no longer meets the criteria for hedge accounting, then hedge accounting is discontinued prospectively. If the hedging instrument expires or is sold, terminated or exercised, the cumulative gain or loss on the hedging instrument recognized in cash flow hedging reserve till the period the hedge was effective remains in cash flow hedging reserve until the underlying transaction occurs. The cumulative gain or loss previously recognised in the cash flow hedging reserve is transferred to the Statement of Profit and Loss upon the occurrence of the underlying transaction. If the forecasted transaction is no longer expected to occur, then the amount accumulated in cash flow hedging reserve is reclassified in the Statement of Profit and Loss.
Fair Value Hedge
The Company designates derivative contracts or non-derivative financial assets / liabilities as hedging instruments to mitigate the risk of change in fair value of hedged item due to movement in interest rates, foreign exchange rates and commodity prices. Changes in the fair value of hedging instruments and hedged items that are designated and qualify as fair value hedges are recorded in the Statement of Profit and Loss. If the hedging relationship no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortised to Statement of Profit and Loss over the period of maturity.
D. INVENTORIES
a. Items of inventories are measured at lower of cost or realizable value, except obsolescence/ defective products which are valued at net realizable value. Cost of inventories comprises of cost of purchase and other costs including other expenses incurred in bringing them to their respective present location and condition.
b. The comparison of cost and the net realizable value is made on an item-by-item basis.
c. The cost formulas used are on FIFO basis.
IV. OTHER ACCOUNTING POLICIES:A. Current and Non -current classification:
All assets and liabilities have been classified as current or non-current as per the Company’s normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013 and Ind AS 1, Presentation of Financial Statements.
Assets:
An asset is classified as current when it satisfies any of the following criteria:
a. It is expected to be realized in, or is intended for sale or consumption within the Company’s normal operating cycle;
b. It is held primarily for the purpose of being traded,
c. It is expected to be realized within twelve months after the reporting date; or
d. It is cash or a cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting date.
Liabilities:
A liability is classified as current when it satisfies any of the following criteria:
a. It is expected to be settled in the Company’s normal operating cycle;
b. It is held primarily for the purpose of being traded;
c. It is due to be settled within twelve months after the reporting date; or
d. The Company does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
Based on the nature of services rendered to customers and time elapsed between deployment of resources and the realization in cash and cash equivalents of the consideration for such services rendered, the Company has considered an operating cycle of 12 months.
Current assets and liabilities include the current portion of non-current assets and liabilities respectively. All other assets and liabilities are classified as non-current. Deferred tax assets and liabilities are always disclosed as non-current.
B. Cash flow statement:
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
Statement of Cash Flows is prepared in accordance with the Indirect Method prescribed in the Indian Accounting Standard-7 “Statement of Cash Flows”
C. Recoverability of trade receivable
Judgments are required in assessing the recoverability of overdue trade receivables and determining whether a provision against those receivables is required. Factors considered include the credit rating of the counter party, the amount and timing of anticipated future payments and any possible actions that can be taken to mitigate the risk of non-payment.
D. Provisions
Provisions are recognized in the period when it becomes probable that there will be a future outflow of funds resulting from past operations or events and the amount of cash outflow can be reliably estimated. The timing ofrecognition and quantification ofthe liability requires the application of judgment to existing facts and circumstances, which can be subject to change. The carrying amounts of provisions and liabilities are reviewed regularly and revised to take account of changing facts and circumstances.
E. Provisions for doubtful debts
Exposures to customers outstanding at the end of each reporting period are reviewed to determine incurred and expected credit losses and the Company establishes an allowance for doubtful debts and impairment that represents its estimate of expected losses in respect of trade receivables. Historical trends of impairment of trade receivables do not reflect any significant credit losses. Given that the macro-economic indicators have undergone change, it has not affected the customers of the Company substantially; hence the Company expects the historical trend of minimal credit losses to continue. The Provision for doubtful debt as at March 31, 2024 related to customers that have defaulted on their payments to the Company and are not expected to be able to pay their outstanding balances, mainly due to economic circumstances.
