2. Summary of material accounting policies
On 31 March 2023, the Ministry of Corporate Affairs notified Companies (Indian Accounting
Standards) Amendment Rules, 2023 amending the Companies (Indian Accounting Standards)
Rules, 2015. The amendments come into force with effect from 1 April 2023, i.e., Financial Year
2023-24. One of the major changes is in Ind AS 1 ‘Preparation of Financial Statements, which
requires companies to disclose in their financial statements ‘material accounting policies’ as
against the erstwhile requirement to disclose ‘significant accounting policies’. The word
‘significant’ is substituted by ‘material’.
Accounting policy information is expected to be material if users of an entity’s financial
statements would need it to understand other material information in the financial statements.
The Company applied the guidance available under paragraph 117B of Ind AS 1, Presentation of
Financial Statements in evaluating the material nature of the accounting policies.
The following are the material accounting policies for the Company:
2.1 Current and noncurrent classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current
classification.
All the 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.
An asset is classified as current when it satisfies any of the following criteria:
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a) It is expected to be realized in, or is intended for sale or consumption in, the Company’s normal
operating cycle; .!;§/ f(XV]
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 cash equivalent unless it is restricted from being exchanged or used to settle a
liability forat least twelve months after the reporting date.
All other assets are classified as non-current.
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.
The Company classifies all other liabilities as noncurrent.
Current assets/ liabilities include the current portion of noncurrent assets/ liabilities respectively.
Deferred tax assets and liabilities are always disclosed as non- current.
The operating cycle is the time between the acquisition of assets for processing and their
realiation in cash and cash equivalents. The Company has identified twelve months as its
operating cycle.
2.2 Functional and presentation currency
These financial statements are presented in Indian rupees, which is also the functional currency
of the Company. All the financial information presented in Indian rupees has been rounded to
the nearest Lakhs.
2.3 Fair value measurement
The Company measures financial instruments at fair value at each balance sheet date. 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. The fair value
measurement is based on the presumption that the transaction to sell the asset or transfer the
liability takes place either:
• in the principal market for the asset or liability, or
• in the absence of a principal market, advantageous market for the asset or
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The principal or the most advantageous market must be accessible by the Company. The fair
value of an asset or a liability is measured using the assumptions that market participants would
use when pricing the asset or liability, assuming that market participants act in their economic
best interest.
A fair value measurement of a non-financial asset takes into account a market participant’s
ability to generate economic benefits by using the asset in its highest and best use or by selling
it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for
which sufficient data are available to measure fair value, maximizing the use of relevant
observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the Ind AS financial
statements are categorized within the fair value hierarchy, described as follows, based on the
lowest level input that is significant to the fair value measurement as a whole:
• Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or
liabilities.
• Level 2 — Valuation techniques for which the lowest level input that is significant to
the fair value measurement is directly or indirectly observable.
• Level 3 — Valuation techniques for which the lowest level input that is significant to
the fair value measurement is unobservable.
For assets and liabilities that are recognised in the Ind AS financial statements on a recurring
basis, the Company determines whether transfers have occurred between levels in the hierarchy
by re-assessing categorization (based on the lowest level input that is significant to the fair
value measurement as a whole) at the end of each reporting period.
The Company’s management determines the policies and procedures for both recurring fair
value measurement, such as derivative instruments and unquoted financial assets measured at
fair value, and for non-recurring measurement, such as assets held for sale in discontinued
operations.
External valuers are involved, wherever considered necessary. For the purpose of fair value
disclosures, the Company has determined classes of assets and liabilities on the basis of the
nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy,
as explained above.
This note summarizes accounting policy for fair value. Other fair value related disclosures are
given in the relevant notes.
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2.4 Foreign currency transactions and balances
Transactions in foreign currencies are initially recorded by the Company at their respective
functional currency spot rates at the date, the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are translated at the
functional currency spot rates of exchange at the reporting date. Exchange differences arising
on settlement or translation of monetary items are recognized in the statement of profit and
loss.
Non-monetary items that are measured based on historical cost in a foreign currency are
translated at the exchange rate at the date of the initial transaction.
Non-monetary items that are measured at fair value in a foreign currency are translated using
the exchange rates at the date when the fair value was measured.
