Note 2.1: Summary of significant accounting
policies
a. Current versus non-current classification
Assets and Liabilities are classified as current or non
- current, inter-alia considering the normal operating
cycle of the company's operations and the expected
realization/settlement thereof within 12 months after
the Balance Sheet date.
Deferred tax assets and liabilities are classified as non¬
current assets and liabilities.
b. Revenue recognition
The revenue is recognized on the basis of Mercantile
System of Accounting. The expenses and Income
considered payable and receivable respectively are
accounted on accrual basis. Revenue from sale of
goods is recognised when significant risk and reward of
ownership is transferred to the customer and commodity
has been delivered to the customer.
c. Interest
Interest income is recognised on a time proportion basis
taking into account the amount outstanding and the
applicable interest. Interest income is included under
the head "Other income" in the statement of profit &
loss account.
d. Dividends
Dividend income is recognised when the Company's
right to receive dividend is established by the balance
sheet date.
e. Inventories
Inventories are valued at lower of cost and Net realisable
value (FIFO) after providing for obsolescence and other
losses where considered necessary (as mentioned in Ind
AS 2). Raw material and WIP is valued at cost exclusive
of duties and taxes. Scrap is estimated at realisable
value. Finished goods are valued at cost or estimated
realizable value inclusive of excise duty payable
thereupon at the time of dispatch whichever is lower.
f. Income Tax Expenses
Income Tax Expense represents the Sum of tax currently
payable and deferred tax (net)
i. Current income tax
The Company measures current income tax assets
and liabilities based on the amounts expected
to be recovered from or paid to tax authorities,
using tax rates and laws that have been enacted
or substantively enacted as of the reporting date.
Current income tax related to items recognized
outside profit or loss is recorded directly in other
comprehensive income or equity, corresponding
with the underlying transaction. The Company
regularly assesses tax positions taken in its filings,
including situations where tax regulations require
interpretation, and establishes provisions when
necessary to account for potential uncertainties.
This approach ensures appropriate recognition of
current tax obligations and receivables in line with
applicable accounting standards.
ii. Deferred tax
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 liabilities are recognised for all
taxable temporary differences, Deferred tax
assets are recognised for all deductible temporary
differences and the carry forward of any unused
tax losses. Deferred tax assets are recognised 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 losses can be utilised.
The carrying amount of deferred tax assets is
reviewed at each reporting date and reduced
to the extent that it is no longer probable that
sufficient taxable profit will be available to allow
all or part of the deferred tax asset to be utilised.
Unrecognised deferred tax assets are re-assessed
at each reporting date and are recognised 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 realised 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 recognised outside
profit or loss is recognised outside profit or loss
(either in other comprehensive income or in
equity). Deferred tax items are recognised in
correlation to the underlying transaction either in
OCI or directly in equity.
Deferred tax assets and deferred tax liabilities are
offset if a legally enforceable right exists to set off
current tax assets against current tax liabilities and
the deferred taxes relate to the same taxable entity
and the same taxation authority.
a. Property, plant and equipment
Plant and equipment is stated at cost of acquisition or
constructions including attributable borrowing cost till
such assets are ready for their intended use, less of
accumulated depreciation and accumulated impairment
losses, if any. Cost of acquisition for the aforesaid
purpose comprises its purchase price, including import
duties and other non-refundable taxes or levies and
any directly attributable cost of bringing the asset to
its working condition for its intended use, net of trade
discounts, rebates and credits received if any.
Such cost includes the cost of replacing part of the
plant and equipment and borrowing costs for long¬
term construction projects if the recognition criteria are
met. When significant parts of plant and equipment
are required to be replaced at intervals, the Company
depreciates them separately based on their specific
useful lives. Likewise, when a major inspection is
performed, its cost is recognised in the carrying amount
of the plant and equipment as a replacement if the
recognition criteria are satisfied. All other repair and
maintenance costs are recognised in profit or loss as
incurred.
