2. Significant Accounting Policies
2.1 Basis of preparation
(i) Compliance with Ind AS-
The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS)
notified under Section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting
Standards) Rules, 2015] and other relevant provisions of the Act.
The financial statements are presented in INR and all values are rounded to the nearest Lakhs
(INR 00,000), except when otherwise indicated.
(ii) Historical cost convention-
The financial statements have been prepared on a historical cost basis, except for:
a) Certain financial assets & liabilities (including derivative instruments) and contingent
consideration that are measured at fair value.
b) Assets held for sale have been measured at fair value less cost to sell
c) Defined benefit plans - plan assets measured at fair value.
2.2 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 realised or intended to be sold or consumed in normal operating cycle of
the Company
• Held primarily for the purpose of trading
• Expected to be realized within twelve months after the reporting period, or
• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability
for at least twelve months after the reporting period.
All other assets are classified as non -current.
> A liability is treated as current when:
• It is expected to be settled in normal operating cycle of the Company
• It is held primarily for the purpose of trading
• It is due to be settled within twelve months from 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.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities. 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.
2.3 Revenue recognition
The Company has adopted Ind AS 115, 'Revenue from Contracts with Customers' using
cumulative effect approach. Under Ind AS 115, revenue is recognized upon transfer of control of
promised goods or services to customers at an amount that reflects the consideration to which
the Company is expected to be entitled to in exchange for those goods or services. Revenue
towards satisfaction of a performance obligation is measured at the amount of transaction price
allocated to that performance obligation as per contractually agreed terms with the customers.
The transaction price of goods sold and services rendered is net of various discounts and schemes
offered by the Company as part of the contract. Revenue is recorded provided the recovery of
consideration is probable and determinable. Revenue from sale of goods and services transferred
to distributors/ intermediaries are recognized at a point in time.
a) Sale of goods:
Revenue from the sale of manufactured and traded goods products is recognized upon transfer
of control of products to the customers which coincides with their delivery to customer and is
measured at fair value of consideration received/receivable, net of discounts, amount collected
on behalf of third parties and applicable taxes.
b) Interest:
Interest income is recognized on time proportion basis taking into account the amount
outstanding and rate applicable. For all debt instruments measured at amortized cost, interest
income is recorded using the effective interest rate ("EIR"). EIR is the rate that exactly discounts
the estimated future cash payments or receipts over the expected life of the financial instrument
or a shorter period, where appropriate, to the gross carrying amount of the financial assets.
Interest income is included in other income in the Statement of Profit and Loss.
c) Dividends:
Dividend is recognized when the Company's right to receive the payment is established, which is
generally when shareholders approve the dividend.
d) Commission:
Commission income is recognized rateably over the contract period as per the agreed contractual
terms.
e) Services rendered:
Revenue from service related activities including management and technical know-how service
is recognized as and when services are rendered and on the basis of contractual terms with the
parties.
f) Other Operating revenues
Rental Income arising from operating leases on investment properties is accounted for on a
straight line basis over the lease term and is included in revenue in the Statement of Profit and
Loss due to its operating nature.
2.4 Investment Property
(i) Recognition and measurement
Investment Property comprise of Freehold Land and Building.
Investment properties are measured initially at cost, including transaction costs. Subsequent
to initial recognition, investment properties are stated at cost less accumulated depreciation
and accumulated impairment loss, if any.
Though the Group measures investment property using cost based measurement, the fair
value of investment property is disclosed in the notes. Fair values are determined based on an
annual evaluation performed by an accredited external independent valuer.
Investment properties are derecognised either when they have been disposed of or when they
are permanently withdrawn from use and no future economic benefit is expected from their
disposal. The difference between the net disposal proceeds and the carrying amount of the
asset is recognised in the Consolidated Statement of Profit and Loss in the period of
derecognition.
(ii) Depreciation
Depreciation on Buildings classified as Investment Property is provided, under the Straight
Line Method, pro rata to the period of use, based on useful lives specified in Schedule II to
the Companies Act, 2013.
2.5 Taxes
a) The income tax expense or credit for the year is the tax payable on the current year's taxable
income based on the applicable income tax rate as per the Income tax Act, 1961 adjusted by
changes in deferred tax assets and liabilities attributable to temporary differences and to unused
tax losses.
b) The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the end of the reporting year. Management periodically evaluates positions taken in
tax returns with respect to situations in which applicable tax regulation is subject to
interpretation. It establishes provisions where appropriate on the basis of amounts expected to
be paid to the tax authorities.
c) Deferred income tax is recognised in respect of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the corresponding amounts
used for taxation purposes. Deferred tax is also recognised in respect of carried forward tax losses
and tax credits.
d) Deferred tax assets are recognised for all deductible temporary differences and unused tax losses
only if it is probable that future taxable amounts will be available to utilise those temporary
differences and losses. Therefore, in the case of a history of recent losses, the Company
recoganises the deferred tax asset to the extent that it has sufficient taxable temporary
differences or there is convincing other evidences that sufficient taxable profit will be available
against which such deferred tax can be realised.
e) Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset
current tax assets and liabilities and when the deferred tax balances relate to the same taxation
authority. Current tax assets and tax liabilities are offset where the Company has a legally
enforceable right to offset and intends either to settle on a net basis, or to realise the asset and
settle the liability simultaneously.
f) Current and deferred tax is recognised in the Statement of profit and loss, except to the extent
that it relates to items recognised in other comprehensive income or directly in equity and in this
case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
2.6 Property, plant and equipment
a) Freehold land is carried at historical cost. All other items of property, plant and equipment are
stated at historical cost less depreciation. Historical cost includes expenditure that is directly
attributable to the acquisition of the assets. Cost may also include transfers from equity of any
gains or losses on qualifying cash flow hedges of foreign currency purchases of property, plant
and equipment.
b) Subsequent costs are included in the asset's carrying amount or recognised as a separate asset,
as appropriate, only when it is probable that future economic benefits associated with the item
will flow to the Company and the cost of the item can be measured reliably. The carrying amount
of any component accounted for as a separate asset is derecognised when replaced. All other
repairs and maintenance are charged to the Statement of profit and loss during the reporting
year in which they are incurred.
(c) Depreciation methods, estimated useful lives and residual value-
Depreciation is calculated using the straight-line method to allocate their cost, net of their
residual values, over their estimated useful lives.
The useful lives have been determined based on those specified by Schedule II to the Companies
Act; 2013, in order to reflect the actual usage of the assets. The residual values are not more than
5% of the original cost of the asset.
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end
of each reporting year.
(d) An asset's carrying amount is written down immediately to its recoverable amount if the
asset's carrying amount is greater than its estimated recoverable amount.
(e) Gains and losses on disposals are determined by comparing proceeds with carrying amount.
These are included in the Statement of profit and loss within other gains/ (losses).
2.7 Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Subsequent to
initial recognition, intangible assets are carried at cost less any accumulated amortisation and
accumulated impairment losses. Internally generated intangibles, excluding capitalised
development costs, are not capitalised and the related expenditure is reflected in profit or loss
in the year in which the expenditure is incurred.
The useful lives of intangible assets are assessed as either finite or indefinite.
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 year. 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.
Intangible assets with indefinite useful lives are not amortised, but are tested for impairment
annually, either individually or at the cash-generating unit level. The assessment of indefinite life
is reviewed annually to determine whether the indefinite life continues to be supportable. If not,
the change in useful life from indefinite to finite is made on a prospective basis. Gains or losses
arising from derecognition of an intangible asset are measured as the difference between the
net disposal proceeds and the carrying amount of the asset and are recognised in the statement
of profit or loss when the asset is derecognised.
2.8 Leases
Ind AS 116 supersedes Ind AS 17, Leases including appendencies thereto. Ind AS 116 sets out the
principles for the recognition, measurement, presentation and disclosure of leases and requires
lessee to record all leases on the balance sheet with exemptions available for low value and short
term leases. At the commencement of a lease, a lessee recognises lease liability and an asset
representing the right to use the underlying asset during the lease term (i.e., the right-of-use
asset). Lessee subsequently reduces the lease liability when paid and recognises depreciation on
the right of-use asset. Lessee is required to separately recognise the interest expense on the lease
liability and the depreciation expense on the right-of-use asset. The standard has no impact on
the actual cash flows of the company.
2.9 Inventories
Raw materials and stores & spares are stated at cost (FIFO bases), work in progress are stated at
estimated cost, finished goods are stated at the lower of cost and net realisable value & material
in transit are stated at direct cost.
Cost of raw materials and traded goods comprises cost of purchases. Cost of work-in- progress
and finished goods comprises direct materials, direct labour and an appropriate proportion of
variable and fixed overhead expenditure, the latter being allocated on the basis of normal
operating capacity. Cost of inventories also include all other costs incurred in bringing the
inventories to their present location and condition. Costs of purchased inventory are determined
after deducting rebates and discounts. Net realisable value is 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.
2.10 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. An asset's recoverable amount is the
higher of an asset's or cash-generating unit's (CGU) fair value less costs of disposal and its value
in use. Recoverable amount is determined for an individual asset, unless the asset does not
generate cash inflows that are largely independent of those from other assets. When 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 a 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. These calculations are corroborated by valuation multiples, quoted
share prices for publicly traded companies or other available fair value indicators.
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.
For assets excluding goodwill, an assessment is made at each reporting date to determine
whether there is an indication that previously recognised impairment losses no longer exist or
have decreased. If such indication exists, the Company estimates the asset's or CGU's recoverable
amount. A previously recognised impairment loss is reversed only if there has been a change in
the assumptions used to determine the asset's recoverable amount since the last impairment
loss was recognised. The reversal is limited so that the carrying amount of the asset does not
exceed its recoverable amount, nor exceed the carrying amount that would have been
determined, net of depreciation, had no impairment loss been recognised for the asset in prior
years. Such reversal is recognised in the statement of profit and loss unless the asset is carried at
a revalued amount, in which case, the reversal is treated as a revaluation increase.
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