2. Significant Accounting Policies:
This note provides a list of the significant accounting policies adopted in
the preparation of these separate financial statements. These policies
have been consistently applied to all the years presented, unless
otherwise stated.
a) Basis of preparation:
These separate financial statements are prepared in accordance with
Ind AS under the historical cost convention on accrual basis except for
certain financial instruments which are measured at fair value, the
provisions of the Companies Act, 2013 (to the extent notified). The Ind
AS are prescribed under Section 133 of the Act read with Companies
(Indian Accounting Standards) Rules, 2015.
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. 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. Fair value for measurement and / or
disclosure purposes in these financial statements is determined on such
basis, except for measurements that have some similarities to fair value
but are not fair value, such as net realizable value in Ind AS 2.
Accounting policies have been consistently applied except where the
change is required by an Ind AS or change results in the financial
statements providing reliable and more relevant information about the
effects of transactions, other events or condition on the entity's financial
position, performance or cash flow.
b) Use of estimates and judgements:
The preparation of the financial statements in conformity with Ind AS
requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. Difference between
the actual results and estimates are recognized in the year in which
results are known/materialized.
Although these estimates are based upon management's best
knowledge of current events and actions, actual results could differ from
these estimates. Any revision to accounting estimates is recognized
prospectively in the current and future periods.
c) Current versus non-current classification:
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:
- Expected to be realized or intended to be sold or consumed in the
normal operating cycle,
- Held primarily for the purpose of trading,
- Expected to be realized within twelve months after the reporting period
or,
- Cash or cash equivalents 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 treated as current when:
- It is expected to be settled in the normal operating cycle,
- It is held primarily for the purpose of trading,
- It is due to be settled within twelve months after the reporting period or,
- There is no unconditional right to defer the settlement of the liability for at
least twelve months after the reporting period.
All other liabilities are classified as non-current.
The operating cycle is the time between the acquisition of assets for
processing and their realization in cash and cash equivalents. The
company has identified twelve months as its operating cycle.
d) Property, plant and equipment:
i. Recognition and initial measurement:
Property, plant and equipment are stated in the balance sheet at their
carrying value being the cost of acquisition less accumulated
depreciation. The cost comprises purchase price, borrowing cost if
capitalization criteria are met and directly attributable cost of bringing the
asset to its working condition for the intended use. Any trade discount
and rebates are deducted in arriving at the purchase price.
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
Company. All other repair and maintenance costs are recognized in
statement of profit or loss as incurred.
ii. Depreciation, estimated useful lives and residual value:
Depreciation on property, plant and equipment is provided on straight
line method, computed on the basis of useful lives as estimated by
management which coincides with rates prescribed in Schedule II to the
Companies Act, 2013.
The residual values, useful lives and method of depreciation are
reviewed at each financial year end and adjusted prospectively, if
appropriate.
iii. De-recognition:
An item of property, plant and equipment and any significant part initially
recognized is de-recognized upon disposal or when no future economic
benefits are expected from its use or disposal. Any gain or loss arising on
de-recognition of the asset (calculated as the difference between the net
disposal proceeds and the carrying amount of the asset) is included in
the income statement when the asset is de-recognized.
e) Intangible Assets:
i. Recognition and initial measurement:
Intangible assets (software) are stated in the balance sheet at their
carrying value being the cost of acquisition less accumulated
depreciation. The cost comprises purchase price, borrowing cost if
capitalization criteria are met and directly attributable cost of bringing the
asset to its working condition for the intended use. Any trade discount
and rebates are deducted in arriving at the purchase price.
ii. Amortization and estimated useful lives:
Amortization of intangible assets is provided on straight line method,
computed on the basis of useful lives as estimated by management
which coincides with rates prescribed in Schedule II to the Companies
Act, 2013.
The residual values, useful lives and method of depreciation of are
reviewed at each financial year end and adjusted prospectively, if
appropriate.
g) Impairment of assets:
At each reporting date, the Company assesses whether there is any
indication that an asset may be impaired, based on internal or external
factors. If any such indication exists, the Company estimates the
recoverable amount of the asset or the cash generating unit. If such
recoverable amount of the asset or cash generating unit to which the
asset belongs is less than its carrying amount, the carrying amount is
reduced to its recoverable amount. The reduction is treated as an
impairment loss and is recognized in the statement of profit and loss. If,
at the reporting date there is an indication that a previously assessed
impairment loss no longer exists, the recoverable amount is
reassessed, and the asset is reflected at the recoverable amount.
Impairment losses previously recognized are accordingly reversed in
the statement of profit and loss.
h) Foreign Currency:
Functional and presentation currency
The financial statements are presented in Indian Rupee (‘INR') which is
also the functional and presentation currency of the Company.