The gain or loss arising on translation of non-monetary items measured at fair value is treated
in line with the recognition of the gain or loss on the change in fail- value of the item (i.e.,
translation differences on items whose fair value gain or loss is recognised in other
comprehensive income (“OCT’) or profit or loss are also recognised in OCI or profit or loss,
respectively).
2.5 Property Plant & Equipment
The cost of an item of property, plant and equipment are recognized as an asset if, and only if 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.
Freehold land is carried at historical cost less any accumulated impairment losses.
Items of property, plant and equipment (including capital-work-in progress) are stated at cost of
acquisition or construction less accumulated depreciation and impairment loss, if any.
Cost includes expenditures that are directly attributable to the acquisition of the asset i.e.,
freight, non-refundable duties and taxes applicable, and other expenses related to acquisition
and installation.
The cost of self-constructed assets includes the cost of materials and other costs directly
attributable to bringing the asset to a working condition for its intended use.
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.
Any gain or loss on disposal of an item of property, plant and equipment is recognized in
profit or loss."
Subsequent expenditure
Subsequent expenditure is capitalized only if it is probable that the future economic benefits
associated with the expenditure will flow' fro the Group and the cost of the item can be
measured reliably.
Depreciation
Depreciation on items of PPE is provided on written down value basis, computed on the basis
of useful lives as mentioned in Schedule II to the Companies Act, 2013. Depreciation on
additions / disposals is provided on a pro-rata basis i.e. from / up to the date on which asset is
ready for use / disposed-off.
The residual values, useful lives and method of depreciation are reviewed at each financial year
end and adjusted prospectively, if appropriate.
The cost of replacing part of an item of property, plant and equipment is recognized in the
carrying amount of the item if it is probable that the future economic benefits embodied
within the part will flow to the Company and its cost can be measured reliably. The carrying
amount of the replaced part will be derecognized. The costs of repairs and maintenance are
recognized in the statement of profit and loss as incurred.
Items of stores and spares that meet the definition of Property, plant and equipment are
capitalized at cost, otherwise, such items are classified as inventories.
Advances paid towards the acquisition of property, plant and equipment outstanding at each
reporting date is disclosed as capital advances under other assets. The cost of property, plant
and equipment not ready to use before such date are disclosed under capital work-in-progress.
2.6 Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a
financial liability or equity instrument of another entity.
a. Financial assets
Initial recognition and measurement
All financial assets are recognized initially at fair value plus, in the case of financial assets not
recorded at fair value through profit or loss, transaction costs that are attributable to the
acquisition of the financial asset. Purchases or sales of financial assets that require delivery of
assets within a time frame established by regulation or convention in the market place
(regular way trades) are recognized on the trade date, i.e., the date that the Company commits
to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
• Debt instruments at amortised cost;
• Debt instruments at fair value through other comprehensive income (FVTOCI);
• Debt instruments, derivatives and equity instruments at fair value through profit or loss
(FVTPL);
• Equity instruments measured at fair \alue through other comprehensive income
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Debt instruments at amortised cost
A ‘debt instrument’ is measured at the amortised cost, if both of the following conditions are
met: (i) The asset is held within a business model whose objective is to hold assets for
collecting contractual cash flows; and (ii) 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 amortised cost
using the effective interest rate (EIR) method. Amortised cost is calculated by taking into
account any discount or premium on acquisition and fees or costs that are an integral pait of the
EIR. The EIR amortisation is included in finance income in the statement of profit and loss.
The losses arising from impairment are recognised in the statement of profit and loss. This
category generally applies to trade and other receivables.
Debt instrument at FVTOCI
A ‘debt instrument’ is classified as FVTOCI, if both of the following criteria are met: (i) The
objective of the business model is achieved both by collecting contractual cash flows and
selling the financial assets; and (ii) The asset’s contractual cash flows represent SPPI.
Debt instruments included within the FVTOCI category are measured initially as well as at
each reporting date at fair value. Fair value movements are recognized in OCI. However, the
Company recognizes interest income, impairment losses and foreign exchange gain 01 loss in
the statement of profit and loss. On de-recognition of the asset, cumulative gain or loss
previously recognised in OCI is reclassified from the equity to statement of profit and loss.
Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the
EIR method.
Debt instrument at FVTPL
FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet
the criteria for categorization as at amortized cost or as FVTOCI, is classified as FVTPL. Debt
instruments included within the FVTPL category are measured at fair value with all changes
recognized in the statement of profit and loss.