The loss allowance on trade receivable has been computed on the basis of Ind AS 109, Financial Instruments which require such allowance to be made even for trade receivable considered good on the basis that credit risk exists even though it may be very low. The Company exposure to credit and currency risk and loss allowance related to trade receivable are disclosed in Note no.11, 35.
F. Impairment of Non-Financial Assets
The Company assesses the chances of an asset getting impaired on each reporting date. If any indication exists, the Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or Cash Generating Units (CGU’s) fair value less costs of disposal and its value in use. It is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or a group of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account, if no such transactions can be identified, an appropriate valuation model is used.
G. Impairment of Financial Assets
The impairment provisions for financial assets are based on assumptions about risk of default and expected cash loss rates. The Company uses judgment in making these assumptions and selecting the inputs to the impairment calculation, based on Company’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period.
The preparation of these financial statements in conformity with the recognition and measurement principles of Ind AS requires the management of the Company to make estimates and assumptions that affect the reported balances of assets and liabilities, disclosures of contingent liabilities as at the date of the financial statements and the reported amounts of income and expense for the periods presented.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and future periods are affected.
Key sources of estimation of uncertainty at the date of the financial statements, which may cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are in respect of impairment of investments, useful lives of property, plant and equipment, valuation of deferred tax assets and fair value measurement of financial instruments, these are discussed below. Key sources of estimation of uncertainty in respect of revenue recognition, employee benefits and provisions and contingent liabilities have been discussed in their respective policies.
H. Leases:
i) The Company, as a lessee, recognises a right of-use asset and a lease liability for its leasing arrangements, if the contract conveys the right to control the use of an identified asset. The contract conveys the right to control the use of an identified asset, if it involves the use of an identified asset and the Company has substantially all of the economic benefits from use of
the asset and has right to direct the use of the identified asset. The cost of the right of-use asset shall comprise of the amount of the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date plus any initial direct costs incurred. The right-of-use assets is subsequently measured at cost less any accumulated depreciation, accumulated impairment losses, if any and adjusted for any re-measurement of the lease liability. The right of-use assets is depreciated using the straight line method from the commencement date over the shorter of lease term or useful life of right-of-use asset.
ii) The Company measures the lease liability at the present value of the lease payments that are not paid at the commencement date of the lease. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the Company uses incremental borrowing rate.
iii) For short-term and low value leases, the Company recognises the lease payments as an operating expense on a straight-line basis over the lease term.
I. IntangibleAsset
Intangible Assets 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, borrowing costs, and any cost directly attributable to bringing the asset to its working condition for the intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the intangible assets.
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.
Amortization is recognized in the statement of profit and loss on a straight-line basis over the estimated useful lives of intangible assets. The amortization expense is recognized in the statement of profit and loss account in the expense category that is consistent with the function of the intangible asset. Intangible assets that are not available for use are amortized from the date they are available for use.
Gains or losses arising from de-recognition 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.
Intangible assets comprises of computer software. Cost of computer software includes cost such as expenditure incurred on development of the computer software and is amortized on straight line basis over a period of useful life, which in management’s estimate represents the period during which economic benefits will be derived from their use.
J. Capital work in progress
a. Expenditure incurred on assets under construction (including a project) is carried at cost under Capital Work-in-Progress. Such costs comprises purchase price of asset including import duties and non-refundable taxes after deducting trade discounts and rebates and costs that are directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
b. Cost directly attributable to projects under construction include expenditure in relation to survey and investigation activities of the projects, cost of site preparation, initial delivery and handling charges, installation and assembly costs, professional fees, expenditure on maintenance and up gradation, among others of common public facilities, depreciation on assets used in construction of project, interest during construction and other costs if attributable to construction of projects. Such costs are accumulated under 'Capital Work-in-Progress' and subsequently allocated on systematic basis over major assets, other than land and infrastructure facilities, on commissioning ofprojects.
c. Capital expenditure incurred for creation of facilities, over which the Company does not have control but the creation of which is essential principally for construction of the project is capitalized and carried under 'Capital work-in-progress' and subsequently allocated on systematic basis over major assets, other than land and infrastructure facilities, on commissioning of projects, keeping in view the 'attributability' and the 'Unit of Measure' concepts in Ind AS 16- 'Property, Plant & Equipment'. Expenditure of such nature incurred after completion of the project, is charged to Statement of Profit and Loss.