Transactions and balances
Foreign currency transactions are recorded in the functional currency,
by applying to the exchange rate between the functional currency and
the foreign currency at the date of the transaction.
Foreign currency monetary items are converted to functional currency
using the closing rate. Non-monetary items denominated in a foreign
currency which are carried at historical cost are reported using the
exchange rate at the date of the transaction; and non-monetary items
which are carried at fair value or any other similar valuation denominated
in a foreign currency are reported using the exchange rates that existed
when the values were determined.
Exchange differences arising on monetary items on settlement, or
restatement as at reporting date, at rates different from those at which
they were initially recorded, are recognized in the statement of profit and
loss in the year in which they arise.
i) Revenue Recognition:
Effective from 1st April, 2018, the Company has adopted Ind AS 115,
“Revenue from Contracts with Customers”.Revenue is recognized to
the extent that it is probable that the economic benefits will flow to the
Company and the revenue can be reliably measured, regardless of
when the payment is being made. Revenue is measured at the fair 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.
Income from the services is recognized when the services are rendered
in accordance with the terms agreed.
Interest income is recognized using the effective interest rate method.
The effective interest rate is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial asset to the
gross carrying amount of a financial asset. While calculating the
effective interest rate, the company estimates the expected cash flows
by considering all the contractual terms of the financial instruments but
does not consider the expected credit losses.
j) Leases
The Company as a lessee
As per Ind AS-116,the Company has recognized lease liabilities and
corresponding equivalent right-of-use assets. The Company's lease
asset classes primarily consist of leases for Land, Buildings, Plant &
Machinery and Vehicles. The Company assesses whether a contract
contains a lease, at inception of a contract. A contract is, or contains, a
lease if the contract conveys the right to control the use of an identified
asset for a period of time in exchange for consideration. To assess
whether a contract conveys the right to control the use of an identified
asset, the Company assesses whether:
(i) The contract involves the use of an identified asset.
(ii) The Company has substantially all the economic benefits from use of the
asset through the period of the lease and
(iii) The Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognizes a
right-of-use (ROU) asset and a corresponding lease liability for all lease
arrangements in which it is a lessee, except for leases with a term of 12
months or less (short-term leases) and low value leases. For these
short-term and low-value leases, the Company recognizes the lease
payments as an operating expense.
Certain lease arrangements include the options to extend or terminate
the lease before the end of the lease term. ROU assets and lease
liabilities includes these options when it is reasonably certain that they
will be exercised.
The lease liability is initially measured at amortized cost at the present
value of the future lease payments. The lease payments are discounted
using the interest rate implicit in the lease or, if not readily determinable,
using the incremental borrowing rates in the country of domicile of these
leases.
ROU assets are depreciated from the commencement date on a
straight-line basis over the shorter of the lease term and useful life of the
underlying asset. ROU assets are evaluated for recoverability whenever
events or changes in circumstances indicate that their carrying amounts
may not be recoverable. For the purpose of impairment testing, the
recoverable amount (i.e. the higher of the fair value less cost to sell and
the value-in-use) is determined on an individual asset basis unless the
asset does not generate cash flows that are largely independent of those
from other assets. In such cases, the recoverable amount is determined
for the Cash Generating Unit (CGU) to which the asset belongs.
Lease liability and ROU assets have been separately presented in the
Balance Sheet and lease payments have been classified as financing
cash flows.
k) Financial Instruments:
a. Financial Assets
Initial recognition and measurement
The company recognizes financial assets when it becomes a party to the
contractual provisions of the instrument. All financial assets are
recognized at fair value on initial recognition. Transaction costs that are
directly attributable to the acquisition of financial assets that are not at
fair value through profit or loss, are added to the fair value on initial
recognition. Transaction costs of financial assets carried at fair value
through profit and loss are expensed in the statement of profit and loss.
Regular way purchase and sale of financial assets are accounted for at
trade date.
Subsequent measurement
Debt instruments at amortized cost - A ‘debt instrument' is measured at
the amortized cost if both the following conditions are met:
• The asset is held within a business model whose objective is to hold
assets for collecting contractual cash flows, and
• Contractual terms of the asset give rise on specified dates to cash flows
that are solely payments of principal and interest (SPPI) on the principal
amount outstanding.
After initial measurement, such financial assets are subsequently
measured at amortized cost using the effective interest rate (EIR)
method.
Investments in subsidiaries, associates and joint ventures
Investment in subsidiaries, associates and joint ventures is carried at
cost in the separate financials statements.