Equity Instruments
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments
which are held for trading are classified as FVTPL. If the Company decides to classify an
equity instrument as FVTOCI, then all fair value changes on the instrument, excluding
dividends, are recognized in the OCI and there is no subsequent reclassification of these fair
value gains and losses to the statement of profit and loss. Equity instruments included within
the FVTPL category are measured at fair value with all changes recognized in the statement of
profit and loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similai
financial assets) is primarily derecognized (i.e., removed from the Company s balance sheet)
when:
a) The rights to receive cash flows from the a. or
b) The Company has transferred its rights to receive cash flows from the asset or has assumed an
obligation to pay the received cash flows in full without material delay to a third party under a
‘pass-through' arrangement; and either (a) the Company has transferred substantially all the
risks and rewards of the asset, or (b) the Company has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the company has transferred its rights to receive cash flows from an asset or has entered
into a pass- through arrangement, it evaluates if and to what extent it has retained the risks and
rewards of ownership. When it has neither transferred nor retained substantially all of the risks
and rewards of the asset, nor transferred control of the asset, the Company continues to
recognize the transferred asset to the extent of the Company’s continuing involvement. In that
case, the Company also recognises an associated liability. The transferred asset and the
associated liability are measured on a basis that reflects the rights and obligations that the
Company has retained.
Impairment of Financial Assets
The company assesses at each balance sheet date whether a financial asset or a group of
financial assets is impaired.
In accordance with Ind AS 109, the company uses “Expected Credit Loss” (ECL) model, for
evaluating impairment of Financial Assets other than those measured at Fair Value Through
Profit and Loss (FVTPL).
Expected credit losses are measured through a loss allowance at an amount equal to:
• The 12 months expected credit losses (expected credit losses that result from those default
events on the financial instrument that are possible within 12 months after the reporting
date);
• Full lifetime expected credit losses (expected credit losses that result from all possible
default events over the life of the financial instrument)
The company uses 12-month ECL to provide for impairment loss where there is no significant
increase in credit risk. If there is significant increase in credit risk full lifetime ECL is used.
b. Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value i.e.,
loans and borrowings, payables, or as derivatives designated as hedging instruments in an
effective hedge, as appropriate. All financial liabilities are recognized initially at fair value and,
in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Company’s financial liabilities include trade and other payables, loans and borrowings
including bank overdrafts, financial guarantee contracts.
S ubsequent m easu rem ent
The measurement of financial liabilities depends on theft classification^^
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading
and financial liabilities designated upon initial recognition as fair value through profit or loss.
Financial liabilities are classified as held for trading if they are incurred for the purpose of
repurchasing in the near term. This category also includes derivative financial instruments
entered into by the Company that are not designated as hedging instruments in hedge
relationships as defined by Ind AS 109. Separated embedded derivatives are also classified as
held for trading, unless they are designated as effective hedging instruments. Gains or losses on
liabilities held for trading are recognised in the statement of profit and loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are
designated as such at the initial date of recognition, and only if the criteria in Ind AS 109 are
satisfied. For liabilities designated as FVTPL, fair value gains/losses attributable to changes in
own credit risk are recognized in OCI. These gains/loss are not subsequently transferred to the
statement of profit and loss.
However, the Company may transfer the cumulative gain or loss within equity. All other
changes in fair value of such liability are recognised in the statement of profit and loss.
Loans and borrowings
After initial recognition, interest-bearing borrowings are subsequently measured at amortised
cost using the EIR method. Gains and losses are recognised in the statement of profit and loss
when the liabilities are derecognised 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 amortisation is included as
finance costs in the statement of profit and loss.
De-recognition
A financial liability is derecognised when the obligation under the liability is discharged or
cancelled or expired. 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 recognised in the statement of profit and loss.
Reclassification of financial assets and liabilities
The Company determines classification of financial assets and liabilities on initial recognition.
After initial recognition, no re-classification is made for financial assets which are equity
instruments and financial liabilities. For financial assets which are debt instruments, a re¬
classification is made only if there is a change in the business model for managing those assets.