K. Borrowing costs
a. Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the asset. A qualifying asset is one that necessarily takes substantial period oftime to get ready for its intended use.
b. Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.
c. All other borrowing costs should be charged as an expense in profit and loss statement in the period in which they occur.
L. Impairment of Non-Financial Assets
a. The Company assesses at each reporting date as to whether there is any indication that any property, plant & equipment and intangible assets or group of assets, called Cash Generating Units (CGU) may be impaired. If any such indication exists the recoverable amount of an asset or CGU is estimated to determine the extent of impairment, if any. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the CGU to which the asset belongs. The goodwill on business combinations is tested for impairment annually and when circumstances indicate that the carrying value may be impaired.
b. An impairment loss, if any is recognized in the Statement of Profit and Loss to the extent, asset’s carrying amount exceeds its recoverable amount. The recoverable amount is higher of an asset’s fair value less cost of disposal and value in use. Value in use is based on the estimated future cash flows, discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value of money and risk specific to the assets.
c. The impairment loss recognized in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.
M. Provisions and Contingent liabilities
A provision is recognized when the Company has a present obligation as a result of past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, in respect of which a reliable estimate can be made. Such provisions are determined based on management estimate of the amount required to settle the obligation at the Balance Sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount cannot be made. Contingent liabilities are disclosed on the basis of judgment of management. These are reviewed at each balance sheet date and disclosed to reflect the current management estimates.
Contingent assets are not recognised in the financial statements. A contingent asset is disclosed where an inflow of economic benefits is probable. Contingent assets are assessed continually and, if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in which the change occur
N. Income taxesa. Current tax
Income tax has been recognized under the MAT provisions of Income Tax Act, 1961 during the year. Deferred taxes are recognized in statement of profit and loss, except when they relate to items that are recognized in other comprehensive income or directly in equity.
b. Deferred income taxes
Deferred income tax is recognized using the balance sheet approach. Deferred income tax assets and liabilities are recognized for deductible and taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount, except when the deferred income tax arises from the initial recognition of an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction. Deferred income tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilized.
The carrying amount of deferred income 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 income tax asset to be utilized.
Deferred tax assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be received or settled. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the relevant entity intends to settle its current tax assets and liabilities on a net basis. Deferred tax assets and liabilities are classified as non-current assets / liabilities.
c. Recognition of MAT Credit entitlement:
The credit availed under MAT is recognized as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the period for which the MAT credit can be carried forward for set off against the normal tax liability. This requires significant management judgment in determining the expected availment of the credit based on the business plans and future cash flows ofthe Company.
O. Foreign Exchange Transactions:
a. The financial statements are presented in Indian rupees, which are the functional currency of the company and the currency of the primary economic environment in which the company operates.
b. Transactions in foreign currencies are initially recorded at the exchange rate prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency closing rates of exchange at the reporting date.
c. Exchange differences arising on settlement or translation of monetary items are recognized in Statement of Profit and Loss except to the extent of exchange differences which are regarded as an adjustment to interest costs on foreign currency borrowings that are directly attributable to the acquisition or construction of qualifying assets, are capitalized as cost of assets.
P. Employee benefits
i) Short term employee benefits
All employee benefits which are payable within twelve months of rendering service are classified as short-term employee benefits. Benefits such as salaries, wages, bonus, short term compensated absences and the expected cost of ex-gratia is recognized in the period in which the employee renders the related service.
Employee benefits include short term benefits like salaries and wages which are recognized as an expense in the statement of Profit and Loss of the year in which the related service is rendered.