De-recognition of financials assets
A financial asset (or, where applicable, a part of a financial asset or part
of a group of a similar financial asset) is primarily de-recognized (i.e.,
removed from the company's separate balance sheet) when:
• The rights to receive cash flows from the asset have expired, or
• The company has transferred its rights to receive cash flows from the
asset.
b. Financial Liabilities
Initial recognition and measurement
The company recognizes financial liabilities when it becomes a party to
the contractual provisions of the instrument. All financial liabilities are
recognized at fair value on initial recognition. Transaction costs that are
directly attributable to the issue of financial liabilities, that are not at fair
value through profit or loss, are reduced from the fair value on initial
recognition. Transaction costs that are directly attributable to the issue of
financial liabilities at fair value through profit and loss are expensed in
the statement of profit and loss.
Subsequent measurement
These liabilities include borrowings and deposits. After initial
recognition, interest-bearing loans and borrowings are subsequently
measured at amortized cost using the effective interest rate (EIR)
method. Gains and losses are recognized in the statement of profit and
loss when the liabilities are de-recognized as well as through the EIR
amortization process.
Amortized cost is calculated by taking into account any discount or
premium on acquisition and fees or costs that are an integral part of the
EIR. The EIR amortization is included as finance costs in the statement
of profit and loss.
De-recognition of financial liabilities
A financial liability is de-recognized when the obligation under the
liability is discharged or cancelled or expires. When an existing financial
liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially
modified, such an exchange or modification is treated as the de¬
recognition of the original liability and the recognition of a new liability.
The difference in the respective carrying amounts is recognized in the
statement of profit or loss.
c. Offsetting financials instruments
Financial assets and liabilities are offset and the net amount is reported
in the balance sheet where there is a legally enforceable right to offset
the recognized amounts and there is an intention to settle on a net basis
or realize the asset and settle the liability simultaneously. The legally
enforceable right must not be contingent on future events and must be
enforceable in the normal course of business and in the event of default,
insolvency or bankruptcy of the group or the counterparty.
l) Borrowing costs:
General and specific borrowing costs that are directly attributable to the
acquisition, construction or production of a qualifying asset are
capitalized during the period of time that is required to complete and
prepare the asset for its intended use or sale. Qualifying asset are
assets that necessarily take a substantial period of time to get ready for
their intended use or sale.
Other borrowing costs are expensed in the period in which they are
incurred.
m) Inventories:
Inventories are valued at the lower of cost and net realizable value. Cost
includes purchase price excluding taxes those are subsequently
recoverable by the company from the concerned authorities, freight
inwards and other expenditure incurred in bringing such inventories to
their present location and condition. Cost of inventories is determined
using the weighted average cost method.
n) Employee Benefits:
a. Short-term benefit plans
Liabilities for wages and salaries, including non-monetary benefits that
are expected to be settled wholly within 12 months after the end of the
period in which the employees render the related service are recognized
and measured at the amounts expected to be paid when the liabilities
are settled. The liabilities are presented as current employee benefit
obligations in the balance sheet.
b. Defined contribution plans
The company pays provident fund contributions to publicly administered
provident funds as per local regulations. The company has no further
payment obligations once the contributions have been paid. The
contributions are accounted for as defined contribution plans and the
contributions are recognized as employee benefit expense when they
are due. Prepaid contributions, if any, are recognized as an asset to the
extent that a cash refund or a reduction in the future payments is
available.
c. Defined benefit plans
The company's gratuity plan is a defined benefit plan. The present value
of gratuity obligation under such defined benefit plans is determined
based on actuarial valuations carried out by an independent actuary
using the Projected Unit Credit Method [PUCM], which recognizes each
period of service as giving rise to additional unit of employee benefit
entitlement and measure each unit separately to build up the final
obligation. The obligation is measured at the present value of estimated
future cash flows. The discount rates used for determining the present
value of obligation under defined benefit plans, is based on the market
yields on government securities as at the balance sheet date, having
maturity periods approximately to the terms of related obligations.
Actuarial gains and losses 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.
o) Income Taxes:
Tax expense recognized in statement of profit or loss comprises the sum
of deferred tax and current tax except the ones recognized in other
comprehensive income or directly in equity.
Calculation of current tax is based on tax rates and tax laws that have
been enacted for the reporting period. Current income tax relating to
items recognized outside profit or loss is recognized outside profit or loss
(either in other comprehensive income or in equity). Current tax items
are recognized in correlation to the underlying transaction either in other
comprehensive income or directly in equity.
Deferred tax is provided using the liability method 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 recognized to the extent that it is probable that
the underlying tax loss or deductible temporary difference will be utilized
against future taxable income. This is assessed based on the
Company's forecast of future operating results, adjusted for significant
non-taxable income and expenses and specific limits on the use of any
unused tax loss or credit. 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 utilized. Un-recognized deferred
tax assets are re-assessed at each reporting date and are recognized to
the extent that it has become probable that future taxable profits will
allow the deferred tax asset to be recovered. 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. Deferred tax relating to items recognized outside
profit or loss is recognized outside profit or loss (either in other
comprehensive income or in equity).
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