Capital work-in-progress includes cost of property, plant
and equipment under installation / under development
as at the balance sheet date.
Property Plant and equipment are eliminated from
financial statements, either on disposal or when retired
from active use. Losses arising in case of retirement
of Property, Plant and equipment and gains or losses
arising from disposal of property, plant and equipment
are recognised in statement of profit and loss in the
year of occurrence.
The assets' residual values, useful lives and methods of
depreciation are reviewed at each financial year and
adjusted prospectively, if appropriate, Depreciation is
provided as per useful life prescribed by Schedule II
of the Companies Act, 2013 on Written Down Value
Method on Tangible PPE.
h. Intangible assets
The Company recognizes intangible assets (primarily
computer software) when costs are measurable and
future economic benefits are probable. Acquired
separately, they are measured at cost; obtained via
business combinations, at acquisition-date book value.
Subsequently, they are carried at cost less accumulated
amortization (using straight-line method over useful
lives) and impairment losses. Amortization periods
are reviewed annually. This policy ensures compliance
with accounting standards while maintaining prudent
capitalization criteria.
i. Investment properties
Investment properties, including those under
construction that are held for long-term rental
yields and/or for capital appreciation. Investment
properties are initially recognised at cost.
Subsequently investment property comprising
of building is carried at cost less accumulated
depreciation and accumulated impairment losses.
The cost includes the cost of replacing parts
and borrowing costs for long-term construction
projects if the recognition criteria are met. When
significant parts of the investment property
are required to be replaced at intervals, the
Group depreciates them separately based on
their specific useful lives. All other repair and
maintenance costs are recognised in profit and
loss as incurred.
v. Investment properties are derecognised when
either they have been disposed of or when the
investment property is permanently withdrawn
from use and no future economic benefit is
expected from its disposal.
The difference between the net disposal proceeds
and the carrying amount of the asset is recognised
in the statement of profit and loss in the period of
de-recognition.
ii. Impairment of 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 units
(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 or Companies of 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.
Impairment losses of continuing operations,
including impairment on inventories, are
recognised in the statement of profit and loss.
xiv. 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 or loss.
j. Borrowing costs:
i. Borrowing costs that are attributable to the
acquisition, construction, or production of a
qualifying asset are capitalised as a part of the
cost of such asset till such time the asset is ready
for its intended use or sale. A qualifying asset is
an asset that necessarily requires a substantial
period of time (generally over twelve months) to
get ready for its intended use or sale.
ii. All other borrowing costs are recognised as
expense in the period in which they are incurred.
k. Leases
The determination of whether an arrangement is
(or contains) a lease is based on the substance of
the arrangement at the inception of the lease. The
arrangement is, or contains, a lease if fulfilment of the
arrangement is dependent on the use of a specific asset
or assets and the arrangement conveys a right to use
the asset or assets, even if that right is not explicitly
specified in an arrangement.
Finance Lease
Finance leases that transfer substantially all of the risks
and benefits incidental to ownership of the leased item,
are capitalised at the commencement of the lease at
the fair value of the leased property or, if lower, at the
present value of the minimum lease payments. Lease
payments are apportioned between finance charges
and a reduction in the lease liability so as to achieve
a constant rate of interest on the remaining balance of
the liability. Finance charges are recognised in finance
costs in the statement of profit and loss.
A leased asset is depreciated over the useful life of the
asset. However, if there is no reasonable certainty that
the Entity will obtain ownership by the end of the lease
term, the asset is depreciated over the shorter of the
estimated useful life of the asset and the lease term
Operating Lease
Assets acquired on leases where a significant portion
of the risks and rewards of ownership are retained by
lessor are classified as operating leases. Lease rentals
are charged to the statement of profit and loss on straight
line basis unless payments to the lessor are structured
to increase in line with expected general inflation to
compensate for the lessor's expected inflationary cost
increase.
The Company has elected not to recognize right of use
assets and lease liability for short term lease of property
for period less than 12 months or less.
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