A liability is recognized for the amount expected to be paid when there is a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
Post-Employment Benefits Defined Contribution Plans
A defined contribution plan is a post-employment benefit plan under which the Company pays specified contributions to a separate entity. The Company makes specified monthly contributions towards Provident Fund, Superannuation Fund and Pension Scheme. The Company’s contribution is recognized as an expense in the Statement of Profit and Loss during the period in which the employee renders the related service.
Defined Benefits Plans
The cost of the defined benefit plan and other post-employment benefits and the present value of such obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, mortality rates and future pension increases. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
ii) Provident Fund
Provident Fund contributions are made to a trust administered by the Trustees. Trust makes investments and settles member’s claims. Interest Payable to the members shall not be at a rate lower than the statutory rate. Liability is recognized for any shortfall in the plan assets vis-a-vis actuarially determined liability of the fund obligation.
iii) Gratuity Plan
The company has a defined gratuity plan. Every employee who has rendered continuous service of 5 years or more is entitled to gratuity amount of 15 days salary (15/26 last drawn basic salary plus dearness allowance) for each completed year for five year or more subject to maximum of ? 20 lakhs on superannuation, resignation, termination, disablement or death.
The liability in respect of gratuity and other post-employment benefits is calculated using the Projected Unit Credit Method and spread over the period during which the benefit is expected to be derived from employees’ services.
Re-measurement of defined benefit plans in respect of post- employment are charged to the Other Comprehensive Income.
Q. Cash and cash equivalents:
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short- term, highly liquid investments with original maturities ofthree months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
R. Financial instruments
i) FinancialAssets
Initial recognition and measurement
All financial assets are initially recognized at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities, which are not at fair value through profit or loss, are adjusted to the fair value on initial recognition.
Subsequent measurement
The Company classifies its financial assets into various measurement categories. The classification depends on the contractual terms of the financial assets, cash flows and the Company’s business model for managing financial assets.
• Financial assets carried at amortized cost
A financial asset is measured at amortized 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.
• 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.
• Financial assets at fair value through profit or loss (FVTPL)
A financial asset not classified as either amortized cost or FVTOCI, is classified as FVTPL.
Impairment of financial assets
In accordance with Ind AS 109, the Company applies the expected credit loss (ECL) model for measurement and recognition of impairment loss on trade receivables or any contractual right to receive cash or another financial asset.
For this purpose, the Company follows a ‘simplified approach’ for recognition of impairment loss allowance on the trade receivable balances. The application of this simplified approach does not require the Company to track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
As a practical expedient, the Company uses a provision matrix to determine impairment loss allowance on portfolio of its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivables and is adjusted for forward-looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analyzed.
ii) Financial Liabilities
Initial recognition and measurement
All financial liabilities are recognized at fair value and in case of loans, net of directly attributable cost. Fees of recurring nature are directly recognized in the Statement of Profit and Loss as finance cost.
Subsequent measurement
Financial liabilities other than derivative financial instruments are subsequently measured at amortised 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.
De-recognition of financial instruments
The Company derecognizes a financial asset 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 a financial liability) is derecognized from the Company's Balance Sheet when the obligation specified in the contract is discharged or cancelled or expires.
S. Earnings per share
Basic earnings per share are 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. The weighted average number of equity shares outstanding during the period are adjusted for events of bonus issue; bonus element in a right issue to existing shareholders and instruments converted to equity 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.
T. Dividend Distribution:
Dividend distribution to the shareholders is recognized as a liability in the Company's financial statements in the period in which the dividends are approved by the Company's shareholders.
U. Fair value measurement of financial instruments
When the fair value of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the Discounted Cash Flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.