A change in the business model occurs when the Company either begins or ceases to perform
an activity that is significant to its operations. If the Company reclassifies financial assets, it
applies the re-classification prospectively from the re-classification date, which is the first day
of the immediately next reporting period following the change, in business model. The
Company does not restate any previously recognised gair^folSe^ffobluding impairment gains
or losses) or interest. (i§l [Ov|j \p:\\
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Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance
sheet, if there is a currently enforceable legal right to offset the recognised amounts and there is
an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
2.7 Impairment of non-flnancial assets
The carrying amounts of the Company’s non-financial assets, other than inventories and
deferred tax assets are reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists, then the asset’s recoverable amount is
estimated. For goodwill and intangible assets that have indefinite lives or that are not yet
available for use. an impairment test is performed each year at March 31.
The recoverable amount of an asset or cash-generating unit (as defined below) is the greater of
its value in use and its fair value less costs to sell. In assessing value in use. the estimated
future cash flows are discountedto their present value using a pre-tax discount rate that reflects
current market assessments of the time valueof money and the risks specific to the asset or the
cash-generating unit. For the purpose of impairment testing, assets are grouped together into the
smallest group of assets that generates cash inflows from continuing use that are largely
independent of the cash inflow of other assets or groups of assets (the “cash-generating unit”).
An impairment loss is recognized in the statement of profit and loss if the estimated
recoverable amount of an asset or its cash-generating unit is lower than its carrying amount.
Impairment losses recognized in respect of cash-generating units are allocated first to reduce
the carrying amount of any goodwill allocated to the units and then to reduce the carrying
amount of the other assets in the unit on a pro-rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets,
impairment losses recognized in prior periods are assessed at each reporting date for any
indications that the loss has decreased or no longer exists. An impairment loss is reversed if there
has been a change in the estimates used to determine the recoverable amount. An impairment
loss is reversed only to the extent that the asset’s carrying amount does not exceed the
carrying amount that would have been determined, net of depreciation or amortization, if no
impairment loss had been recognized.
2.8 Cash & Cash Equivalents
Cash and bank balances comprise of cash balance in hand, in current accounts with banks,
demand deposit, short-term deposits, Margin Money deposits and unclaimed dividend
accounts. For this purpose, “short-term” means investments having maturity of three months
or less from the date of investment. Bank overdrafts that are repayable on demand and form an
integral part of our cash management are included as a component of cash and cash
equivalents for the purpose of the statement of cash flows. The Margin money deposits,
balance in dividend accounts which are not due and unclainie^T^T^gnd balances shall be
disclosed as restricted cash balances.
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a. Short term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is
recognized for the amount expected to be paid if the Company has a present legal or
constructive obligation to pay this amount as a result of past sendee provided by the employee
and the obligation can be estimated reliably.
b. Defined Contribution Plan
The Company’s contributions to defined contribution plans are charged to the statement of
profit and loss asand when the services are received from the employees.
c. Defined Benefit Plans
The liability in respect of defined benefit plans and other post-employment benefits is
calculated using the projected unit credit method consistent with the advice of qualified
actuaries. The present value of the defined benefit obligation is determined by discounting the
estimated future cash outflows using interest rates based on prevailing market yields of Indian
Government Bonds and that have terms to maturity approximating to the terms of the related
defined benefit obligation. The current service cost of the defined benefit plan, recognized in
the statement of profit and loss in employee benefit expense, reflects the increase in the
defined benefit obligation resulting from employee service in the current year, benefit
changes, curtailments and settlements. Past service costs are recognized immediately in
income. The net interest cost is calculated by applying thediscount rate to the net balance of
the defined benefit obligation and the fair value of plan assets. This cost is included in
employee benefit expense in the statement of profit and loss. Actuarial gains and losses
arising from experience adjustments and changes in actuarial assumptions are charged or
credited to equity in other comprehensive income in the period in which they arise.
d. Termination benefits
Termination benefits are recognized as an expense when the Company is demonstrably
committed, without realistic possibility of withdrawal, to a formal detailed plan to either
terminate employment before the normalretirement date, or to provide termination benefits as
a result of an offer made to encourage voluntary redundancy. Termination benefits for
voluntary redundancies are recognized as an expense if the Company has made an offer
encouraging voluntary redundancy, it is probable that the offer will be accepted, and the
number of acceptances can be estimated reliably.
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The Company’s net obligation in respect of other long term employee benefits is the amount
of future benefit that employees have earned in return for their service in the current and
previous periods. That benefit is discounted to determine its present value. Re-measurements
are recognized in the statement of profit and loss in the period in which they arise.
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