V. Cost recognition
Costs and expenses are recognized when incurred and have been classified according to their nature. The costs of the Company are broadly categorized in employee benefit expenses, cost of raw materials consumed, depreciation and amortization expense and other expenses. Employee benefit expenses include Salaries & wages, bonus to employees, incentives and allowances, contributions to provident fund and other funds and staff welfare expenses. Other expenses mainly include laboratory expenses, power & fuel expenses, Testing charges, Repairs & maintenance expenses, rent charges, professional charges, business promotion and advertisement expenses & several other expenses. (Refer Note: 29 for details)
W. Investment Property
As per Ind AS 40 "INVESTMENT PROPERTY", Investment property is property (land or a building—or part of a building—or both) held (by the owner or by the lessee under a finance lease) to earn rentals or for capital appreciation or both. Therefore, an investment property generates cash flows largely independently of the other assets held by an entity. This distinguishes investment property from owner-occupied property. The production or supply of goods or services (or the use of property for administrative purposes) generates cash flows that are attributable not only to property, but also to other assets used in the production or supply process.
Investment property shall be recognized as an asset when and only when:
a. It is probable that the future economic benefits that are associated with the investment property will flow to the entity; and
b. The cost of the investment property can be measured reliably.
Reclassification to investment property
When the use of a property changes from owner occupied to investment property, the property is reclassified as investment property as it’s carrying amount on the date ofreclassification.
As per Ind AS 40 “Investment Property”, Transfers to, or from, investment property shall be made when, and only when, there is a change in use, evidenced by:
• commencement of owner-occupation, for a transfer from investment property to owner-occupied property;
• commencement of development with a view to sale, for a transfer from investment property to inventories;
• end of owner-occupation, for a transfer from owner-occupied property to investment property; or
• Commencement of an operating lease to another party, for a transfer from inventories to investment property.
However, there is no investment property in the company.
X. Segment reporting
The Company's main business is testing & analysis. There is no separate reportable segment as per Ind AS 108.
Y. Exceptional items
Exceptional items refer to items of income or expense, including tax items, within the statement of profit and loss from ordinary activities which are non recurring and are of such size, nature or incidence that their separate disclosure is considered necessary to explain the performance ofthe Company.
Z. Actuarial Valuation
The determination of company liability towards defined benefit obligation to Employees is made through Independent Actuarial
Valuation including determination of amount to be recognized in the Statement of Profit & Loss & in other Comprehensive
Income vide his valuation report dt. 24/05/2024. Such valuation depend upon assumption determined after taking into account
interim, seniority, promotions and other relevant factors such as Supply & Demand Factor in the Employment Market.
Information about such valuation is provided in notes to the Financial Statements.
Z1. New and Amended Standards
The Ministry of Corporate Affairs has notified Companies (Indian Accounting Standards) Amendment Rules, 2023 dated March
31, 2023 to amend the following Ind AS which are effective for annual periods beginning on or after April 01, 2023. The
Company applied these amendments for the first-time during the year.
i) Definition of Accounting Estimates - Amendments to Ind AS 8 The amendments clarify the distinction between changes in accounting estimates and changes in accounting policies and the correction of errors. It has also been clarified how entities use measurement techniques and inputs to develop accounting estimates. The amendments had no impact on the Company’s financial statements.
ii) Disclosure of Accounting Policies - Amendments to Ind AS 1 The amendments aim to help entities provide accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their ‘significant’ accounting policies with a requirement to disclose their ‘material’ accounting policies and adding guidance on how entities apply the concept of materiality in making decisions about accounting policy disclosures. The amendments have had an impact on the Company’s disclosures of accounting policies, but not on the measurement, recognition or presentation of any items in the Company’s financial statements.
iii) Deferred Tax related to Assets and Liabilities arising from a Single Transaction - Amendments to Ind AS 12 The amendments narrow the scope of the initial recognition exception under Ind AS 12, so that it no longer applies to transactions that give rise to equal taxable and deductible temporary differences such as leases. The amendments had no impact on the Company’s financial statements.
iv) Apart from these, consequential amendments and editorials have been made to other Ind AS like Ind AS 101, Ind AS 102, Ind AS 103, Ind AS 107, Ind AS 109, Ind AS 115 and Ind AS 34.
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